Green hydrogen is crucial for decarbonizing energy systems, particularly in sectors where electrification is challenging. Latin American countries have significant potential for green hydrogen production, with Uruguay's "Green Hydrogen Roadmap" aiming to export up to 1 million tons annually by 2040, requiring about 18 GW of additional renewable capacity. To address growing energy demands and formulate climate policies, sophisticated tools like energy system models (ESMs) are essential. However, existing ESMs often neglect indirect emissions, providing limited insights. Life cycle assessment (LCA) techniques provide a holistic view by including these emissions but are typically applied post-optimization. This study integrates LCA insights directly into Uruguay's energy system optimization using a novel framework called Impuls-urbs. The primary aim is to show how policymaking is influenced when considering the production of key materials and supply-chain greenhouse gas emissions within the optimization. The optimization results from a typical ESM and Impuls-urbs are compared for the case of Uruguay’s electricity and hydrogen sector. They showed a significant need for future expansion within Uruguay's electricity sector, driven by hydrogen production demands. Integrating upstream processes in the Impuls-urbs model revealed shifts in the optimal energy mix. Representing the indirect emissions and additional energy needs for the key material production influenced the power plant expansion priorities. In conclusion, Impuls-urbs offers a comprehensive assessment of Uruguay's green hydrogen ambitions, guiding strategic decision-making and policy formulation towards a sustainable energy transition. This approach provides insights into economic, environmental, and technical challenges and opportunities by evaluating the interconnected development of the material sector, electricity system, and hydrogen sector.