Environment variables play a crucial role in enhancing the flexibility, scalability, and security of Node.js applications by allowing dynamic configuration without code modification. They are key-value pairs stored outside the codebase, holding sensitive data like API keys and database credentials, which helps keep applications secure across different environments such as development, testing, and production. The article outlines best practices for using environment variables, such as validating them at startup, avoiding committing sensitive files to version control, and potentially using a Key Management System (KMS) for added security. It also discusses various methods for setting environment variables in Node.js, including using the dotenv package, setting them at the system level, within launch scripts, using PM2 process manager, and within Docker containers, while emphasizing the importance of never exposing sensitive variables to the frontend. Clerk uses environment variables in its SDKs to configure and authenticate applications within its dashboard, demonstrating the practical application of these practices.