You need to actually use the environment variables if you want them to do anything.
'sqlsrv' => [
'driver' => 'sqlsrv',
'host' => env('DB_HOST', 'localhost'),
'database' => env('DB_DATABASE', 'database'),
'username' => env('DB_USERNAME', 'root'),
'password' => env('DB_PASSWORD', ''),
'charset' => 'utf8',
'prefix' => '',
],
Then it should use the ones set in your .env file.