IGCSE Business Studies (0450)

Environmental concerns and sustainability (externalities)

What this topic tests, the mistakes that cost marks, and one exam-style question worked through step by step.

Key ideas and common mistakes

Business activity harms the environment by putting harmful things in, such as air, water or noise pollution, and by taking things out, such as natural resources, green space or habitats.
A business should address environmental concerns to maintain a positive public image and avoid legal or financial penalties.
Common mistake: Students often overlook that both reputation and compliance are important, not just one or the other.
Weighing two reasons for acting on environmental pressure requires comparing their impact on the business.
Common mistake: Such as reputation damage from pressure groups versus competitive advantage from differentiation—since students often list reasons without justifying which has greater long-term consequences.
Identify and explain two specific positive externalities (benefits to third parties) created by a business, then justify which is most significant by considering how widely and deeply each benefit impacts society.
Common mistake: Avoiding vague or internal effects.

Identify two ways that business activity can harm the environment.

Try it first, then show the working

First way: it can cause pollution (air, water or noise pollution)
Second way: it can use up green space / natural resources (or deforestation, loss of habitat, overmining, traffic congestion)

Answer: It can cause pollution; it can use up green space or natural resources.

7 exam-style questions on Environmental concerns and sustainability (externalities), each marked to the scheme.