Cambridge IGCSE and O Level Business Studies

25 Environmental and ethical issues

Answers to Coursebook activities
Activity 25.1 (page 317)
1 Students should be encouraged to evaluate whether the advantages of the location of the factory, i.e. the
positive externalities, outweigh the disadvantages, i.e. the negative externalities. There is no ‘right’ answer.
Arguments in support of the location might focus on issues such as improved products for consumers,
employment opportunities in an area of high unemployment, the sharing of ideas with other businesses
and the benefits to the local community of improvements in the local infrastructure. The location of
Loreli’s factory and the improvements it could bring in infrastructure and product expertise might
encourage similar businesses or support industries to also locate in the same area.
Arguments against might focus on the general environmental impact of the location of the factory and
how this might have a negative effect on the local population. Issues such as pollution and destruction
of ‘green spaces’ and how these might affect the local population’s quality of life/living standards and
the loss of possible income to the local area from any possible reduction in tourist numbers.
2 Might approve because: provides employment, which reduces government spending on payments to
the unemployed; improves the standard of living for the local community through employment and
improved infrastructure; contributes towards growth of the economy. Might not approve because:
might be politically unpopular – how soon is the next election for government? (this may not be
relevant to all countries); action of pressure groups; might want to protect the environment – could
have as one of its objectives to reduce pollution in the country.

Activity 25.2 (page 318)

1 Government, local community, pressure groups, suppliers/construction companies, airlines, airport
customers.
2 Construction traffic, increased traffic congestion once the airport is opened, noise pollution and air
pollution once the airport is operational.
3 Economic benefits: employment opportunities for both the construction and the operation of the new
airport – increases consumers’ disposable income. Consumers will spend some of this ‘extra’ income
on goods and services produced in Country X – increases the output of domestic businesses. Increase
in tourism – increases exports; earns foreign currency for Country X – tourists will spend money in
local businesses, e.g. hotels, restaurants and tourist attractions.
4 More aircraft increases noise and air pollution; land used for the new airport cannot be used for more
environmentally friendly uses; trees, plants and animal habitats will be destroyed forever; could affect
the health of local residents.
5 Student’s own answer, depending on answers to previous questions.

Activity 25.3 (page 322)

1 Noise, air and land pollution; possibility of chemical leaks; effect on local water supplies and the habitat
these provide for birds and other animals.
2 Benefits: provides employment, which increases consumers’ disposable income and improves living
standards. Limitations: air, noise and traffic pollution; health issues arising from the toxic chemicals
used in tyre manufacturing; will water and energy supplies to local households be reduced as a result of
the factory usage?
3 Passing and enforcing laws to prevent/control the level of pollution. Planning laws to restrict the size
of the factory or its hours of operation to protect local residents from 24-hour noise, traffic or air

© Cambridge University Press 2018 Chapter 25 Answers to Coursebook activities 1

Cambridge IGCSE and O Level Business Studies

pollution. Could require ABC Tyres to offset its damage to the environment with schemes aimed at
helping the environment, e.g. planting trees.

Activity 25.4 (page 324)

1 Student’s own answer.
2 Not only unethical, it is illegal.

Case study (page 325)

a Ignored warnings about unsafe conditions of buildings, low pay, limited employees’ rights, dangerous
working conditions and child labour.
b Should not buy goods from suppliers who provide worse conditions than would be expected if they
were being manufactured in the buyer’s own country. However, this does not mean that low labour
costs are unethical as long as employees are being paid the ‘going rate’ for Bangladesh. Western buyers
are, after all, looking to source supplies at the lowest cost. But if Western retailers are then selling these
goods using very high profit margins, is it ethical that they should do so when wage rates are so low?
c Western buyers have a responsibility to ensure that the goods they source are being produced ethically.
They could send representatives from their company to visit Bangladesh and inspect the factories. The
power is with the Western buyers and they could force suppliers in Bangladesh to behave ethically
otherwise they will not buy their products.
d Children should be receiving an education and not being forced to work simply because they are
cheaper than adults. Children are more likely to suffer injuries in the workplace as they are not as
physically well developed as adults and are less aware of potential dangers in the workplace.
e Pass laws stating the minimum age for employees; ensure that all children receive an education; fine
or close down businesses that break the law; provide financial assistance to families so that they do not
have to rely on the wages of their children.

Test yourself (page 325)

1 Causes different types of pollution, uses up natural resources, soil erosion, destruction of animal
habitats, production of waste, emission of greenhouse gases, uses up non-renewable energy resources.
2 The effect of business activities on unrelated parties.
3 To analyse the social costs and social benefits of a project. Benefits should outweigh cost.
4 A business activity that has a positive overall impact on the environment and its stakeholders, ensuring
future survival.
5 It is in the long-term interests and survival of a business to act ethically.
6 A group of people who join together for a common cause, often to change the behaviour of business.
7 Pollution targets and waste disposal regulations; government might fine, close down or even imprison
business owners who ignore these targets and regulations; taxes or levies on commercial energy use; to
encourage businesses to be more energy efficient.

Exam-style practice questions (page 326)

1 a A business activity that has a positive overall impact on the environment and its stakeholders. (2)
b The effect of business activity on unrelated parties. (2)
c Positive: provides employment (1), Juan Cruz will pay wages to local people to work in his shrimp
farming business (1). Negative: damage to marine biodiversity (1), the business is taking too many
shrimp from the sea and soon none will be left (1). [Total: 4]
d Uses energy sources (1), might use sources of energy that cannot be renewed such as coal and gas (1),
use of these energy sources also creates greenhouse gases that are bad for the environment (1). Uses

© Cambridge University Press 2018 Chapter 25 Answers to Coursebook activities 2

Cambridge IGCSE and O Level Business Studies

natural resources (1), might take too many shrimp from the sea/overfishing (1), could lead to scarcity
of shrimp, which will increase prices (1). [Total: 6]
e Impose a tax on energy use (1), increase the price of energy to the business, which increases costs of
production (1), Juan Cruz will look at ways to reduce energy consumption/use more energy-efficient
production methods/use alternative, more environmentally-friendly energy sources (1). Set standards
for businesses to meet when using renewable resources, e.g. shrimp (1), set a quota for the amount of
resource a business can use in a given time period (1), reduces risk of resource becoming scarce (1).
[Total: 6]
2 a A group of people who join together for a common cause (1) to influence business activity/
government policies (1). [Total: 2]
b Exploiting employees by paying very low wages, employing child labour, unsafe/unhealthy working
conditions. [2]
c Improves reputation/brand image (1) increases sales/profits/investment (1). Motivates employees (1),
easier to retain and recruit employees (1). [Total: 4]
d Encourage consumers to boycott/stop buying Khan’s products (1), reduces sales and profits (1),
could cause closure of Khan’s business. Could persuade government to ban import of supplies from
countries acting unethically (1), Khan will not have enough supplies of raw materials (1), will not be
able to produce a full output so will lose sales (1), or have to look for other suppliers who might be
more expensive (1). [Total: 6]
e If he does not change supplier then consumers may boycott his goods (1), this will decrease sales and
profits (1), could result in closure of the business (1). If he does change then costs will rise (1), might
have to increase the price of garments (1), less competitive so consumers will buy elsewhere and
Khan’s market share/profits will fall (1). [Total: 6]

© Cambridge University Press 2018 Chapter 25 Answers to Coursebook activities 3