The growing demand for sustainable materials has intensified the search for biodegradable polymers. Poly(ε-caprolactone) (PCL), though biodegradable, is fossil-derived. In this study, a novel lignin extracted from pine wood using a green solvent was incorporated into PCL and compared with commercial lignins (dealkaline, alkaline, and lignosulfonate). The lignin additions imparted antioxidant properties, enhanced thermal stability, and promoted circular economy goals through lignin valorization. Notably, the green-extracted lignin showed superior compatibility with PCL when compared with commercial lignins, as evidenced by lower water uptake and solubility, and improved surface hydrophobicity (higher contact angle). Although the addition of lignin reduced the tensile strength and elongation at break, it greatly increased the PCL radical scavenging activity (DPPH) from 8 ± 1% of neat PCL to 94.8 ± 0.3% when 20 wt% of lignin-LA was added. Among the tested lignins, lignin-LA stands out as the most promising candidate to be applied as a functional additive in biodegradable polymer blends and composites for advanced sustainable applications. Not only given its intrinsically higher sustainability but also due to its capacity for improving the thermal properties of PCL–lignin blends.