The forest-wood supply chain in Veneto (Italy) is experiencing a deep crisis due to a lack of coordination among its steps, increased competition from foreign markets, and the economic advantages of imported timber. One of the most critical points is the initial phase of processing, which struggles to compete due to outdated technology. This study analyzes a case study of a sawmill equipped with a biomass-fueled drying system, it aims at technological improvement following circular economy principles. An environmental impact analysis was conducted using the Life Cycle Assessment (LCA) methodology. The focus was on the impact of the moisture content of wood chips used to fuel the boiler, in terms of emissions produced during the drying process. The analysis revealed that the sawmill’s wood chips had a high moisture content (45%). A sensitivity analysis was conducted with three different moisture contents (25%, 30%, and 45%) to evaluate variations in thermal efficiency and emissions. The results indicate that the combustion process of wet wood chips has the highest environmental impact across multiple impact categories. Additionally, recommendations for optimizing drying efficiency and reducing emissions through improved biomass management are discussed.