Thermal insulation of buildings is a critical area of interest for reducing the energy load required for heating and cooling. In this, retrofitting older buildings with modern and sustainable thermal insulation materials is gaining importance rapidly. Herein, we report a novel, bio-based, low-density (0.038–0.095 g cm−3) composite granules by high-shear co-granulation of wood pulp fibre and polymer microsphere using chitosan as a bio-based binder. The process parameters such as binder concentration, composition, and chopper speed were optimized to obtain composite granules in the size range of 4–8 mm. The optimized composite granules exhibited adequate compressive strength in the range of 106.05–155.78 kPa at 20 % strain and good pumpability. The steady-state effective thermal conductivity of the granules was determined to be in the range of 43.4–50.7 mW m-1 K-1. The study shows that lightweight and pumpable composite granules can offer a sustainable alternative to conventional fossil-based granular insulation materials, especially in the refurbishment of expired insulations in old structures.