Business Studies – 6.3.1 Environmental issues | e-Consult

Stricter environmental regulations can significantly impact a business's strategic decisions. Firstly, regarding where to locate production, businesses may avoid areas with stringent regulations and opt for locations with more lenient environmental laws. For example, a manufacturing company producing chemicals might choose to locate in a country with weaker emission standards, or in a region within a country where environmental enforcement is less rigorous. However, this decision involves considering the potential reputational damage associated with operating in such areas.

Concerning what to produce, businesses might shift their product lines away from those with high pollution potential. A company that previously manufactured products with significant waste byproducts might invest in developing and producing more environmentally friendly alternatives. This could involve researching and developing biodegradable materials, or focusing on products with a lower carbon footprint. The demand for 'green' products is increasing, making this a potentially profitable strategy.

Regarding how a business operates, the regulations will necessitate changes to production processes. This could involve investing in cleaner technologies, such as filters and scrubbers for emissions control, or implementing waste reduction and recycling programs. Businesses may also need to redesign their processes to minimize the use of hazardous materials. These changes often lead to increased initial investment but can result in long-term cost savings and improved brand image.

Example: A steel manufacturer facing stricter emission regulations might invest in new furnace technology to reduce air pollution. They might also explore using recycled steel to reduce the demand for virgin materials, thereby lowering their environmental impact. The cost of this new technology will be a factor, but the business may be willing to accept a lower profit margin to comply with the regulations and maintain a positive public image.