Respond to environmental effects and controls
Identify environmental damage and business responses, then explain how legal controls can change production and costs.
Section 6 · External influences on business activity
Exam scope and assessment notes
Cambridge IGCSE (9–1) Business Studies 0986, 2026 syllabus, Version 2. This is the separate 9–1 legacy route; 0774 replaces it for first assessment June 2027. Candidates are not assessed on constructing income statements or statements of financial position, nor on price-elasticity or exchange-rate calculations. Simple cash-flow forecast construction is assessed. Written practice is self-checked, not an official Cambridge grade; timed-paper evidence and human subject-teacher review remain outstanding.
Before you begin
- No previous study of external influences is assumed. Identify who is affected, which business decision changes and what evidence or condition would affect the outcome.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which is an example of a negative environmental effect of business activity?
What you will learn
- Identify negative environmental effects
- Explain reasons and methods for responding
- Trace legal controls to business decisions and costs
Business activity can create environmental effects
Production and distribution may cause pollution or deplete natural resources. The scale depends on the process, place and controls; identify the specific effect rather than using 'environmental impact' as an unexplained label.
A business may respond to environmental issues to improve reputation, support sales, meet customer expectations or comply with law. It may change materials, energy use, production methods, packaging or delivery practices.
Regulation can affect how, what and where a business operates
Environmental legal controls may influence how a business produces, what it can produce or sell, and where it can operate. Requirements can increase costs for equipment, monitoring, materials or site changes.
Controls may also encourage process improvement or reduce harmful effects. Evaluate the requirement, its cost and the harm addressed; do not assume every environmental action increases sales or that regulation affects all firms equally.
Pause and explain
What can environmental legal controls affect?
Worked example
A dyeing business faces a legal limit on wastewater pollution. Explain one likely business cost and one reason it may change its process.
Show the worked solution
- The business may need treatment equipment or monitoring.
- Changing the process can reduce pollution and meet the legal limit.
- It should compare compliance cost with operational and environmental effects.
Answer The business may pay for wastewater treatment, monitoring or process changes. A revised process can reduce pollution and support legal compliance; it should compare the cost with the environmental harm addressed and any effect on production or customers.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A manufacturer uses large amounts of fresh water and discharges polluted water. Suggest two responses and one cost or trade-off to assess.
Give me a hint
Consider resource use and treatment while keeping production and product quality in view.
Compare my reasoning
- Reduce water use through process monitoring or reuse where suitable.
- Treat wastewater and check compliance before discharge.
- Compare equipment, energy and monitoring costs with environmental effects.
The manufacturer could reduce water use through process changes or reuse and treat wastewater to meet applicable limits. These steps may require equipment, energy and monitoring, so it should assess cost and environmental improvement while protecting product quality.
Look for these in your work
- Two relevant responses
- Pollution control
- Cost and quality considered
A new environmental rule limits packaging material. Explain one effect on product design, one effect on cost and one possible customer response.
Give me a hint
Legal requirements can change what is sold and how the product is packaged.
Compare my reasoning
- The firm may redesign packaging or use a compliant material.
- New materials or equipment may raise costs or change production.
- Customers may value less packaging, but test protection and convenience.
The firm may redesign its packaging or change materials to comply. A new material or process can raise costs or require equipment; some customers may welcome less packaging, but the business must protect the product and test customer response.
Look for these in your work
- Design effect
- Cost channel
- Customer response tested
A hotel considers replacing all lighting with efficient equipment to reduce its environmental impact. Explain what it should compare before deciding.
Give me a hint
Compare investment and running-cost savings with equipment life and operating needs.
Compare my reasoning
- Calculate installation and maintenance cost.
- Estimate electricity savings over the equipment's life.
- Check lighting quality, guest comfort, disposal and any applicable requirements.
The hotel should compare installation and maintenance costs with expected electricity savings over the equipment's life. It should also check guest comfort, disposal and any applicable rules; environmental benefit alone does not show whether the investment is affordable or operationally suitable.
Look for these in your work
- Initial and ongoing costs
- Expected benefit period
- Service and compliance conditions
Common mistakes
- Assuming environmental controls affect only product advertising
- Claiming a greener process guarantees higher sales
- Ignoring how location and product rules can change operations
What can you explain now?
Which is an example of a negative environmental effect of business activity?
Compare with the explanation
Pollution
Pollution is a syllabus example.
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Make it stick
Name two business responses to environmental issues and one way a legal control can affect operations.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.