So many problems prevail between the ecosystem, humanity, and the earth. These are climate change impacts, causes of global warming, pollution effects on human health, and consequences of deforestation. The world today has businesses that have increased the significance of how environmental sustainability works. Economic development is necessary but often damages the environment. Industries pollute air, water and soil through carbon emissions, waste production and resource exploitation. Nevertheless, rising environmental concerns have compelled companies to adopt sustainable business modules, adhere to environmental regulations and embrace new eco-friendly initiatives.
Governments and organisations are being encouraged to adopt corporate social responsibility (CSR), develop sustainable supply chains (The World Bank, n.d.) and implement green technologies throughout the entire process to reduce environmental impact. Consumers are also becoming more environmentally conscious, gravitating towards businesses that take environmental responsibility into account. This has resulted in the scrapping of businesses that turn a blind eye to environmental factors as it has the potential to harm their image, subject them to laws and regulations and also loss of money.
Environmental Issues
So many problems prevail between the ecosystem, humanity, and the earth. These are climate change impacts, causes of global warming, pollution effects on human health, and consequences of deforestation. They damage ecosystems, degrade air and water quality, and exacerbate extreme weather events. Basically, it is due to human activity like industrialisation, deforestation, and reckless usage of plastics. This is a boon to people like Peggy lshauk, a Niagra Region Public Health Nurse.
Environmental Issues and Its Causes
Although human impact contributes to environmental issues, natural factors such as volcanic eruptions can also play a role; however, industrialization, deforestation, pollution, and overconsumption are significant contributions to environmental issues. Due to the massive expansion of industries and businesses, we have overused carbon emissions, waste generation, and depleted resources, ultimately leading to climate change and biodiversity loss. Unchecked dumping of industrial waste pollutes air, water and land; the cutting down of trees to make way for agriculture and urban development disturbs ecosystems. The details of environmental issues are as follows:-
Climate Change and Emissions of Carbon
Reducing excess carbon dioxide (CO₂) and greenhouse gas (GHG) emissions is one of the main environmental challenges businesses face in addressing climate change. Transportation, agriculture and manufacturing all add immensely to global warming.
Effect on Businesses
For one, carbon taxes and emissions laws increase the cost of doing business.
- Severe weather is disrupting supply chains
- Change in customer behaviour in favour of sustainable brands
- Adopt Sustainable Business Practices:
- Building clean energy (solar, wind, hydro).
- Implementing practices for the reduction of waste.
- Carbon offset programs and sustainability reporting.
Pollution of Air, Water, and Land
Manufacturing industries discharge toxic gases, harmful chemicals, and plastics into the environment.
- Air Pollution: Emission of carbon monoxide (CO), sulfur dioxide (SO₂) and nitrogen oxides (NOx) caused by the waste from factories and vehicles, resulting in respiratory tract diseases and environmental problems.
- Water Pollution: Chemicals and industrial waste enter rivers and oceans, harming marine life and deteriorating water quality.
- Soil Pollution: Littering, the misuse of pesticides and chemical fertilisers, and improper waste disposal lead to soil contamination and biodiversity loss.
Sustainable Business Practices
Establishing waste management and recycling programs.
- Eco-friendly raw materials and bio-degradable packaging.
- Limiting the use of single-use plastics in their business operations.
Destruction of Forests and Overuse of Resources
Industries like logging, agriculture and construction all contribute to this loss of biodiversity and climate imbalance, and a few others do so by contributing to deforestation.
Impact on Businesses
- The scarcity of raw materials increases costs.
- There is regulatory pressure to move toward sustainable sourcing.
Sustainable Business Practices
- Implementing reforestation and afforestation programs.
- Recycled or sustainable materials.
- Working with certified sustainable suppliers (e.g. FSC-certified wood).
Overproduction and Waste Management
The new economy favours mass production, resulting in excess waste. Environmental pollution is primarily caused by e-waste, industrial, and packaging waste.
Impact on Businesses:
- More stringent litter disposal rules.
- Indeed, companies producing unnecessary waste suffer negative public perception.
- Production inefficiencies and disposal-related financial losses
Sustainable Business Practices
- Adoption of circular economy models (reducing, reusing, recycling).
- Support for product longevity and repairability
- Investing in waste-to-energy technology
Loss of Biodiversity
Business activities that destroy ecosystems, like deforestation, mining and intensive farming cause biodiversity loss. This imbalance in the ecosystem adversely impacts sectors utilising natural resources (agriculture, pharmaceuticals, etc.)
Green Business Practices
- Sustainable farming and ethical sourcing.
- Funding conservation programs.
- Decreasing the ecological footprint of production procedures.
Ways Companies Can Solve Environmental Problems
- Incorporation of Green Technologies
- Some of the green innovations that businesses can adopt are:
- Plants make for installations and are a great effort toward the objective of solar energy, wind vitality, and geothermal systems.
- From energy-efficient appliances and smart technology to more effectively utilise energy.
- Sustainable Packaging (made from reusable or biodegradable material)
Corporation Social Responsibility (CSR) Initiatives
Many companies use CSR strategies with sustainability integrated into them, such as:
- Collaborating with the environmental NGOs.
- Organising tree-planting and clean-up drives.
- Informing employees and stakeholders on sustainable practices.
This particular section contains information about the environmental regulations that govern their adherence. Local and international environmental laws . Businesses are required to have environmental laws, such as:
- The Paris Agreement (framework for global climate action).
- ISO 14001 (international standard for environmental management).
- Extended Producer Responsibility (EPR) (compelling companies to dispose of product waste).
Environmental Responsibility in Supply Chain
To make their supply chains more sustainable, companies can:
- The sustainable sourcing of materials by working with green suppliers with ethical production methods
- Lowering carbon emissions in logistics (e.g.: electric vehicles).
- Ensuring fair and ethical labour policies.
- Promoting Sustainable Shopping Habits
There are ways for businesses to encourage consumers to make environmentally conscious choices, particularly:
- The Beginners Guide To Promoting Sustainable Products (Organic, Cruelty-Free, Energy Efficient)
- Taking back products for old recycling.
- Explaining the impact on the environment via marketing campaigns.
- Climate Change and Its Impact on Cities and Urban Areas
Deforestation
Deforestation creates enormous problems. Some of the effects of deforestation are biodiversity loss, soil erosion and climate imbalance. It lowers oxygen levels and obliterates animal habitats.
Solutions for Deforestation
- Reforestation: Plant trees to absorb carbon dioxide.
- Sustainable farming: Grow crops but do not harm forests.
- Ban illegal logging: Governments should prevent companies from illegally felling trees.
Ocean Pollution Crisis
Oceans are rife with plastic, oil spills and chemicals. Our ocean pollution crisis is one of the most compelling threats to protect this life and other life. Fish eat plastic waste, and the fish they consume go to people, and as a result, we get health hazards.
Ways to Stop Ocean Pollution
- Ban single-use plastics: Straws, cups, and plastic bags pollute water bodies.
- Recycling: Plastics are a simple solution to eliminate unwanted plastic from the ocean.
- Controls on industrial waste: construction factories must filter waste before turning water.
Biodiversity Loss
Because of habitat destruction, pollution and climate change, many more are going extinct. Solutions for those problems include forest protection, preventing illegal hunting, and maintaining clean surroundings.
Steps to Protect Biodiversity
- Wildlife sanctuaries: National parks are to safeguard endangered species.
- Reduce pollution: Clean air, water and land make it easier for animals and plants to survive.
- Foster sustainable development targets: States should pursue development without compromising nature.
Intellectual Property and Sustainable Development Goals
The sustainable development goals (SDGs) are about cleaning and securing the world. They rally for renewable energy, climate action and mindful consumption. Requires businesses and individuals to do the practices to make those goals a reality.
Renewable Energy Solutions
Renewable energy causes lower pollution generation. Solar, wind, and hydro are the renewable energy solutions. They are not releasing poisonous gas into the air.
Benefits of Renewable Energy
- Cleaner air and less pollution: Reduction in carbon emissions
- Saves funds: Solar and wind energy have long-term cost-efficiency.
- Jobs creation: The green energy sector employs people.
Carbon Footprint Reduction
Reductions in carbon emissions help to combat climate change. We must use less energy, drive less, and consume fewer resources to reduce our carbon footprint. All the technical and jargon-free ways mentioned here are a natural part of life.
- Go electric with your vehicles: EVs have zero emissions.
- Use energy-efficient appliances: Cuts down power usage.
- Go plant-based: Meat production accounts for emissions.
Steps to Create an Eco-Friendly Lifestyle
People need to make lifestyle changes that include eco-friendly habits for the environment’s safety. A few small lifestyle changes can yield significant benefits.
A Guide to Leading a Green Lifestyle?
- The three Rs: Reduce the waste that gets created, Re-use and Recycle.
- Use less water: Turn taps off and get leaks repaired.
- Use biodegradable products: Don’t waste plastic; use eco-friendly material.
Relevance to ACCA Syllabus
Environmental issues have become increasingly important in the ACCA syllabus, especially in sustainability reporting, corporate governance, and risk management sections. To do so, ACCA students must know how businesses account for environmental liabilities, integrate sustainability into financial reporting, and respond to regulatory frameworks (e.g. IFRS and GRI standards). Ecological accounting, therefore, assists with financial decisions and compliance with ethical and financial reporting requirements.
Environmental Issues ACCA Questions
Q1: Which accounting standard covers accounting for environmental liabilities and decommissioning costs?
A) IFRS 9
B) IAS 37
C) IFRS 16
D) IAS 36
Ans: B) IAS 37
Q2: What is a significant goal of sustainability reporting?
A) Shareholder wealth maximisation
B) Reporting on environmental, social and governance (ESG) impacts
C) Making financial reporting options available
D) Short-term profit maximisation
Ans: B) Reporting Environmental, social, and governance (ESG) impacts
Q3: Which organisation publishes the Global Reporting Initiative (GRI) standards for sustainability reporting?
B) International Accounting Standards Board (IASB)
FASB (Financial Accounting Standards Board)
C) The Sustainability Accounting Standards Board (SASB)
D) Global Reporting Initiative (GRI)
Ans: D)Global Reporting Initiative (GRI)
Q4: What does the term external cost (an externality) mean in environmental accounting?
A) Employee wages
d) Depletion on plant assets
C) Air pollution caused by a company factory
D) Advertising expenses
Ans: C)Air pollution caused by a company factory
Q5: What do you consider to be the primary purpose of corporate carbon credit trading for sustainability?
A) (Complete) elimination of the need for sustainability reporting
B) To grant legal protection to companies to pollute without restrictions
C) To encourage businesses to reduce greenhouse gas emissions
D) Which reasons would you increase tax liabilities for businesses operating sustainably?
Ans: C) To encourage businesses to reduce greenhouse gas emissions
Relevance to CMA Syllabus
In the context of strategic management, risk assessment, and performance measurement, the US CMA syllabus adds environmental issues. Environmental costs impact financial statements, and sustainability initiatives can impact business strategies and cost structures. Under such a framework, CMAs must assess the ecological costs, incorporate them into the budgeting and cost control frameworks, and recommend sustainable business operations for prolonged financial viability.
Environmental Issues CMA Questions
Q1: Under Eco-friendly cost, the following are part of your Prevention cost.
A) Penalty from a pollution regulation violation
B) Expenses associated with installing pollution control devices
C) Restoring the environment once it has been polluted
D) Compensation for affected communities
Ans: b) Expenses associated with installing pollution control devices
Q2: Why is environmental sustainability (ES) an issue in cost management in a manufacturing firm?
A) It raises operational costs and does not finance cronies
B) Has nothing to do with cost control measures
C) It can result in long-term cost savings by increasing energy efficiency and minimising waste
D) Only a marketing/public relations issue, not finance
Ans: C) It can result in long-term cost savings by increasing energy efficiency and minimising waste
Q3: What answers best describe what a “life-cycle costing” approach is meant by environmental management accounting?
A) It takes into account only the upfront production costs
B) It assesses the entire environmental and financial impact from production to disposal
C) It restricts itself to costs of compliance with government regulations
D) It is blind to indirect environmental costs like pollution and resource depletion
Ans: B) It assesses the entire environmental and financial impact from production to disposal
4Q: How does including environmental costs benefit management accounting?
A) It minimises the compliance with financial disclosures
B) It will enable companies to make informed decisions regarding sustainable practices
C) It boosts short-term profits at the cost of environmental concern
D) It removes the need to budget and forecast
Ans: B) It will enable companies to make informed decisions regarding sustainable practices
Q5: From what perspective of the balanced scorecard framework environmental performance measures are included?
A) Financial Perspective
B) Customer Perspective
C) Performance Metric View Internal Business Process View
D) The Learning and Growth Perspective
Ans: C) Performance Metric View Internal Business Process View
Relevance to CPA Syllabus
The US CPA exam includes environmental issues in audit, taxation, and financial reporting. CPAs need to scrutinise financial statements that involve disclosure of environmental liabilities, compliance with environmental laws, and sustainability-reporting-related risks. Integrating environmental factors into corporate accounts and business models is necessary for evaluating risks, valuing assets, and measuring financial performance.
Environmental Issues CPA Questions
Q1: How should companies account for environmental remediation liabilities in their financial statements?
A) As an asset in the balance sheet
B) Pre-contingent liability only if uncertain
C) As a liability where a present obligation exists under IAS 37
D) Not recognised until completing the cleanup
Ans: C) As a liability where a present obligation exists under IAS 37
Q2: What regulation requires publicly traded companies to disclose material environmental risks in their financial reports?
A) Sarbanes-Oxley Act (SOX)
B) ‘Securities Exchange Act of 1934’
C) Statutory: Environmental Protection Agency (EPA) Regulations.
D) SEC Regulation S-K
Ans: D) SEC Regulation S-K
Q3: If a CPA is auditing a company with substantial environmental liabilities, what issue should they be investigating?
A) Whether it allows the company to hide the environmental costs in its marketing budget
B) The sufficiency of environmental provisions and disclosures
C) Only revenues from sustainability projects
D) Whether the firm fulfils its minimum tax liabilities
Ans: B) The sufficiency of environmental provisions and disclosures
Q4: What is the impact of eecologicaltaxation on financial statements?
A) Lower the taxable income→ Higher the net profit
B) Raises costs through ecological fees and CO2 taxes
C) It does not affect financial statements
D) Only reported as a contingent liability
Ans: B) Raises costs through ecological fees and CO2 taxes
Q5: What does CPA represent when verifying corporate environmental, social, and governance (ESG) reports?
A) Make sure that ESG data meets regulatory guidelines and financial disclosures
B) Verify compliance with IFRS standards only
C) The ESG approval must be made solely based on these reports.
D) Disregard ESG disclosures as they are non-financial
Ans: A) Make sure that ESG data meets regulatory guidelines and financial disclosures
Relevance to CFA Syllabus
ESG issues are included in the CFA exam under ethical investing, financial risk assessment and corporate governance. CFA industry professionals analyse all implications for investment decisions across portfolios and risk assessments based on these environmental factors. Sustainable finance and ESG are key to assessing businesses’ long-term sustainability in global markets.
Environmental Issues CFA Questions
Q1: Which is NOT a part of the “E” (environment) factor in ESG investing?
A) Board diversity
B) Executive compensation-related policies
C) CO2 emissions and resource use
D) Ethical labour practices
Ans: C) CO2 emissions and resource consumption
Q2: What role do environmental risks play in assessing investments?
A) Not relevant for financial analysis
B) They improve a company that can earn more profit in the future
C) Financial risks inherent in regulatory penalties and operational costs
D) They affect marketing strategies but have no effect on financial performance
Ans: C) Which poses financial risks, including regulatory penalties and operational costs
Q3: What is the reason for investors to include environmental factors in managing portfolios?
A) Global compliance with regulation implementation of sustainability
A) In the name of short-term gain
C) Assessing the long-term risks and sustainability of the investments
D) Not to invest in high-return sectors
Ans: C) for assessing long-term investment risks and sustainability
Q4: What sort of financial instrument allows investors to pour money into hydrocarbons and yet has to pay for environmentally sustainable projects?
A) High-Yield Bonds
B) Green Bonds
C) Derivatives
D) Treasury Bills
Ans: B) Green Bonds
Q5: How do environmental liabilities affect financial modelling in acompany’ss valuation?
A) They raise future cash_flow estimates
B) They lower company valuation through added costs and risks
C) Do not impact valuation models
D) DCF ignores them
Ans: B) They lower company valuation through added costs and risks
