Social costs and the environment

Business activity has an impact on the natural environment:

  • resources such as timber, oil and metals are used to manufacture goods
  • manufacturing can have unintended spillover effects on others in the form of noise and pollution
  • land is lost to future generations when new houses or roads are built on greenfield sites
Social costs and an impact upon the environment can be caused by business

The unintended negative effects of business activity on people and places are called social costs and include:

Ethical businesses are careful to minimise the impact of their behaviour on the environment.

Government laws are used to protect the environment. For example, firms must apply for planning permission before building factories or offices on greenfield sites. Grants are available to encourage firms to locate on brownfield sites, run down areas in need of regeneration.