"Environment" is a noun. Any noun would make sense in the sentence: "Please add details such as pets, clothing, homework, games, food, or environment." "Environment" is a broad term that includes many things. Basically, it means surrounding conditions. It includes physical or atmospheric conditions like temperature and humidity, and also man-made factors such as music, conversational background, and even the tone of human interactions.

Here is a sentence from a book entitled "The Wonderful Wizard of Oz." In it, the author describes the "environment" in which the story begins. "When Dorothy stood in the doorway and looked around, she could see nothing but the great gray prairie on every side. Not a tree nor a house broke the broad sweep of flat country that reached to the edge of the sky in all directions. The sun had baked the plowed land into a gray mass, with little cracks running through it. Even the grass was not green, for the sun had burned the tops of the long blades until they were the same gray color to be seen everywhere."

it's probaly easier to correct if you put this under exercises: Can a native English speaker understand this sentence? It’s an instruction from a children's book, asking kids to write a short story. “Please add details such as the environment/setting.” What will you add after reading this instruction?

grammatically correct, but the context or meaning of the sentence is not easily understood.

Native speakers can understand and get the gist of what is required. But you have not helped us to help you very well, because you have not shown the full context. After reading the instruction a native English speaker would add details about the "environment" relating to the "context which you have not shown us".