Business Impacts on the Environment (Cambridge International IGCSE Business)

Pollution

Spec point — how business activity can negatively affect the environment, e.g. pollution, depletion of resources

• Some industrial processes generate pollutants, including air and water emissions, hazardous waste and chemical byproducts

  • The disposal **of these pollutants can harm ecosystems, wildlife and human health
  • For example, the** burning of fossil fuels releases large amounts of greenhouse gases into the atmosphere

• Food and consumer goods manufacturers account for 60% of worldwide greenhouse gas emissions

• Single-use plastics are also a huge concern

  • They produce toxic chemicals when they break apart
  • This causes pollution and harms animals, such as marine turtles, who become entangled in plastic found in the sea

Depletion of resources

• Natural resources, such as water, energy and raw materials, are used in business operations

  • Excessive consumption of these resources can lead to their depletion

• Materials and products may be sourced from environmentally sensitive areas

  • Industries like logging, agriculture, and construction contribute to deforestation in locations such as South America
  • This has a significant impact on biodiversity and contributes to global warming

Why businesses respond to environmental issues

Spec point — e.g. improved reputation, increased sales

• More businesses are taking action to reduce their environmental impact

• This is partly due to growing public concern

  • According to a 2023 UK survey, over 80% of consumers said they were more likely to buy from a company that takes sustainability seriously

• Governments are also introducing stricter environmental laws, and pressure from stakeholders *like customers, employees and investors is increasing

Reasons to respond to environmental issues

Exam Hint Many students think environmental responsibility only increases costs. Remember, it can also be an opportunity—such as attracting eco-conscious customers or gaining a competitive edge. Examiners reward answers that recognise both challenges and benefits

How businesses respond to environmental issues

• With growing concern about climate change, pollution and resource use, many businesses are taking action to reduce their environmental impact
• These actions can help businesses save money, follow the law and build customer trust

Businesses may respond to environmental issues by reducing waste, using sustainable materials and eco-friendly packaging and encouraging green behaviour

Business responses to environmental issues

Reducing waste

• Businesses can reduce, reuse and recycle materials to cut down on landfill waste and pollution

Improving energy efficiency

• Installing energy-saving equipment, such as LED lighting or solar panels, helps reduce electricity use and lower carbon emissions

Using sustainable materials

• Switching to recycled or eco-friendly materials can reduce environmental damage and appeal to green customers

Changing production methods

• Businesses may invest in cleaner technology or reduce harmful emissions during manufacturing to lower their overall environmental footprint

Eco-friendly packaging

• Using biodegradable or recyclable packaging helps reduce plastic waste and limits environmental harm

Encouraging green behaviour

• Businesses can promote eco-friendly habits, such as offering discounts for reusable bags or encouraging employees to cycle or walk to work

Case Study Danone's Steps To Reduce Its Environmental impact

Danone, known for brands like Activia and Evian, has taken major steps to reduce its environmental impact, especially in food production and packaging

Actions

• It has committed to becoming carbon neutral by 2050 and has already achieved carbon neutrality in several of its factories
• The company works with farmers to support sustainable agriculture, using fewer chemicals and protecting soil health
• It has invested heavily in plant-based products, such as dairy-free yoghurts and drinks, which generally have a lower environmental footprint than animal-based alternatives
• Danone is redesigning its packaging to use 100% recyclable, reusable or compostable materials by 2025, with several water brands already using bottles made entirely from recycled plastic

Outcome

These actions help Danone meet legal requirements, reduce its carbon footprint and build a strong reputation with environmentally aware consumers

Legal controls over business activity affecting the environment

Spec point — "effects of legal controls over business activity affecting the environment: how, what and where to produce or sell, influence on costs"

Effects of legal controls on business activity and the environment

• Governments pass environmental laws to reduce damage caused by business activity. These laws affect:

  • How businesses produce
  • What they produce
  • Where they produce or sell
  • The costs of doing business

1. How businesses produce

• Legal controls may ban or restrict harmful production methods (e.g., limits on factory emissions, rules on waste disposal)
• Businesses may need to invest in cleaner technology, filters, or recycling systems
• Impact: Higher production costs, but safer working and living environments

2. What businesses produce

• Certain products may be banned if they harm the environment (e.g., plastic bags, toxic chemicals)
• Businesses may be forced to redesign or switch to sustainable alternatives
• Impact: Higher R&D costs, but opportunities to innovate and appeal to eco-conscious consumers

3. Where businesses produce or sell

• Firms may be prevented from locating near protected areas (e.g., national parks, residential zones)
• Laws may restrict selling in markets where environmental standards are not met (e.g., exporting to the EU with strict rules)
• Impact: Limits expansion but protects communities and ecosystems

4. Influence on costs