Like any other farm animal, sheep are often abused and kept in terrible conditions. Little care is given to the welfare of an animal beyond what is necessary for it to make products for us. There are certainly farms out there that treat their sheep very well, but there's no guarantee that that's where your wool comes from.

I haven't looked into the environmental impact of wool specifically, but other animals use significantly more land, use more water, and produce more waste that gets into the natural waterways than plant based alternatives.

The fact that sheep would die if not sheered is irrelevant. They shouldn't exist. They are fucked up mutants created to make a product for humans.