Governments use different kinds of measures (legal controls) to limit the negative effects of business activity on the natural environment. They do it either by encouraging businesses through incentives to protect the environment, or by threatening businesses that do not protect the environment to start doing so through legal controls.
Encouraging – Incentives
Government incentives will encourage businesses to be environmentally friendly. The most common incentives include:
- Lower corporate TAX rates, as a reward for the greenest businesses, will help to increase Net Profits After Interest and TAX, therefore encourage managers and owners to ‘go green’.
- TAX deduction for businesses using renewable sources of energy, and being energy efficient.
- TAX free environment, mainly for energy and environment management companies, to be more environmentally friendly, support sustainable business operations and encourage sustainable development.
- Building infrastructure that enables recycling by providing businesses with waste collection services such waste containers and waste collection vehicles, etc.
- Accessible scientific information regarding environmental management.
Threatening – Legal controls
Government threats will discourage businesses from destroying natural environment. The most common threats include:
- Penalties may be imposed in the form of financial fines or even forced closure of businesses that ignore pollution targets or waste disposal laws and regulations.
- Higher TAXes will be imposed on companies that exceed energy consumption standards. These higher levies will decrease Net Profits After Interest and TAX, therefore persuade managers and owners indirectly to be more energy efficient.
- Standards and quotas for using natural renewable resources forcing companies to have a certain percentage of energy consumption to come from renewable energy sources.
