This paper provides a discussion of the relationship between environmental and economic performance and the influence of corporate environmental strategy choice on this relationship. After formulating a theoretical model, it reports results of an empirical analysis carried out for the European manufacturing industry, which uses new data to test hypotheses derived from the model. Corporate environmental strategies are identified on the basis of their orientation towards shareholder value. The analysis finds that for firms with shareholder value-oriented strategies the relationship between environmental performance and different dimensions of economic performance is more positive than for firms without such a strategy. © 2004 Published by Elsevier Ltd.