Insulation materials are critical for reducing building space heating energy demands and achieving net-zero targets, as well as for improved occupant thermal comfort. However, traditional insulation materials are frequently derived from unsustainable sources, therefore contributing to carbon emissions and environmental degradation. Mycelium-based composites (MBCs), a bio-based material made from mycelium—the filamentous structures of fungi—and an organic substrate, are a sustainable alternative. Thermal characterisation of insulation materials is a vital component of research and development of construction materials and underpins subsequent operational and embodied energy performance evaluation. Transient methods generally permit rapid testing and use of small specimen sizes, which is highly advantageous in material development. However, steady-state methods show more accurate measurements, especially for materials with some heterogeneity. The objective of this study is to identify sources of uncertainty in the thermal characterisation of MBCs, such as the presence of the fungal skin layer, and to seek to mitigate their effect such that reported thermal performance determined from both steady and transient methods could be more meaningfully compared. In this study, we found that, compared to thermal conductivity measured using a Heat Flow Meter (HFM) at 10 °C, the Hot Disk (HD) overestimates thermal conductivity by 40% for samples with the fungal skin on, and 26% for the samples with the skin off. In comparison to the HFM results at 20 °C, the HD overestimates thermal conductivity by 24% for the sample with skin on, and 11% for the sample with skin off.