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Top Environmental Problems and their Impact on Global Business

Our planet is plagued by environmental problems that deplete natural resources and strain livelihoods, many of which are exacerbated by poor industrial practices. If left unchecked, environmental problems negatively impact businesses both directly, as in supply chain disruptions, and indirectly, as in health hazards that lead to loss of man-hours and efficiency. Following are some common environmental problems that businesses need to address to ensure sustainability and long-term financial viability.

Pollution

Pollution is one of the world’s biggest environmental problems, as it tends to be a typical byproduct of modern life. Air pollution, for instance, is the result of fossil fuel combustion, as well as various gases and toxins released by industries and factories.

Below are the most common air pollutants today, as well as a discussion of their source processes and effects on health:

  • Ozone – A colorless, odorless gas generated when nitrogen oxides (found in motor vehicles and industrial machinery) and volatile organic compounds (found in gasoline, paints, inks and solvents) are exposed to sunlight. Inhaling ozone can trigger health problems including chest pain, cough, throat irritation and congestion, bronchitis, asthma and emphysema.
  • Carbon monoxide – A poisonous gas produced by the incomplete combustion of fossil fuels. When inhaled, carbon monoxide reduces the blood’s oxygen-carrying capacity. Exposure to high levels of carbon monoxide can cause death. Aside from being highly toxic, carbon monoxide is colorless, odorless and tasteless, therefore often referred to as the “silent killer”.
  • Nitrogen dioxide – A highly reactive gas formed when fuel is burned at high temperatures (such as in motor vehicle exhaust, electric utilities and industrial boilers). Nitrogen dioxide reacts with water and oxygen to make nitric acid, one of the main components of acid rain. Nitrogen dioxide can irritate the lungs and increase susceptibility to respiratory ailments.
  • Particulate matter – Very small solid particles and liquid droplets suspended in the air. Short-term exposure to particulate matter can cause irritation to the eyes, nose and throat, as well as heart and lung ailments. Prolonged exposure can lead to hospital admissions and premature death due to cardiovascular and respiratory diseases.
  • Sulfur dioxide – A highly reactive and pungent-smelling gas formed by the incineration of fossil fuel at industrial facilities such as power plants. Other processes that generate sulfur dioxide are sea spray and the decomposition of organic matter. Inhalation of sulfur dioxide can cause wheezing, chest tightness and shortness of breath, as well as heart and lung ailments.
  • Lead – A common ingredient in many manufactured products. Gasoline and paint are the major sources of lead emissions. Exposure to lead can cause kidney disease, nervous system disorders, mental retardation, learning disabilities, miscarriage, stillbirth, premature birth and death.

Pollution and modern living seemingly go hand-in-hand, but the costs of air pollution can no longer be ignored. According to a 2012 study by the Massachusetts Institute of Technology (MIT), air pollution cost the Chinese economy $112 billion in 2005 . In Hong Kong, medical bills and productivity loss due to air pollution amounted to HK$39.4 billion in 2013 .

The costs of pollution go beyond medical bills and loss of productivity. Heavily polluted areas make it difficult for companies located there to hire and retain workers, forcing them to pay higher wages to attract and keep employees. In addition, unchecked pollution can temper investors’ interest. To produce their products safely, companies in heavily polluted areas may need to close shop and move their operations to less polluted locations.

Waste Disposal

As populations and industries grow, so does the problem of proper waste disposal. Communities accumulate so much garbage that properly disposing of it has become increasingly difficult. Solid garbage, for example, is usually buried in landfill sites or incinerated, which is extremely harmful to the environment. Decomposing garbage may attract vermin, give off a foul smell or leach into groundwater. The smoke given off by burning garbage contributes to air pollution.

Certain byproducts of the manufacturing process amplify the need for improved waste disposal. Efficiency is sometimes pursued at the expense of environmental sustainability. To produce as much as possible in the most cost-effective manner, manufacturers may adopt practices that appear to be cheap, but are actually resource-intensive in the long run. These practices generate byproducts that cannot be reused and must be disposed of.

A good starting point towards the zero-waste ideal is the circular economy model associated with other concepts such as the “cradle to cradle” design and industrial ecology. The idea here is that instead of products eventually being buried or burned, as in most linear models of production, their parts are designed from the beginning to be re-used and processed for re-entry into the production cycle.

For example, Google's Project Ara initiative addressed the challenge of outdated mobile phones by reinventing consumers’ smartphone usage. By breaking down a phone into replaceable parts that can be assembled and customized according to user requirements, consumers easily alter their phone with simple skills and tools. Phone repair is done more easily and inexpensively by replacing only what is broken instead of the entire phone. Google found a way to maximize a phone's lifetime usage and reduce the need to use new resources for new phones, while minimizing the amount of its generated e-waste.

In Europe, Philips has 22 service organizations that are collecting 40% of lamps that contain mercury. The company has a recycling rate greater than 95% in the market. Philips also started to sell lighting as a service to enhance the collection of their lighting equipment. They aim to reach more customers as the company retains ownership of the lighting equipment so customers don’t have to pay for lighting upfront. In addition, Philips guarantees comprehensive environmental management pertaining to the recycling of their lighting equipment.

Climate Change

In his encyclical Laudato si , Pope Francis urged action on climate change, warning that climate change is real and a problem that we can no longer afford to ignore:

“Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods. It represents one of the principal challenges facing humanity in our day. If present trends continue, this century may well witness extraordinary climate change and an unprecedented destruction of ecosystems, with serious consequences for all of us.”

Shoreline erosion, coastal flooding and greater storm surges cause significant damage to coastal property and infrastructure. Cities, inhabited islands and tidal wetlands will be more prone to flooding. These can indirectly lead to business losses in the form of operational disruptions among suppliers, which in turn affect the rest of the supply chain and customers. In addition, floodwater can bring waterborne diseases that are harmful to people, plants and livestock.

Climate change can also trigger a higher demand for energy. As the climate gets warmer, people consume more electricity for air conditioning. Greater electricity consumption, in turn, means higher operational costs for businesses. Furthermore, a higher energy demand translates to increased consumption of natural resources such as fossil fuel and water, resulting in a lack of resources for companies to turn into products and services.

Climate change has negative effects on agricultural productivity. Increased temperatures and carbon dioxide levels can be beneficial to some crops, but this benefit can only be realized if other conditions like nutrient levels, soil moisture and water availability are also adjusted. Otherwise, crop yields may decrease. Crops may also become more susceptible to diseases, given that some weeds, pests and fungi grow in warmer temperatures.

Wheat, for example, is an important food crop that grows in cool temperatures. Rising temperatures will stress wheat crops and lower their yields. This explains why, according to a December 2014 study that was published in Nature Climate Change , every 1°C increase in global temperatures means a 6% fall in wheat production . Falling wheat production would make it difficult for food manufacturers to produce vital foodstuffs such as cereal, bread, noodles and pasta. Plus, in order to maintain optimal yields, wheat growers would have to use chemical pesticides and fertilizers that are hazardous to both human health and the environment.

Drought/Inadequate Access to Water

The world’s water supply is becoming increasingly scarce. According to the WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation (JMP), 2.5 billion people (roughly 36% of the world’s population) still lack access to improved sanitation facilities. 748 million people continued to get their drinking water from unsafe sources in 2012. The World Wildlife Fund cautions that by 2025, water shortages will affect about two-thirds of the world’s population .

Some of these shortages can be attributed to climate change. For example, the California drought, which is entering its fourth year, is said to be caused by rising temperatures and changing atmospheric patterns conducive to diminishing rains. California’s climate is normally characterized by a concentrated rainy season followed by a long and temperate dry period. In the last three years, the rains have not come, with precipitation levels only being at 5% of the historical average.

Such water shortages have a detrimental effect on agriculture. Farms are dependent on water for irrigation, so a decrease in water supply will drastically affect their productivity. Farms will have smaller yields, which means manufacturers will also have fewer raw materials to turn into products and services. Climate change-related water issues cost Unilever between $300m and $400m every year .

If the water supply in a particular area gets critically low, businesses in that area may be forced to move their operations to where water supply is still sufficient. Water is needed in almost every aspect of business operations, from running machines, to keeping the office premises clean. Relocation forces businesses to spend on new facilities and equipment, as well as on hiring and training new staff.

Partnering for the Future

Environmental problems make it apparent that solving complex issues requires the cooperation of all sectors. Environmental issues affect every individual, organization, community and country, and by becoming environmental stewards, it keeps the economy moving, which is necessary for growth and long-term viability.

FCS’ Sustainability Consulting

Providing expert advice on sustainable supply chains and resource management, FirstCarbon Solutions (FCS) helps companies ensure that their business is not vulnerable to disruptions caused by environmental problems. We help businesses recognize challenges and turn them into opportunities by helping them adopt sustainable practices that lead to long-term financial viability. Our solutions lead to data-driven actionable insights for sustainability strategies.

For more information on how FCS can help you transform your business, make your supply chains greener and improve your access to capital in an increasingly low-carbon landscape, please watch this video .

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