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Business Studies IGCSEPDF 183
212 pagesrevision 46931
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Brand image and public relations: A
green reputation attracts customers,
employees, and investors.
WHY BUSINESSES WANT TO BE
ENVIRONMENT-FRIENDLY
Government and pressure group
relations: Compliance prevents fines,
protests, and bans.
Sense of social responsibility: They
recognize their contribution to global
warming and pollution and wish to act
ethically.
Positive consumer perception: Many
consumers prefer eco-friendly products
and are willing to pay slightly higher
prices for them.
Long-term resource security: Reducing
use of non-renewable resources
ensures long-term availability and lower
future costs.
Short-term profit loss: Eco-friendly
changes may reduce short-term
profitability.
Higher prices: To cover environmental
costs, firms may raise prices, which can
reduce demand and sales.
Definition:
Externalities are the unintended side effects (positive or negative) that a business’s
actions have on third parties (stakeholders other than the business and its direct
customers).
Reduced competitiveness: Businesses in
countries with fewer environmental laws
can produce cheaper products,
undercutting eco-friendly firms.
WHY BUSINESSES DO NOT WANT TO BE
ENVIRONMENT-FRIENDLY
High costs: Recycling, waste treatment,
and installing filters or renewable systems
require expensive machinery and skilled
labour.
Responsibility argument: Some firms
argue that it’s the government’s job — not
theirs — to clean up pollution.
3. Externalities (Spillover Effects)