Can businesses afford to be concerned about the environment?

The International Standards Organisation regulates the levels of pollution by imposing extra costs where standards have not been met and even allow opportunity to benefit from being made an example. Social cost are those costs that affect society as a whole e.g. level of noise and dirt pollution

Businesses that do exploit the environment are in constant fear by the actions of pressure groups. These are organised groups of people who combine to protect the environment and welfare of society. Pressure groups can influence their views in a number of ways, which may disrupt the operations of a business. Direct action normally involves either picketing a factory or boycotting a product. This may mean a disruption in the raw materials and components being delivered to factories and therefore a delay in production - "Time is money". This may affect the international competitiveness and may exclude benefits of economies of scale.

An environmentally friendly and ethical business may offer a number of marketing opportunities. For example, the Body Shop (cosmetics) has followed this approach, which has helped gain a competitive edge over rivals. The advertising within the shop and on the label of the product states that non of the research had been tested on animals and by addressing this factor, the products was sold at a premium price with a unique selling point which would see Body shop develop into the market leader.

The success not only allows the business to breed hansom profit margins, but help increase the level of motivation within the workforce.

Firms may also find it easier to raise funds if the have a good and clean environmental record i.e. the Co-operative bank will not lend money to business that damage the environment.

Trade-offs may exist because adopting an ecological sound production process may provide special capital and job losses.

Meeting the standards imposes additional costs on business, as they may need to introduce new processes, retrain employees and use more expensive resources. A firm may want to carry out an environmental audit, which measures the impact of there operations in society. An environmental "SWOT" analysis investigates into the current strengths and weaknesses of what the firm and predicting future opportunities and threats.

Strengths

* Public image for "greenness"

* Recycling activities.

* Staff involvement.

* Environmentally friendly products.

Weaknesses

* Continuing emissions in the atmosphere.

* High-energy use.

* Toxic waste.

* High dependence on road transport.

Opportunities

* Scope for waste production.

* R&D development in developing green products.

Threats

* EU Legislation.

* Increasing cost of landfill sites.

A firm must weigh up the pro's and con's of the environment and it must be looked at both short and long term i.e. should a manufacturing business use a cheap, non-sustainable source of timber or a more expensive, sustainable supply that may mean lower profits for shareholders.

Can business afford not to be concerned about the environment?

Shell is one of the leading oil producers who have suffered short-term problems due to the actions of pressure groups. The proposed plan to sink the Brent Spar oilrig off the West Coast of Scotland was deemed to have an environmental impact on the surrounding area. Members of Friends of the Earth chained themselves to the rig; while some members on land attacked Shell petrol stations to enforce there belief on what shell was doing was wrong. However, Shell learnt from their mistakes and invested £4m in an energy recovery plant, which burns wastes to give a "clean" public image.

Economists regard pollution as a market-failure to be tackled by government policy. Government intervention may by in a direct manner over certain practises or the imposition of "green taxes". The latter is favoured by those that favour market principles, since it makes the polluter pay for the damage caused. This may make firms more conscious on the consequences of over polluting as there a constant threat of extra costs, which may affect the level profits and overall competitiveness.

In society today, it would be deemed ignorant if a firm ignored its impact on the environment, and with businesses now operating within a single market across Europe, firms can face large penalties when not conforming with the rules and can damage the reputation and international competitiveness of any firm.

Mark Lewis Williams 20/04/07