What does environmental impact mean in business?

Table of Contents Show

How to Measure Environmental Impact?
Negative Impacts
Assessing Impacts
For Further Reading
On this page
Make your business environmentally friendly

Environmental impact is simply the effect of activities on the natural environment. Because nearly every business activity has an impact (some positive - but mostly negative), it is important to assess or measure the impact of those activities.

The information from these assessments or measurement will inform the decision-making process and the future actions taken. This is true in marketing as well as other areas of business practice. Marketing is tasked with growing the business; thus, many of the efforts of marketers have a direct environmental impact.

How to Measure Environmental Impact?

There are many methods for assessing environmental impact and many metrics or data to observe. Some common measurements include:

Carbon Footprint
Water Use
Solid Waste

Positive measurement for environmental impact might include:

Reforestation
Preservation and Education Programs
Recycling

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Figure 1. A deforested hill in Burma, as a result of resource and energy demand.[1]

An environmental impact is defined as any change to the environment, whether adverse or beneficial, resulting from a facility’s activities, products, or services.[2] In other words it is the effect that people's actions have on the environment. For example, when volatile organic compounds are released into the environment, the effect or impact is pollution in the form of smog, in this case being negative. It can go the other way, as a person picking up litter can have a beneficial impact on the local environment.

Negative Impacts

The primary impacts of concern in an energy dependent society often come as a result of our energy use. Burning hydrocarbons like coal and oil to provide us with useful energy results in the emission of carbon dioxide and other pollutants. Other activities causing harm include improper waste disposal to bodies of water and soil, accidental spills of chemicals, increased demand for resources as populations increase (especially due to consumerism), and much more. The impacts that these have on the environment have become clear and include:

There are many issues in the world that are causing one or more of these effects. The oil sands, for instance, are of great concern to many these days as they essentially contribute to each of the above impacts, see environmental impacts of oil sands.

For information on how the average person may be affecting the environment, visit CO2 footprint and anthropogenic effects.

Assessing Impacts

The environmental impact a specific action may have can be analyzed using a life cycle assessment, which is the process of observing a product from its "cradle to grave" and determining the impacts associated with it at each step.[3] These methods are somewhat subjective and resource intensive.[2]

Emission inventories for example may quantify the emission of pollutants, while risk assessments can analyze the effects these pollutants will have on the health of those within the environment.

Process hazard analysis involves identifying and assessing potential impacts of unplanned hazardous materials. A team may rank the possible hazards and focus on preventing those that can cause the most harm.

For Further Reading

References

Environmental influences on businesses can be internal or external, and these can work separately or together to influence a company’s operations. While some influence a business’ performance directly, others are more indirect. They can all provide challenges, opportunities and threats in countless ways.

The writers at AccountLearning.com list the critical factors of business environments and how they influence outcomes. First are geographical, ecological and natural factors, and an example of this can be seen in how goods are consumed. People who live in North India might eat different cuisine than those in South India, so particular kinds of foods and supplies will sell better in the respective regions. Geographical factors like climate and vegetation influence what can be grown where; for example, areas like Mumbai have conditions more favorable to growing cotton and areas with more natural bodies of water are richer in aquatic life.

Demographics also come into play, as they influence demand patterns and different kinds of marketing strategies. These demographics also impact the kind of labor force a region might have. On top of those factors, political loyalty also plays a massive role that pushes companies and employees to make critical work decisions. When a region’s political situation deteriorates, it can get so problematic that companies are forced to shut down.

What about local, regional and national economic environments? These can be very deliberate and direct and mainly depend on a country’s economic system. That can be capitalist or free trade, communist, socialist, centrally planned or mixed. Businesses are supposed to follow governmental laws and policies or risk paying significant penalties; many parts of the world operate under highly regulated business environments, and some are much stricter than others.

The health and size of the national economy is another important factor that affects the ability to obtain resources and turn a profit. Governments act as financiers and suppliers through their financial institutions and natural resources, and when an economy slows down, these pipelines are impacted. Social environments also play a significant role, whether it is a major cultural upheaval like the George Floyd murder or the #MeToo Movement. Industry social cultures and internal office politics are also on the list of environmental impacts on businesses.

Technical and physical business environments are also vital to this discussion. Technology is how the work is accomplished, such as computer systems, video tutorials and cell phones. You also have physical components like weather, climate and pollution. Like most of the other environmental impacts on business, humans can manage pollution, but it often spirals out of control. The writers at the BBC post that all business activities impact the environment through the use of natural resources and by creating waste products. So, in a nutshell, businesses contribute to pollution and can be impacted by it.

The top environmental issues in the world that businesses should be concerned about are waste reduction, pollution, sustainability and climate change. Practices such as recycling supplies, using devices that save water and energy, and reducing the amount of waste generated can all help. Advocates push for businesses to do green audits, which can measure carbon footprints and help businesses find ways to institute more sustainable practices.

Being environmentally friendly has its advantages, too. It can lower operating costs and increase sales. Companies that recycle don’t spend as much on supplies, and consumers are more attuned than ever to the importance of protecting the environment. Many even refuse to do business with companies that do not employ these practices. Governments sometimes offer money to businesses that are invested in environmentally friendly methods.

The community and your customers are becoming more environmentally aware and educated.

An environmentally friendly business:

operates in a sustainable manner, causing minimal damage to the environment and using renewable resources where possible
considers where its supplies come from and how they are made—it will work with environmentally responsible suppliers and source materials locally to reduce its carbon footprint
seeks to remove or minimise any negative effect it has on the environment
considers the effect its products and services have on the environment
limits unnecessary packaging and manages stock production to reduce waste.

Your business reputation, ability to sell products and services and attract staff may all be affected by the environmental policies and procedures that you have in place.

more effectively meeting the product and service needs and expectations of customers who value environmentally friendly practices—they will feel positive after purchasing products from a business that is proving to do no harm or minimises harm to the environment
developing a positive reputation
being more attractive to staff and business partners who value environmentally sustainable practices
attracting new customers who are seeking environmentally friendly products and services
creating innovative practices that positively affect the environment and can lead to increased sales
having a competitive advantage over non-environmentally friendly competitors.

Being environmentally friendly also has cost benefits, including:

the reduction of transport and packaging costs by using environmentally friendly and locally sourced resources and supplies
the reduction of vehicle and operating costs by using renewable energy
savings from becoming more energy efficient (e.g. less water and electricity usage)
the money saved on waste removal through recycling and reducing waste
the ability to attract more grants through, for example
- planning for changes to the climate
- reducing reliance on older, more expensive types of energy
- sourcing more local products and services
the increased possibility of success in sustainable procurement tenders—your eligibility will improve if your business can demonstrate how it has or can reduce negative environmental effects of purchased products and services.

Make your business environmentally friendly

Small businesses can work to be part of a circular economy where decisions and choices are made to eliminate waste and ensure resources are reused and recycled.

To make sure that your business is part of this economy, consider setting up an environmental management system within your business or discussing appropriate systems with your industry association.

Other ways you can make your business more environmentally friendly include:

using products that reduce your reliance on natural resources (e.g. rainwater tanks, solar hot water systems). Learn about saving water in your business
using products that are made from recycled material (e.g. office supplies made from recycled plastic, furniture made from recycled rubber)
conducting an environmental impact audit (discussed below) to assess if any of your activities can be done differently (e.g. reducing air travel by holding conference phone calls instead of interstate meetings)
increasing the amount of business waste you recycle
reviewing your business values—you should ensure that sustainability and environmentally friendly practices are reflected in them
asking your employees, suppliers and networks for ideas or advice.

You should also understand the environmental obligations and duties that you have to meet.

You might also consider using a small business sustainability advisory service.

These services can help you complete an environmental road map and provide mentoring. Help to become environmentally friendly is available via free programs including:

ecoBiz program (from the Chamber of Commerce and Industry Queensland), provides Queensland small to medium businesses with a free on-site one-on-one coaching session with a sustainability expert, to help cut business costs associated with energy, water, and waste usage while reducing environmental impacts.
Business Energy Advice Program (BEAP), which delivers face to face and phone consultations about industry-specific energy saving opportunities and options for small business to help manage their energy.

An environmental impact audit can be used to assess how environmentally friendly your business is. The findings of the audit can be used to help your business implement changes to ensure that you minimise any environmental damage it may be causing.

An environmental impact audit involves analysing how your business:

procures resources
creates products
deals with waste.

An environmental impact audit involves 3 phases.

Phase 1: Before operations (procurement and preparation)

When starting operations to make your products, you should identify where components and supplies, including packaging, come from and what environmental impact they have before they are used in your business.

Phase 2: During operations (manufacturing, assembly, creating)

You should analyse the impact on the environment that occurs during your business operations to make your products. Consider:

how much energy is used
what processes are involved with maintaining equipment
how you service customers
where you operate.

Phase 3: Finishing operations (clean up and waste management)

Assess the environmental impact that occurs after your business operations to make your products are complete. Consider the following.

Where does your waste go?
What is the quality of water and air as it leaves your premises?
How are products and packaging recycled?

Environmental impact audit example

Read the following example of an environmental impact audit of a business that manufactures custom wood furniture.

These questions were considered before starting operations to make the furniture:

What supplies or services does the business receive?
How far do the supplies or services travel?
What happens to them before the business receives them?
Are there any other environmental issues?

Current state

The business imports wood planks by ship from Indonesia.
The planks are fumigated before being loaded for shipping.
There is a possible sustainable sourcing issue with no transparency of forestry practices.
There is limited information on carbon emissions and waste management.

Changes to implement

Source wood that is reconstituted forest waste product (recycling).
Research sustainable products and materials.
Find Australian-made products that requires less energy for transport.
Use heat to bond natural wood resin.
Make changes to ensure all products are formaldehyde-free.
Aim for a net-zero carbon footprint or better.

These questions were considered when manufacturing the furniture:

What energy does the business use?
What equipment and packaging are used?
What transport is used?
What is the business location and the type of premises?
How does the business use the premises (inside and out)?

Current state

The business uses electricity from the grid.
The office has an old, large refrigerator that may be leaking from its seal.
Products extensively used during operations include disposable plastic wrap and petrol for the work car.
There is an old warehouse 30 minutes from the main road that is used to service the Queensland coast.
There is a large yard that is currently not in use.

Changes to implement

Install solar panels.
Service the fridge.
Source Australian alternative to disposable plastic wrap (e.g. made from potato water waste).
Replace the car with an electric or hybrid vehicle.
Lease a green building close to the transport route.
Create greening initiatives (e.g. planting trees).

These questions were considered when the furniture was completed:

What is the business waste?
Where does the waste go?
Does the business recycle onsite?
What is the quality of water and air leaving the property?
What happens to chemical waste?
How do customers use and dispose of our products?

Current state

The business creates cardboard waste.
There are no recycling options onsite, so all waste (cardboard, chemical and food) goes into general rubbish.
The quality of water and air is not affected and chemicals are disposed of according to relevant regulations.
Our products are thrown away by customers when they break or require replacement.

Changes to implement

Recycle food waste onsite or give it away to gardeners.
Clean and recycle water on site.
Use alternative chemicals or dispose of them in a more environmentally sustainable way.
Install a compost bin.
Cultivate a relationship with a repair shop to increase the lifespan of the products.

Complete an environmental impact audit at your business and record the details below. (Consider other questions if any of the following don't apply.)

Phase 1: Before operations