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External Environment: Business & the Environment (GCSE)

AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

Twenty years ago, environmental issues were rarely a priority on the agenda of business management. Now, there is an argument that operating an environmentally-friendly business is a top priority for business, particularly those whose operations and activities are nationwide and international. The environment has become a key external influence on businesses.

The key environmental issues which potentially constrain the ability of a business to achieve its objectives include:

Business & environmental regulation

Business activities are regulated by three main agencies in the UK:

  • Environment Agency in England and Wales
  • Northern Ireland Environment Agency
  • Scottish Environment Protection Agency

And also by Local authorities who regulate

  • Air quality & pollution
  • Noise, odour and light pollution
  • Land contamination
  • Environmental health

Environmental laws and regulations are wide and varied, but essentially businesses have to make sure that they:

  • Store and treat waste safely and securely
  • Protect employees and environment from air pollution
  • Don't produce excessive noise, smoke, fumes & other forms of pollution
  • Comply with rules for storage and use of hazardous substances & waste

To meet their obligations, businesses need to focus on:

  • Use of raw materials, water and other resources (inputs)
  • Energy use and its impact on climate change
  • Waste and pollution produced by the business
  • The impact the business has on employees and the local, wider and international community

Whilst complying with these regulations and laws inevitably imposes additional costs on many businesses, it is possible to identify some advantages that arise for the environmentally-conscious business. These include:

  • Lower raw material costs & waste disposal charges
  • Longer life of assets which are recycled or repaired
  • Trading opportunities with organisations that will only use environmentally-friendly suppliers
  • Improved customer goodwill

Sustainable business

You will see the word "sustainable" or "sustainability" used in many businesses these days.

A sustainable business is a business that has no negative overall impact on the environment.

That definition makes it quite hard to quantify whether the goal of sustainability has been met, since it assumes the net effect of a business activities on the environment can be measured in full. In practice, a business that aims to be sustainable gets involved in a range of activities designed to "minimise" their net effect on the environment. These are activities such as:

  • Using packaging that can be reused or recycled
  • Minimising or eliminating the use of hazardous chemicals and processes that produce harmful by-products
  • Working with suppliers to assess and improve their sustainability, or switching to more sustainable suppliers
  • Using more energy-efficient equipment, or using renewable sources of energy
  • Collaborating with other businesses that can use waste (or supply by-products that can be used as raw materials)
  • Eliminating unnecessary activities – e.g. replacing some business travel with conference calls instead

To be effective, a strategy of building a sustainable business requires the drive and support of people through a firm – particularly top management. Management need to:

  • Understand how changes will affect employees and other stakeholders
  • Gain commitment and support from those stakeholders
  • Anticipate changes in environmental legislation - try to be "ahead of the game"
  • Set short and long-term objectives for sustainability projects
  • Review progress and objectives regularly

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