External Influences On Business Activity: Environmental (Copy)

6.1 External Influences On Business Activity

6.1.7 Environmental

Physical Environmental Issues Affecting Business Behaviour

• Climate Change
  • Alters weather patterns, temperature, and sea levels.
  • Affects agriculture, tourism, and energy consumption.
  • Example: Rising temperatures reduce crop yields in agriculture.
• Global Warming
  • Increases regulatory pressures on firms to reduce greenhouse gas emissions.
  • Leads to investment in sustainable technology.
• Pollution (Air, Water, Noise, Land)
  • Businesses face pressure to cut carbon emissions, manage waste, reduce plastic use.
  • Failure leads to fines, loss of reputation, and consumer boycotts.
• Resource Depletion
  • Non-renewable resources (oil, coal, gas, metals) becoming scarce.
  • Encourages businesses to invest in renewable energy and recycling.
• Waste Disposal
  • Governments impose strict laws on waste management.
  • Businesses invest in waste treatment plants, eco-friendly packaging.
• Natural Disasters
  • Hurricanes, floods, and earthquakes disrupt production and supply chains.
  • Businesses must adopt risk management and contingency planning.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course

Environmental Audits

Meaning:

• A review of the impact of a business’s activities on the environment.
• Often conducted by independent organisations.

Purposes:

• Identify pollution levels and waste generation.
• Assess energy efficiency and resource use.
• Evaluate compliance with environmental regulations.
• Provide transparency to stakeholders.
• Suggest improvements for sustainable operations.

Stakeholder Use:

• Managers → identify cost savings from efficient use of resources.
• Employees → improved working conditions, pride in employer.
• Customers → assurance of ethical and eco-friendly practices.
• Government → ensure compliance with environmental laws.
• Local Community → confidence in reduced pollution and corporate responsibility.
• Shareholders/Investors → lower risk of fines and reputational damage.

Example:

• Marks & Spencer’s “Plan A” sustainability programme publishes regular audits on waste reduction and carbon emissions.

Impact Of Sustainability On Business And Decisions

Meaning Of Sustainability:

• Meeting present needs without compromising ability of future generations to meet their own needs.
• Involves environmental, social, and economic responsibility.

Key Aspects Of Sustainability:

• Environmental Sustainability: Reduce emissions, recycle, use renewable resources.
• Economic Sustainability: Ensure long-term profitability without exploiting resources.
• Social Sustainability: Supporting communities, fair labour, ethical supply chains.

Impact On Business Behaviour:

• Investment in green technology (e.g., solar power, energy-efficient machinery).
• Changes in product design (eco-friendly packaging, recyclable materials).
• Pressure to reduce carbon footprint.
• Need for sustainability reporting (triple bottom line).
• More focus on Corporate Social Responsibility (CSR) as part of brand strategy.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course

Advantages Of Focusing On Environmental Responsibility

• Builds brand loyalty among eco-conscious customers.
• Access to green markets and ethical investors.
• Reduces long-term costs (energy saving, recycling).
• Improves relationship with government and community.
• Helps meet international sustainability standards.

Disadvantages Of Environmental Policies For Businesses

• High cost of new technology and equipment.
• Short-term fall in profits due to compliance costs.
• May increase prices of products → reduced competitiveness.
• Some firms may struggle financially if regulations are strict.
• Risk of greenwashing accusations if actions are not genuine.

Strategic Responses To Environmental Issues

• Eco-friendly production methods (renewable energy, recycling, waste reduction).
• Innovation in green products to meet changing consumer preferences.
• Corporate social responsibility programmes to improve reputation.
• Compliance with laws to avoid fines or legal action.
• Collaboration with government/NGOs on sustainability projects.
• Investment in R&D for sustainable alternatives.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course

Quick Revision Examples

Exam Pointers

• Define technological, social, and environmental change clearly.
• Explain how environmental issues influence costs, location, production, and reputation.
• Include both advantages and disadvantages of CSR and sustainability.
• Mention stakeholders → consumers, employees, community, government, pressure groups.
• Provide real business examples (Tesco’s plastic reduction, Unilever’s sustainable sourcing, Tesla’s EV technology).
• Always include evaluation → weigh costs vs long-term benefits.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Business Full Scale Course