Disinfecting things isn't as hard as some might think. Sewage processing, for example, is pretty low-tech. By the time your toilet water makes it to the plant, most of the poop has dissolved. They run the liquid through a metal strainer to get most of the non-organics out (condoms, tampons, etc). Then the sewage is pumped into settling ponds where most of the solids settle to the bottom and they aerate it so that the bacteria can do their thing and digest it further. They move the liquid through a succession of ponds and tanks until it's basically clear and everything has settled out. To disinfect it, they either run it through a mesh of UV light tubes or add bleach (less ideal). After that's done, you could basically drink the water but they typically dump it into a stream.
And then the next city downstream gets that water and drinks it anyway.
Depending on where you live (i.e. near a large river) reducing water usage doesn't really make much environmental difference, as long as you dump it in the sewer: The water gets reused many many times on its way to the ocean.
Sewage treatment is really hard and a costly thing to do, it might be low tech but it is still hard to disinfect water once you have polluted it with water flushing toilets. Grey water is another thing completely but that is off topic here.
