An environmental strategy is an integrated set of choices about how a company should interact with the environment and its environmental stakeholders. A first step is identifying how a company impacts the environment and the stakeholder demand for improving those impacts. Stakeholders demand depends on the co-benefits they receive from environmental improvements and the resources they are able to deploy in pursuit of those improvements. A second step is identifying the market and nonmarket channels through which stakeholders can transfer value to the company in return for producing an environmental improvement. A third step is ensuring credibility – how can its stakeholders ensure that the environmental improvements are genuine and that each side will follow through on its promises in the exchange? A final step is to identify how the environmental strategy fits with the company’s competitive strategy. An environmental strategy can enhance a company’s market and nonmarket strategies in ways that are difficult for competitors to mimic, thus creating new sources of sustainable competitive advantage.