Page 324 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 6 External influences on business activity

■ It may set standards that businesses have to meet when using natural resources; for
example a certain percentage of this must come from renewable sources.
■ Businesses may not be permitted to set up in some areas.
Governments also help businesses to be environmentally friendly by:

■ Making environmental information more accessible. This can be done by setting up
organisations to provide environmental management advice.
■ Enabling recycling by providing waste collection vehicles, containers and
coordinating collection of waste for businesses.

Incentives
Government incentives encourage businesses to be environmentally friendly. Th e
following incentives are common in a lot of countries:

■ The government can reward the greenest companies with tax credits.
This encourages businesses to go green as this will help improve their
profits.
■ The government can make policies that allow tax exemptions for companies using
renewable sources of energy and being energy eff icient.

For example, the Energy and Environment Park (enpark) has been set up by the
government of UAE, to encourage businesses to be more environmentally friendly.

It offers a tax-free business environment for energy and environment management
companies, located in Dubai. It provides support for sustainable business
322 operations through the integration of environmentally friendly policies, knowledge
and technologies, combining environmental, social and economic elements to
encourage sustainable development.

ACTIVITY 25.3

ABC Tyres, a tyre manufacturing company, wants to open a new plant. Although the site is located on the outskirts of a big
city, it is close to a residential area. The government is considering the environmental impact of this plant before allowing
the company to go ahead.
The government’s analysis shows that manufacturing of tyres involves the use of toxic chemicals and generates large
amounts of waste. The plant will also require huge amounts of water and power. The government does recognise that the
plant will generate employment in the local area. To benefit from this, the government is also looking at ways in which the
environmental impact can be reduced or controlled.
1 Analyse the impact this new plant may have on the environment.
2 How will it affect the residents living in the area?

3 How can the government control the environmental impact of the plant?

Ethical issues faced by businesses
Businesses must make sure that they satisfy the interests of all stakeholders,
whether they are individuals, organisations or the community. We usually expect

businesses to behave responsibly when carrying out their activities. This is known
as business ethics. Although not always enforced by law, business ethics have a vital
role to play in decision-making.