Insulation will save you a ton on money on energy bills, so it is always recommended. However, if you are worried that some of the insulation materials are not good for the environment, here are some alternative options that are all environmentally friendly.
Sheep have naturally evolved to live in cold climates due their natural habitats in these harsh areas. The reason why wool is a great material for sweaters is the same reason it is great for home insulation. R 13 wool insulation is used by contractors to provide insulation to homes. When wool fibers are pressed together they collect air between them, which makes it a great way to insulate your house. You can find different thickness of wool insulation depending on your need, this is determined by its R value.
Aerogel is 90% air which makes it a great material for insulation. Aerogel comes in sheets that are tacked into the studs inside a wall. ThermaBlok, a kind of Aerogel has a backing that can just be peeled off and stuck to the inside of the wall. However, Aerogel is expensive and can cost up to $3 per foot.
Cotton is a natural material that is a great insulator. Much of the insulation made out of cotton comes from the scraps from the garment industry that get recycled into insulation. Cotton is rolled into batts like fiberglass and works in much the same ways. Cotton is also a great material for those with respiratory problems as it is very friendly to the respiratory system. It also absorbs moisture and is flame retardant when treated with boric acid. Cotton insulation also repels insects. However, it costs twice as much as fiberglass but it may be worth the price.
Spray on foam insulation Icynene is one of the most effective insulators of your house. It is made from castor oil and is sprayed on at the same thickness as paint. It then expands to almost a 100 times its volume to seal of all air leaks. It will stop drafts and make your home more sound proof. Although it traps air to insulate, water can move through the material, so your home will be safe from moisture buildup and its side effects.
These are some of the options for more environmentally friendly materials to use in your home insulation. Ask your contractor if they know how to install these or if they have any other ideas for materials that can work as well.