In the framework of general progress towards sustainable development, a review of European Union policy for an environmentally sustainable form of agricultural production is provided. At European level, interest is increasingly focused on integration of environmental aspects into the general policy. Agriculture is recognised as being multifunctional in character, since it plays an important role in protecting rural areas. This has had a direct influence in changing the CAP, which in the past ten years has acquired environmental awareness, and many efforts have been made by Member States to reduce the pressure of agricultural practices on the environment. The results obtained with the application of the CAP) in terms of improvement of the environmental impact of agricultural activities are encouraging. But it is paramount to adopt better evaluation tools, by selecting and adopting specific indicators for the different types of pressure on the environment caused by human activity. The statistical data needed to define of a set of environmental indicators relevant to agriculture are still lacking or are neither homogeneous nor easily accessible. Finally, a methodological approach to a sustainable, environmentally sound farm management is proposed and its main aspects are examined. Also, a possible system of environmental accounting at farm level is suggested.