6.2: Environmental and Ethical Issues Notes:

Environmental Impact of Business Activity

Examples:

• Air pollution from factories.

• Water pollution from waste disposal.

• Carbon emissions from transport.

• Use of non‑renewable resources.

Arguments For & Against Environmental Responsibility

Argument A: Profit First

• Environmental protection is costly.

• Higher prices → loss of competitiveness.

• Consumers may not want to pay more.

Argument B: Social Responsibility

• Global warming affects everyone.

• Consumers prefer eco‑friendly firms.

• Pressure groups can damage reputation.

• Long‑term sustainability benefits business.

Externalities

Key Definitions

• Private costs/benefits: affect the business directly.

• External costs/benefits: affect society.

• Social cost = private cost + external cost

• Social benefit = private benefit + external benefit

• Governments use cost–benefit analysis to decide whether projects should proceed.

Sustainable Development

Definition:

• Development that meets current needs without harming future generations.

How Businesses Can Support Sustainability

• Use renewable energy.

• Recycle waste.

• Use fewer resources (lean production).

• Develop eco‑friendly products.

Environmental Pressures on Business

1. Consumers

• Boycotts if firms damage the environment.

• Preference for eco‑friendly products.

2. Pressure Groups

• Protests, campaigns, media exposure.

• Effective when:

  • strong public support

  • media coverage

  • consumer boycotts

3. Government Legal Controls

• Banning harmful waste disposal.

• Pollution limits.

• Restrictions on factory locations.

• Pollution permits (pay to pollute up to a limit).

Ethical Issues in Business

Common Ethical Dilemmas

• Child labor

• Bribery

• Environmental damage

• Price fixing

• Excessive director pay vs low worker wages

Benefits of Ethical Behavior

• Better reputation → more customers.

• Easier recruitment.

• Avoid legal action.

• Long‑term profitability.

Limitations

• Higher costs (fair wages, safe conditions).

• Higher prices → possible loss of customers.

• Short‑term profit reduction.

NOTES DONE BY FARIDA SABET

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