From the Distillery docs:
With Mix projects, your configuration is evaluated at runtime, so you can use functions such as System.get_env/1 to conditionally change configuration based on the runtime environment. With releases, config.exs is evaluated at build time, and converted to a sys.config file. Using functions like System.get_env/1 will result in incorrect configuration.
This means if you are using a 12FA-style environment variable configuration for your app, your build systems would potentially need to be configured with those same variables.
One solution is to set REPLACE_OS_VARS=true in your build environment and define shell-style variables in configuration strings that Distillery's runtime will automagically replace when first running the build on the target deployment.
config :sauce, api_url: "${SAUCE_API_URL}"
Another solution is to use Confex or a configuration wrapper that knows how to understand and read configuration values such as {:system, "VAR"} from the environment at runtime. However, you may still be at the mercy of your application's dependencies.
Yet another solution is to use Conform, by the same author as Distillery, which addresses the core issue and provides additional benefits like validation of end-user configuration against a schema and an easy-to-use configuration file for end-users and/or system administrators.