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Environment and Business

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Environment and Business

Many Londoners are aware of the Ultra Low Emission Zone (ULEZ) that operates all days of the year except for Christmas. Vehicles emitting CO2 above a certain level have to pay a daily surcharge before entering the ULEZ Zone. This was a necessary measure for the purpose of achieving clean air in London. Do you think this environmental measure affects London's businesses? If you answered yes, then you are one hundred per cent correct. This is just one example of the relationship between the environment and business. Let's now take a look at some other examples.

Relationship between environment and business

Businesses produce goods and services for profits or other motives. Firms operate on four factors of production: natural resources, human resources, capital, and entrepreneurship. This means that natural resources like land, water, and other raw materials gathered from the environment are essential for businesses.

On the other hand, the environment may not always be supportive of human habitats. Natural calamities like earthquakes or floods destroy businesses. Sometimes, it is not possible to do business in a region where there are not enough resources. Hence, the environment by nature limits business establishment or expansion.

Environment and Business, Industries causing pollution, StudySmarterIndustries causing pollution, Pixabay

Importance of the environment on business

Businesses also affect the environment, insofar as some businesses use excessive natural resources to produce goods.

Consider businesses in the petroleum industry. Mining and purifying mineral oil are simply not environmentally friendly.

Some industries produce goods that pollute the environment. You might have heard about the adverse effects of using artificial fertilisers, not only on soil but also on the health of consumers. Hence, many prefer ‘bio’ or organic produce nowadays.

The general awareness of the importance of the environment is increasing day by day. Governments around the world have implemented strong environmental laws and legislation. Many big companies are working to achieve sustainable production. Companies like Tesla are often favoured by consumers because of their environmentally friendly cars. Hence, businesses and the environment are strongly interrelated.

Positive and negative effects of business activities on the environment

Some businesses are environmentally aware and try to become sustainable.

Sustainability refers to the production of goods and services that can be continued in the long run without damaging the environment.

Sustainable businesses may have positive or neutral effects on the environment.

How can businesses achieve sustainability?

Businesses must change some of their activities to achieve sustainability. Some ways to achieve sustainability are:

1. Producing goods and services with environmentally friendly raw materials (e.g., omitting the use of chemicals that damage the environment).

2. Goods should be made from renewable materials or they should be recyclable.

3. The transportation of goods should be non-polluting (e.g., transportation through electric vehicles).

4. Use of renewable energy resources for production (e.g., solar, wind, etc.).

5. Reduced use of packaging.

6. Reducing waste generated from business activities.

7. Following environmental policies.

Environment and Business: External costs

We have already seen that business activities can damage the environment. Harmful business activities affect all of society, not just the people directly involved. These consequences are called external costs.

External costs occur when business activities affect individuals who are not involved in the business.

External costs often impact all of society.

For example, a paper mill requires wood and water as raw materials. If the demand for paper increases, the papermill will demand more wood. This means more trees need to be cut down to fulfil demand. Excessive deforestation is bad for the environment and impacts local communities due to noise pollution. It also affects wildlife, as their habitat becomes destroyed. These are the external costs of production that society has to bear.

Business activities and the environmental implications

Certain business activities can have significant environmental implications. For instance, certain manufacturing businesses may emit many harmful gases and use non-renewable resources, which contribute to climate change.

Business activities and environmental implications: Pollution

Air pollution is the most contributing factor to climate change. The following table shows the top 10 countries that contribute the most to air pollution.

Country

CO2 emissions in million tons

China

10,065

United States

5,416

India

2,654

Russia

1,711

Japan

1,162

Germany

759

Iran

720

South Korea

659

Saudi Arabia

621

Indonesia

615

Figure 1. Top 10 polluters, Source: Climate Trade1

Sources of pollution

Some of the main sources of pollution are outlined in Figure 2.

1. Agriculture: Nitrogen fertilizers used to grow crops and animal waste from slaughterhouses cause pollution.

2. Industries: Factories cause air, water, soil, and noise pollution while producing goods.

3. Transport: Vehicles running on fossil fuels contribute to air and noise pollution.

4. Power plants: Traditional power stations burn coal to create electricity (thermal power stations/ hydropower stations), which contributes to pollution.

5. Natural pollutants: Volcanoes and wildfires are also sources of pollution, though these are most often not caused by businesses.

6. Non-recyclable products: Do you know that plastic toothbrushes take 500 years to decompose?2 If not recycled, plastic is a major pollutant of land and water.

Environment and Business, Sources of Pollution, StudySmarterFigure 2. Sources of Pollution, StudySmarter

Noise pollution affects the environment in equal measure. Because of high-intensity noise from factories and aeroplanes, wildlife is under stress. Noise pollution affects animal breeding patterns and, as a result, some species are on their way to extinction.

Business activities and environmental implications: Climate change

Business activities that cause pollution and deforestation are one of the main causes of climate change.

Long-term changes in the weather pattern are referred to as climate change.

Many scientists have concluded that the surface temperature of the earth is increasing with the increase in CO2 concentration in the atmosphere. Even though some disagree with the seriousness of global warming, the adverse effects are visible around the world in the form of melting ice in the polar regions, melting glaciers, increasing sea levels, changes in the weather pattern, and severe flooding in some areas and severe droughts in others.

Business activities and environmental implications: Traffic congestion

Another adverse effect of business activities, like the transportation of goods, is traffic congestion. Traffic congestion causes vehicles to consume a lot of fuel. An increase in the consumption of fuel means an increase in air pollution. In 2019, Edinburgh and London were ranked 33rd and 45th in a global ranking of the worst cities for traffic congestion3.

Business activities and environmental implications: Use of non-renewable resources

Many businesses use natural and scarce resources such as water, land, and fossil fuels. In addition, ore and minerals are also available in limited quantities. Businesses must use such non-renewable resources responsibly; otherwise, there won’t be much left for future generations.

Business activities and environmental implications: Disposing of waste

The two waste disposal methods which are most damaging to the environment are:

1. Landfill method: means burying waste in the barren land, which causes soil and water pollution.

2. Incineration method: means burning waste, which causes air pollution.

Hence, businesses must make recyclable or biodegradable products to prevent further pollution of the environment.

Types of environmental factors affecting business decision making

Businesses are affected by internal as well as external factors. The external conditions under which businesses operate make up the business environment. Local politics, government intervention, availability of resources, and changes in technology are some examples of external factors that affect business.

In the context of this explanation, the word 'environment' means nature. Hence, the environment is one of the business environment factors, along with political, economic, social, technological, and legal. Together, they are known as 'PESTLE'. Following are the types of environmental factors that senior management must keep in mind before making decisions.

1. Availability of natural resources: businesses prefer places where natural resources such as land, water, and raw materials are available, as this can help them save transportation costs.

2. Climate: businesses (most often) do not place production units in places where the climate is unpredictable. A place with extreme weather conditions seldom has many industries.

3. Pollution: Businesses may make ethical decisions to change their pollution causing processes. Certain organisations, like hospitals, may choose not to be in a place with a high pollution index. Businesses should be careful about the effects of their operations on their surroundings. They need to make sure that they do not destroy plant life and wildlife in their vicinity.

Advantages and disadvantages of following environmental policies in business

Ethical businesses may adopt environmental policies to reduce the damage done by business activities to the environment. Policies like reducing packaging or using renewable resources have a more neutral impact on the environment. Companies often publically share their efforts towards the betterment of the environment by publishing ‘green reports’ similar to business performance reports like annual reports.

Advantages of following environmental policies in businesses

1. Publicity: businesses that publish green reports try to attract more environmentally aware customers. This publicity helps build goodwill for the business.

2. Stand out from the competition: the businesses that follow green policies get more attention from consumers than their competitors that haven’t implemented green policies.

3. Can charge a premium: companies that follow green policies can charge a premium for their unique products, and customers readily pay for it, as they get a feeling of satisfaction when helping the environment.

4. Long-lasting processes: Achieving sustainability throughout business processes means that businesses do not have to worry about scarce resources. This benefit allows businesses to run the same production processes in the long term without investing in researching alternative ways.

Disadvantages of following environmental policies in business

If following environmental policies are so beneficial, why aren’t all companies following them? Some of the reasons are mentioned below.

1. Costs: Implementing environmentally friendly policies can be expensive. Likewise, it is costly for companies to use environmentally friendly materials. In today’s world, businesses and consumers usually prefer to buy new products rather than recycled products, as new goods are cheaper.

2. Extra work burden: If businesses accept green policies, they have to monitor whether every production process falls within acceptable limits. Monitoring and investigating causes additional workload.

Responsibility of consumers toward the environment

It is not just businesses that need to change, but we as consumers must also accept the responsibility of saving the environment. Consumers need to choose unpackaged, recyclable goods. We should favour companies that follow green policies over other companies.

Travelling causes air and noise pollution. Commuters should use public transport, or at least share a ride. Aeroplanes are one of the major contributors to air and sound pollution. Avoiding air travel means helping the environment.

Following ‘RRR’- Reduce, Recycle, and Reuse can also have a positive impact on the environment.

Finally, it is important to report businesses that are causing pollution.

Environment and Business: Pressure groups

People come together to form different groups that keep a close eye on businesses and government policies. These groups are called ‘pressure groups’ because they can influence the policies and decisions made by governments and businesses. These groups cause awareness by organising rallies, protesting, writing letters, and using social media. Pressure groups shed light on the businesses damaging the environment and demand change. Some names to mention are Camp for Climate Action, Greenpeace, World Wide Fund for Nature (WWF), and Friends of the Earth.

Greenpeace

Greenpeace is a pressure group that has a presence in over 55 countries around the world, including the UK. Recently, Greenpeace campaigned against the plans of the UK Government to approve 16 new oil and gas drilling projects in the North Sea. One of those projects was the Cambo project.

Greenpeace activists blocked Downing Street with an oil-soaked statue of Prime Minister Boris Johnson. Activists also confronted the ship carrying drilling equipment for the Cambo oil field. The project was undertaken by Siccar Point energy in partnership with oil giant Shell, though it is now on hold after Shell pulled out of the project.⁴

Flourishing businesses are necessary for any country to grow economically, but an increase in businesses means a resulting increase in pollution and environmental damage. Businesses must consider the adverse effects of their actions on the environment. While companies can implement multiple green policies, it is also the responsibility of consumers to make environmentally friendly decisions.

Environment and Business - Key takeaways

  • Natural resources like land, water, and other raw materials that are gathered from the environment are of the utmost necessity to run a business.
  • Sustainability means producing goods and services that can continue for a long time without damaging the environment.
  • External costs occur when business activities affect individuals who are not involved in the business.
  • Agriculture, transport, power plants, non-recyclable products, and natural pollutants are some sources of pollution.
  • Long-term changes in the weather pattern are referred to as climate change.
  • The two waste disposition methods which are damaging to the environment are landfill and incineration of waste.
  • Traffic congestion, external costs, pollution, the use of non-renewable resources, and improper waste disposal are some of the adverse effects businesses have on the environment.
  • Businesses can benefit from following environmentally friendly policies. The benefits are good publicity, standing out from the competition, premium prices for products, and sustainable business processes.
  • Pressure groups can influence businesses and governments to set policies that are environmentally friendly.

Sources:

1. Which countries are the world's biggest polluters? 2022. climatetrade.com

2. Brian Armentrout. How long does it take for plastic to decompose? 2021. https://chariotenergy.com.

3. James Allen. Revealed: The Most Heavily Congested Citites in the UK. 2020. www.driving.co.uk

4. Krist Scheiby. 7 wins for the planet in 2021. 2022. www.greenpeace.org.uk

Frequently Asked Questions about Environment and Business

Businesses produce goods and services for profits or other motives. Firms operate on four factors of production: natural resources, human resources, capital, and entrepreneurship. This means that natural resources like land, water, and other raw materials gathered from the environment are essential for businesses.  

Traffic congestion, external costs, pollution, the use of non-renewable resources, and improper waste disposal are some of the adverse effects businesses have on the environment.

The environment is important to businesses because natural resources like land, water, and other raw materials gathered from the environment are essential for businesses. It is not possible to do business in a region where there are not enough resources. 

Some types of business and environmental relationships are:

  1. Availability of natural resources
  2. Climate
  3. Pollution

Some challenges imposed by the environment on businesses:

1. Climate change

2. Pollution

3. Natural calamities

4. Lack of natural resources

5. Traffic congestion

6. Waste disposal

Final Environment and Business Quiz

Question

State True or False.

Businesses are dependent on the environment to survive.

Show answer

Answer

True

Show question

Question

State True or False.

The petroleum industry is environmentally friendly.

Show answer

Answer

False

Show question

Question

What is sustainability?

Show answer

Answer

 Sustainability refers to the production of goods and services that can be continued in the long run without damaging the environment. 

Show question

Question

Mention the ways by which businesses can achieve sustainability.

Show answer

Answer

1. Producing goods and services with environmentally friendly raw materials (No use of chemicals that damage the environment).

2.  Goods should be made from renewable materials or they should be recyclable.

3. The transportation of goods should be non-polluting (electric vehicles).

4. Use of renewable energy resources for production (Solar, wind, etc.).

5. Use of reduced packaging

6. Reducing waste generated from business activities

7. Follow environmental policies

Show question

Question

Define external costs. 

Show answer

Answer

External costs occur when business activities affect individuals who are not involved in the business. 

Show question

Question

Which of the following is an example of an external cost if a British company import iPhones from the US? 

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Answer

Air pollution caused by transport

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Question

What are the sources of pollution?

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Answer

Sources of pollution are

1. Agriculture

2. Industries

3. Transport

4. Power plants

5. Non-recyclable goods

6. Natural pollutants

Show question

Question

What is Climate change?

Show answer

Answer

Long-term changes in the weather pattern are called Climate change.

Show question

Question

Explain the consequences of traffic congestion. 

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Answer

Traffic congestions cause vehicles to consume more fuel. An increase in the consumption of fuel means an increase in air pollution. 

Show question

Question

Mention two waste disposition methods that cause pollution.

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Answer

The two waste disposition methods which are damaging to the environment are: 

1. Landfill: The landfill method means burying the waste in the barren land. It causes soil and water pollution.

2. Incineration: The incineration method means burning waste. It causes air pollution. 

Show question

Question

What are the advantages of following the Green policy?

Show answer

Answer

Advantages of following the green policy:

1. Good publicity

2. Standout from competition

3. Long-lasting business processes

Show question

Question

What are the disadvantages of following the green policy?


Show answer

Answer

Disadvantages of following the green policy are:

1. Cost

2. Extra work burden

Show question

Question

What are Pressure groups?

Show answer

Answer

People come together to form different groups that keep a close eye on businesses and government policies. These groups are called ‘Pressure groups’ because they can influence policies and decisions of government and businesses. These groups cause awareness by organizing rallies, protesting, writing letters, and using social media. Pressure groups shed light on the environment damaging business processes and demand to change those.

Show question

Question

State True or False.

The responsibility of not damaging the environment lies solely on businesses.

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Answer

False

Show question

Question

How can consumers help save the environment?

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Answer

Consumers must

1. Choose low-packaged, recyclable goods

2. Prefer companies that follow green policies to other companies 

3. Use public transport or at least share a ride, avoid air travel

4. Follow ‘RRR’- Reduce, Recycle, and Reuse

5. Report businesses that are causing pollution

Show question

Question

What is sustainability in business?

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Answer

Sustainability in business talks about business practices that have a positive impact on the environment, society or community as a whole. Business sustainability seeks to reduce business practices with negative impact on the environment and society, making sure the business practices of today don't affect the future generations.

Show question

Question

Sustainable business practices includes these except


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Answer

Show question

Question

Ford’s investment in electric vehicles was to 



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Answer

Reduce the emission of greenhouse gases

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Question

 Using green-certified products is a step towards sustainability


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Answer

True

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Question

Sustainable business practices generate wealth for the businesses, true or false?

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Answer

True

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Question

 Give two reasons  why of sustainable business practices are important.


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Answer

 importance of sustainable business practises includes -

  • Apart from the social responsibility that comes with sustainability, sustainability also helps a business succeed by attracting new customers, new talents for the business and building up more support from the public. 

  • Sustainability also helps motivate business employees to work hard to improve the business reputation with its customers and align with the business vision and mission.

Show question

Question

what are the three sustainability principles


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Answer

the three sustainability principles are -

  • The Economy Sustainability

  • The Social Sustainability

  • The Environment Sustainability

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Question

The principle of sustainability says that for complete sustainability to be reached, the foundation of sustainability is to be …...




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Answer

Maintained

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Question

List five of the sustainable development goals 


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Answer

Zero poverty, Zero hunger, Good health and wellbeing, Affordable and clean energy, Decent work and economic growth

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Question

Explain economic sustainability


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Answer

The economic sustainability aims to maximise the resources available to a business in order to maintain profit generation for the business. It talks about the capital generation, with an aim towards improving standard of living and profit generation. 

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Question

 Explain environmental sustainability


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Answer

 Environmental sustainability looks to improve the human and nature welfare by looking to protect natural resources from pollution and exploitation. It also looks to make sure that in reaching the needs of the population, the future generations are not compromised in any way.



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Question

Give examples of environmental sustainability activities


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Answer

Examples of environmental sustainability activities include carbon footprint reduction, management and reduction of packaging waste, water bodies management and protection from pollution.

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Question

Explain the social sustainability


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Answer

This involves a business having the support and backing from its employees, investors, and from the people in the community its operations are sited. It is achieved through human investments and improving social quality through support for campaigns such as campaigns for equality and diversity. Social sustainability also promotes the ideas shared in the sustainable development goals which looks to improve and protect the environment and society at large.

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Question

Explain the role of the human pillar in sustainability


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Answer

This looks to maintain and improve the human capital in the society through investment in empowerment, education, food, good services and health services. Here, the wellbeing and growth of everyone in the society is the goal.

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Question

List the factors of sustainability


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Answer

The factors of sustainability are divided into four (4) pilars, they are 

  • The Social Pillar

  • The Human Pillar 

  • The Economic Pillar

  • The Environmental Pillar

Show question

Question

___ refers to the production of goods and services that can be continued in the long run without damaging the environment.

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Answer

Sustainability 

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Question

Which statement is correct?

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Answer

Sustainable businesses have positive or neutral effects on the environment.

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Question

Sustainability refers to production of goods and services that can be continued in the ___ run without damaging the environment.


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Answer

long 

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Question

___ costs occur when business activities affect individuals who are not involved in the business.


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Answer

External 

Show question

Question

Which country has the highest CO2 emission?

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Answer

China

Show question

Question

___ affects the environment in equal measure. Because of high-intensity noise from factories and aeroplanes, wildlife is under stress.


Show answer

Answer

Noise pollution 

Show question

Question

Long-term changes in the weather pattern are referred to as...


Show answer

Answer

climate change. 

Show question

Question

___ method means burying waste in the barren land, which causes soil and water pollution.


Show answer

Answer

Landfill 

Show question

Question

Incineration method means... 


Show answer

Answer

burning waste. 

Show question

Question

What does RRR stand for?

Show answer

Answer

Reduce, Recycle, and Reuse

Show question

Question

People come together to form different groups that keep a close eye on businesses and government policies. These groups are called...


Show answer

Answer

pressure groups.

Show question

Question

Camp for Climate Action, Greenpeace, World Wide Fund for Nature (WWF), and Friends of the Earth are examples of...


Show answer

Answer

pressure groups.

Show question

Question

Companies that follow green policies can charge a premium for their unique products.


Show answer

Answer

True

Show question

Question

Melting ice in the polar regions, melting glaciers, increasing sea levels, changes in the weather pattern, severe flooding in some areas and severe droughts in others are the effects of...

Show answer

Answer

global warming.

Show question

Question

___ in business refers to business practices that have a positive impact on the environment, communities, or society as a whole.

Show answer

Answer

Sustainability 

Show question

Question

Solar power and wind power are examples of...

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Answer

renewable energy.

Show question

Question

___ is the heating up of the earth's climate primarily due to the burning of fossil fuels as well as deforestation and other industrial and agricultural activities perpetrated by humans.


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Answer

Global warming 

Show question

Question

___ sustainability aims to maximise the resources available to a business in order to maintain profit generation.


Show answer

Answer

Economic 

Show question

Question

___ sustainability looks to improve human and natural welfare by looking to protect natural resources from pollution and exploitation.


Show answer

Answer

Environmental 

Show question

Question

___ sustainability involves a business having the support and backing of its employees, investors, and from the people in the community where its operations are sited.

Show answer

Answer

Social  

Show question

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