The treatment of agricultural and forest residues (AFRs) has become an important issue nowadays, both to avoid improper management and for their enhancement. In the study area of Viseu (Portugal), the AFRs are taken to a Residual Biomass Collection Centre. These are valorised in a Biomass Power Plant to produce electricity. Two further processes could be implemented to valorise this biomass: mulching and composting. This study aims to understand the best strategy to enhance this type of biomass residual considering their environmental performance. The Life Cycle Assessment (LCA) was applied considering a cradle-to-grave approach. Different processes of all the technologies were analysed, and the data collected enabled a comparison of 11 environmental impact categories. The results show that composting is the best alternative, except for global warming and ozone layer depletion, and energy valorisation has the greatest impact on five of the considered categories. In the three processes, impacts are mainly associated with the production and shredding phases of the residual biomass, rather than the transportation stages, due to the short distances covered. In all cases, the value of the final product generates market consequences in terms of electricity and fertiliser production. In line with the aim of the study, its outcomes may provide scientific support to local decision makers in defining best practices in the management of the AFRs.