Legal and Business Environment

Module 1 Course Code: GCC 1.4

Business Environment:
Concept:
Business organisation has to interact and transact with its environment. Hence, both the
business and environment are totally interrelated and mutually interdependent. Business
environment refers to those aspects of the surroundings business enterprise, which affect or
influence its operations and determine its effectiveness.

According to Keith Davis, “Business environment is the aggregate of all conditions, events
and influence that surrounds and affect it”.

According to Andrews, “The environment of a company as the pattern of all external

influences that affect its life and development”.

The business environment is always changing and is uncertain. It is because of dynamism of

environment. As it is already said that the business environment is the sum of all the factors
outside the control of management of a company, the factor, which are constantly changing,
and they carry with them both opportunities and risks or uncertainties which can, make or
mark the future of business.

Business environment encompasses all those factors that affect a company’s operations and
includes customers, competitors, stakeholders, suppliers, industry trends, regulations other
government activities, social and economic factors and technological developments. Thus,
business environment refers to the external environment and includes all factors outside the
firm, which lead to opportunities and threats of a firm.

Nature of Business Environment

The nature of business environment is as follows:

1. Complex: Business environment is compound in nature. Environment consists of a

number of factors, events, conditions and influences arising from different sources which
impact business thus making the business complex.

2. Interdependence: The environment of the business is made of social, economic, legal,

cultural, technological, and political factors. These factors of the environment are
interdependable. The economic status of a country affects the development of technology. A
rich country can make sufficient expenditure on the research and development.

3. Dynamic: Business environment is constantly changing process. Business environment is

dynamic as it keeps on changing in terms of technological improvement, shifts in consumer
preferences or entry of new competition in the market. The various forces in the environment
keep on changing from time to time thus making business dynamic and not static.

4. Inter-relatedness: The different factors of business environment are co-related. For

example, let us suppose that there is a change in the import-export policy with the coming of
a new government. In this case, the coming of new government to power and change in the
import-export policy are political and economic changes respectively. Thus, a change in one
factor affects the other factor.

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5. Impact: Business environment has both long term and short term impact. Environment
therefore has different effects on different firms in the same industry, for example, drugs.

6. Uncertainty: Business environment is largely uncertain as it is very difficult to predict

future happenings, especially when environment changes are taking place too frequently as in
the case of information technology or fashion industries.

7. Relativity: It is a relative concept since it differs from country to country and region to
region. Political conditions in the USA, for example differ from those in China or Pakistan.
Similarly, demand for sarees may be fairly high in India whereas it may be almost non-
existent in France.

Significance of Business Environment

Some of the direct benefits of understanding the business environment are given below:

1. Customer Focus: Environmental understanding makes the management sensitive to the

changing needs and expectations of consumers. For example: Hindustan Lever and several
other FMCG companies launched small sachets of shampoo and other products realising the
wishes of customers. This move helped the firms to increase sales.

2. Strategy Formulation: Environmental monitoring provides relevant information about

the business environment. Such information serves as the basis for strategy making. For
example: ITC realised that there is a vast scope for growth in the travel and tourism industry
in India and the government is keen to promote this industry because of its employment
potential. With the help of this knowledge ITC planned new hotels both in India and abroad.

3. Public Image: A business firm can improve its image by showing that it is sensitive to its
environment and responsive to the aspirations of public. Leading firms like Reliance
Industries, ICICI Bank and others have others have built good image by being sensitive and
responsive to environmental forces. Environmental understanding enables business to be
responsive to their environment.

4. Continuous learning: Environmental analysis serves as broad based and ongoing

education for business executives. It keeps them in touch with the changing scenario so that
they are never are caught unaware. With the help of environmental learning managers can
react in an appropriate manner and thereby increase the success of their organisations.

5. Giving Direction for Growth: The interaction with the environment leads opening up
new frontiers of growth for the business firms. It enables the business to identify the areas for
growth and expansion of their activities.

6. Change Agent: Business leaders act as agents of change. They create a drive for change
at the grass root level. In order to decide the direction and nature of change, the leaders needs
to understand the aspirations of people and other environmental forces through environmental
scanning. For example: contemporary environment requires prompt decision-making and
power to people. Therefore, business leaders are increasingly delegating authority to
empower their staff and to eliminate procedural delays. Micro and Macro level Environment

Factors Affecting Business Environment

Internal Factors

1. Plans & Policies

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 2. Value Proposition
3. Human Resource
4. Financial and Marketing Resources
5. Corporate Image and brand equity
6. Plant/Machinery/Equipments (or you can say Physical assets)
7. Labour Management
8. Inter-personal Relationship with employees
9. Internal Technology Resources & Dependencies
10. Organizational structure or in some cases Code of Conduct
11. Quality and size of Infrastructure
12. Task Executions or Operations
13. Financial Forecast
14. The founders relationship and their decision making power.
External Factors
Micro Level:
1. Customers
2. Input or Suppliers
3. Competitors
4. Public
5. Marketing & Media
6. Talent
Macro Level
1. Economic
2. Political/legal
3. Technology
4. Social an
5. Natural
Types of Environment

A. INTERNAL ENVIRONMENT

Internal environment refers to environment within the organization. It includes

internal factors of the business which can be controlled by business. It includes
objective of business, managerial policies, management & employee of the
organization, labour management relationship, brand image & corporate image
working conditions in the organisation, technological & research & development
capabilities. Internal environment includes 5 M’s i.e, Men, Material, Machinery,
money & Management available with business organisation. These components
usually within the control of business.

Some of the Internal Components are as follows

1. Value system:- The value system of the founders, Board of Directors, managers, workers of
the organisation has important bearing on the strategies of the organisation.

2. Mission & objectives of the business:- Firm’s philosophies, priorities, development,

policies are guided by the mission & objectives of the organisation, mission & objective are
the first steps in the development of the organisation.

3. Organisation Structure:- Organisational hierarchy is the authority which flow of from top
to bottom. Some management structure & styles delay decision making & while other
facilities quick decision making.

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4. Financial capability:- Financial factors like financial policies, financial positions & capital
structure etc. affect corporate strategies & decisions.

5. Human Resource Management:- The characteristics of the Human resources like skill,
quality, morale, commitment, attitude, knowledge etc. could contribute to the strength &
weakness of an organisation. Some organisations final difficult to carry out restructuring or
modernization because of resistance from employees.

6. Marketing capability
7. Operational capability 8. Managerial policies
9. Brand Image & corporate Image
10.Research & development capability
11.General management capability.

B. EXTERNAL ENVIRONMENT

External environment refer to external aspects of the surroundings of business enterprise

which have influence on the functioning of business. These factors are beyond the control of
business. External environment includes factors outside the firm can provide opportunities or
pose threats to the firm.

External environment has two types

i. Micro environment and ii. Macro environment

i. Micro Environment:- The micro environment of a company consists of elements

that directly affect the company. It includes suppliers, customers, market
intermediaries, competitors & customers etc.

Micro environment includes

1. Customers:- Customers are the people money to acquire an organisation’s products. A

consumer occupies the central position in the marketing environment. The marketer has to
closely monitor & analyze changes in consumer tastes & preferences & their buying habits.

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 2. Competitors:- Competitors are the other business entities that compete for resources. A
study of the competitive scenario is essential for the marketer, particularly threats from
competition. In modern age an absolute monopoly is very rare thing. Most of the firms have
to work in some type of competition such as monopolistic competition or oligopoly.

3. Suppliers:- Suppliers provide raw materials, equipment, services & so on. Suppliers with
their own bargaining power affect the cost structure of the industry. They constitute a major
force, which shapes competition in the industry. The quality of the commodity & the cost of
production are considerably influence by the supplies of the inputs.

4. Market Intermediaries:- It includes agents & brokers who help the company to find
customers. It is a link between the company & the consumer. They refer to the different
levels in the chain from the production unit to the final customer. The chain incorporates the
stockiest, the wholesalers, the distributors, the retailers etc.

5. Public:- Public is any group that has actual or potential interest in the business. The
prospects of firm depend upon the society in which it has to work & sell its products. In a
homogenous society, the job of the firm is easy. The people have almost the same habits like
& dislikes values & ethical norms. In a heterogeneous society the job of the firm is difficult.
A particular product may be acceptable to particular of the society but not acceptable to some
other sections.

ii. Macro Environment:- Macro environment forces that creates opportunities & pose threats
to the business units. The macro environment consists of

1. Economic Environment:- It refers to those economic factors which have impact on the
working of business. It consists of economic factors that influence the business in a country.
These factors include gross national product, corporate profit, inflation rate, employment,
balance of payments, interest rates consumer income etc.

a. Economic conditions :- Economic conditions include income level, distribution of income,

demand & supply trends etc. if the company is in boom condition, it positively affects
demand & market share. On the other hand if the economy is in depression it will have
negative effects on the business.

b. Economic Polices:- Economic policies are framed by the government. These policies
establish relationship between business & government. The effect of these policies may be
favourable or unfavourable. Some of the policies are:

I. Industrial policies
ii. Fiscal policies
iii. Monetary policies
iv. Foreign investment policies
v. Export – import (EXIM) policies.
c. Economic system:- Different economic systems prevails in different countries. These
systems affect the business. The economic system includes capitalism, socialism & mixed
economies. The world economy is primarily governed by three types of economic
systems i.e.,

Capitalist economy
Socialist Economy
Mixed economy

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d. Economic Growth :- The stage of economic growth of the economy has direct impact
on the business strategies. Increased economic growth rate result in increase in
consumption expenditure, lower the general pressure within an industry & offers more
opportunities then threats.

e. The rate of interest:- The rate of interest affects the demand for the products in the
economy, particularly when general goods are to be purchased through borrowed finance.
Low interest rated provides opportunities to the industries to expand whereas rising
interest pose a threat to these institution.

f. Currency Exchange: - current exchange rates have direct impact on the business
environment. When the rupee was devalued in 1991, it was to make Indian products
cheaper in the world market & consequently boost India’s exports.

2. Political Environment:- Political environment affects the different business units. A

stable & dynamic political environment is necessary for business growth. Political
environment includes political stability in the country, relation of the government with
other countries, welfare activities of government, centre-state relationship & views of
opposition parties towards business. If the political system is stable & efficient then the
business grows.

3. Socio-cultural Environment:- Socio-Cultural environment refers to social & cultural

factors which are beyond the control of business units. Such factors include attitude of
people to work, family system, caste system, education system, habits, language, religion
has considerable components of business environment. Religion has considerable effect
on business. Some religious restrict their followers they do not allow its followers to
engage in leather industry, wine making etc. similarly, the social environment of business
also includes social factors like customer, traditions, values, beliefs, poverty literacy, life
expectancy rate etc.

4. Technology Environment:- It is the most important factor which affects the business
enterprise. The faster changes in technology create problems for business enterprises.
Products have shorter life span than the past because of rapid technological
developments. Technology provides various advantages. Success in many industries
depends on innovation & research. To promote innovation & research some companies
establish research & development departments in their enterprises.

5. Legal Environment:- It refers to the set f laws & regulations which influence the
business organisation & their operations. every business organisation has to obey & work
within the framework of law. The legal environment is derived partly from the political
climate in a country & has three distinct dimensions to it: a. The law of the home country
b. The law of the foreign markets c. International law in general

6. Natural Environment:- It refers to geographical & ecological factors which are beyond
the control of the enterprise. It includes natural resources, weather & climatic conditions,
landforms, rainfall, environmental pollution etc. Climate & weather conditions affect the
location of certain industries like textile industries. Similarly environmental pollution in
the form of air pollution, have caused disturbances in ecological balance.

7. Demographic Environment:- Demographic factor include size, growth rate, age

composition, sex composition etc of population, family size, economic stratification of

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 population, educational level, caste, religion etc. all these demographic factors are
relevant to business. These factors affect the demand for goods & services. High
population growth rate indicates an enormous increase in labour supply. Population with
varied tastes, preferences, beliefs, temperaments etc. gives rise to differing demand
pattern & calls for different marketing strategies.

8. International Environment:- A final component of the general environment is actions

of other countries or groups of countries that affect the organisation. Governments may
act to reserve a portion of their industries for domestic firms or may subsidize particular
types of businesses to make them more competitive in the international market.
International Environment factors are i. Due to liberalization, Indian companies are
forced to view business issues from the global perspective. ii. Safe & protected markets
are no longer there. World is becoming small in size due to advanced means of transport
& communication facilities. iii. Learning of foreign language is must for every business
manager. iv. Acquiring familiarity with foreign currencies is also must. v. Facing political
& legal uncertainties is inevitable.

Interaction between Internal and External Environment

BASISFOR INTERNAL ENVIRONMENT EXTERNAL
COMPARISON ENVIRONMENT

Meaning Internal Environment refers to External Environment is a set

all the inlying forces and of all the exogenous forces
conditions present within the that have the potential to
company, which can affect the affect the organization's
company's working. performance, profitability,
and functionality.

Nature Controllable Uncontrollable

Comprise of Strengths and weaknesses Opportunities and threats

Company only All companies operating in

Affects
the industry

Bearing on Business Strategy, functions Business survival, growth,

and decisions reputation, expansion, etc.

Technique of Environmental Analysis

1. Environmental Threat and Opportunity Profile Analysis (ETOP)

ETOP is considered as a useful device that facilitates an assessment of information
related to the environment and also in determining the relative significance of external
environment threats and opportunities to systematically evaluate environmental
scanning. By dividing the environment into different sections, the ETOP analysis
helps in analyzing its impact on the organization. The analysis is based on threats and
opportunities in the environment.

Steps involved in the preparation of ETOP

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  Dividing the environment into different sectors

 Analyzing the impact of each sector on the organization

 Sub-dividing each environmental factor on the organization in the form of a

statement

 Preparing a summary to show the major factors for the sake of simplicity

2. Quick Environmental Scanning Technique Analysis (QUEST)

QUEST is an environmental scanning technique that is designed to assist with organizational
strategies by keeping adheres to change and its implications. Different steps involved in this
technique are as follows:

▪ The process of environmental scanning starts with the observation of the organization’s
events and trends by strategists.

▪ After observation, important issues that may impact the organization are considered using
environment appraisal.

▪ A report is created by making a summary of these issues and their impact.

▪ In the final step, planners who are responsible for deciding the feasibility of the proposed
strategy, review reports.

3. SWOT Analysis
SWOT analysis stands for strengths, weaknesses, opportunities and threats analysis of
a business environment. Strengths and weaknesses are an organization’s internal
factor while threats and opportunities are considered as external factors. So, the
process of SWOT analysis includes the systematic analysis of these factors to
determine an effective marketing strategy. It is a tool that is used by the organization
for auditing purposes to find its different key problems and issues.

These are identified through internal and external environmental analysis

Internal environment analysis/ scanning

Different factors are considered while analyzing the internal environment of an organization
like the structure of the organization, physical location, the operational capacity and
efficiency of the organization, market share, financial resources, skills and expertise of
employees, etc.

Strengths: The strength of any organization is related to its core competencies i.e. efficient
resources or technology or skills or advantages over its competitors. For example, the
marketing expertise of a firm can be its strength. Apart from this, an organization’s strength
can be:

▪ Strong customer relations ▪ Market leader in its product or services

▪ Sound market image and reputation ▪ Smooth cash-flows

Weaknesses: A weakness or limitation of an organization is related to the scarcity of its

resources or skill-set of staff or capabilities that creates an adverse effect on its performance.

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For example, limited cash-flow and high cost are considered as a financial weakness of the
organization. Similarly, other weaknesses can be:

▪ Poor product quality ▪ Low productivity ▪ Unrecognized brand name or poor brand image

External environment analysis/scanning

Different factors that are considered while scanning the external environment of the
organization like Competitors, customers, suppliers, technology, social and economic factors,
political and legal issues, market trends, etc.

Opportunities: An opportunity of the organization’s environment is considered as its most

favourable situation. These are the circumstances that are external to the business and can
become an advantage to the organization. For example, different opportunities for a firm can
be:

▪ Social media marketing ▪ Mergers & acquisitions ▪ Tapping new markets

▪ Expansion in International market ▪ New product development

Threats: Threats of an organization are current or future unfavourable situations that may
occur in its external environment. For example, below are a few major threats for a firm:

▪ A new competitor in the market ▪ The slow growth of the market

▪ Changing customer preferences ▪ Increase in the bargaining power of consumers

▪ Change in regulations or major technical changes

4. PEST Analysis
PEST technique for a firm’s environmental scanning includes analysis of political,
economic, social, and technical factors of the environment.

a) Political/ Legal factors: Different factors like changes in tax policy, availability of raw
material, etc. creates a direct effect on a business. So organizations are required to constantly
monitor tax-related policy changes as an increase in tax may increase the heavy financial
burden on them. Similarly, different laws like “Consumer protection act” also play an
important role in an organization’s operation activities as it is important to abide by the act.

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More examples can be foreign trade policy, political changes, regulations in competition,
trade restrictions, etc. also considered as different political/ legal factors that exist in the
external business environment.

b) Economic factors: Different economical Factors like the unemployment rate, inflation,
cost of labour, economic trends, disposable income of consumers, monetary policies, etc.
play an important role in environmental scanning. For example, in the case of high
unemployment, a company may decrease the prices of its products or services and in opposite
situation i.e. when the unemployment rate is low then prices can be high. This happens
because if more customers are unemployed then by lowering the prices, an organization can
attract them.

c) Social / Cultural factors: Attitude, trends, and behavioural aspects of society also create
an impact on the functioning of the organization. Studying and understanding the lifestyle of
consumers is very much required to target the right audience and to offer the right product or
services based on their preferences. For example, Issues and policies related to the
environment like pollution control are also being considered by organizations to ensure that it
operates in an environment-friendly atmosphere. Taking care of the cultural aspect of
different countries while doing business at the international level, is also an important factor.

d) Technological Factors: Technological factors affect the way firms produce products and
services as well as market them. Like, “processes based on new technologies” is one of the
important factors of a technological environment. To maximize profits, production should be
handled most cost-effectively and this, technology has an important contribution. For
example, an increase in computer and internet-based technology is playing a major role in the
way organizations are distributing and marketing their products and services. Also, different
advancements in technologies like automation of the manual process and use of machinery
based on more advanced and latest technologies, more investment in research & development
by organizations have increased their efficiency by increasing production in less time, cost
reduction and better investment in the long run.

Environmental forecasting

Forecasting is a way of estimating the future events that have a major impact on the
enterprise. Environmental forecasting is a technique whereby managers attempt to predict the
future characteristics of the organizational environment and hence make decisions today that
will help the firm deal with the environment of tomorrow.

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Definition: “Estimating the intensity, nature and timing of the external forces that may effect
the performance of a firm, disrupt its plans, or force a change in its strategies.”

Steps in environmental forecasting

1. Identification of relevant environmental variables

Before managers can begin to formulate an effective strategy, they must make a critical
examination of the firm's environment. All environmental variables do not have the same
relevance to all industries.

Assessing the strategic situation is the first phase in determining the content of the proper
strategies for a firm. This process begins with an assessment of the general environment of
the firm, in terms of economic, technological, social, and political/legal influences.

Eg., diesel price is a critical factor for railways using that energy source but not for electric
trains.

2. Collection of information

Once the environmental variables are identified, the next step is to collect the information
that is needed. It involves the identification of sources of information, determination of the
types of information to be collected, selection of methods of data collection and collection of
information.

3. Selection of forecasting technique

The choice of the forecasting technique depends on the nature of the forecast decision, the
amount and accuracy of the available information, accuracy required, time available,
importance of the forecast, the cost, etc.,

4. Monitoring

Monitoring is very important as the characteristics of the variables or their trends may
undergo changes. Further new variables may emerge as critical or the relevance of certain
variables may decline. It is therefore necessary to monitor changes.

Strategic managers must not only understand the current state of the environment and their
industry but also be able to forecast its future states. Moreover, once having implemented the
environmental analysis process, management should continually evaluate and strive to
improve it.

Types of forecasting

1. Economic Forecast

2. Social Forecast

3. Political Forecast

4. Technological Forecast

Economic forecast: As a economic environment is a very critical determinant of business

prospects, economic forecasts is very important.

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The Economic factors often considered include general economic conditions, GDP growth
rate, per capita income, structural changes in GDP, Investment and output trends in different
sectors and subsectors/industries, price trends, trade and BOP trends etc.

Social forecast: Social trends have significant implications for business strategy. It is,
therefore, very essential to forecast the possible changes in the relevant social variables.
Important factors include:

1. Population growth/decline
2. Ethnic composition
3. Life Styles
4. Social attitudes
5. Income levels

Political forecast

Political forecast has an important part in envisioning properly the future scenario of
business. Relevant factors include:

1. Changes in the relative power of Political party.

2. Political alliances and political ideologies etc.

3. Political forecasts also cover industrial policy, commercial policy, and Fiscal policy,
International political developments are also important.

Technological forecast

Innovation and other technological developments can drastically alter the business
environment. Technological forecasts, therefore, assumes great significance.

It encompass not only technological innovations but also the pace and extent of diffusion and
penetration of technologies and their implications.

Techniques of environmental forecasting

Quantitative techniques:

It can be numberized i.e., under this technique numerical data is used. The following are the
quantitative techniques:

A. Econometric Technique: econometric is the statistical methods used by economists. It is a

set of quantitative techniques that are useful in making economic decisions.

It is the application of statistical and mathematical theories to economics for the purpose of
testing hypotheses and forecasting future trends.

For example: a real life application of econometrics would be to study the hypothesis that as a
person’s income increase, spending increases.

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 Techniques of
environmental
forecasting

quantitative qualitative

Trend
Econometric extrapolation/time Brain storming Delphi method
series analysis

Strategic issue
Judgment models
analysis

Scenario
development/
Multiple scenario

B. Trend Extrapolation / time series analysis: Time series models assume that the past is a
introduction to the future and extrapolate (extending the application of a known information
to an unknown situation) the historical data to the future. We can say future is viewed in the
light of past under this technique.

This is an empirical procedure in which certain historical trends (such as population growth,
technological innovations, changes in incomes etc) are used to predict such variables as a
firm’s sales or market share. Because time series analysis projects historical trends into the
future its validity depends on the similarity between past trends and future conditions.

Qualitative Technique: Under this technique numerical datas are not used. The following
are the methods of qualitative technique

1. Brain Storming:

Brain Storming is a creative method of generating ideas and forecasts. Under this method, a
group of knowledgeable people are encouraged to generate ideas, discuss and to make
forecasts on the basis of that. It is popular technique for technological forecasting.

2. Delphi Method:

This is a forecasting procedure in which experts in the appropriate field of study are
independently questioned about the probability of some event’s occurrence. The responses of
experts are compiled and a summary is sent to each expert. This process is repeated until
consensus is arrived regarding a particular forecasted event.

3. Strategic Issue Analysis: it is the process of developing strategy for a business by

researching the business and the environment in which it operates.

A ‘strategic issue’ is an issue or an unresolved question needing a decision or waiting for

some clarifying future event. The developments, events and trends having the potential to
impact an organization are the strategic issues. It is strategic as it has a major impact on the
course and direction of business.

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 4. Judgment models: This is a forecasting technique in which employees, customers,
suppliers and/or trade associations serve as a source of qualitative information regarding
future trends. For instance sales representatives may be asked to forecast sales growth in
various product categories based on their interaction with customers. Survey instruments may
be mailed to customers, suppliers or trade associations to obtain their judgments on specific
trends.

5. Scenario development/ Multiple Scenario: Future events can’t be predicted easily as our
assumptions may go wrong, trends may change, events may take a different route altogether
or some unexpected thing may change the whole scenario. To overcome these, a manager
should formulate several alternative descriptions of future events and trends (called as
multiple scenarios).

Technological Environment
Technological environment refers to the state of science and technology in the country and
related aspects such as rate of technological progress

Technological change can bring about advantages and opportunities for businesses.
Obviously, new technology can create new products and services, thereby creating entire
new markets for a business. Moreover, improvements in technological products and
processes can increase productivity and reduce costs

What is the impact of technology on business?

By improving product development, business processes and developing the skills of workers,
technology increases productivity in various business operations. The size of
improvements is debatable but some technologies like email and social media have made
communication easier and faster.

Areas where technology has been adopted:

 The existence of 3D technology.

 Computer calculation speed/power.
 The ability of computers to create truly 'random' numbers.
 Engine efficiency.
 Internet connectivity.
 Wireless charging.
 Automation.

Growth of Technology:

According to the Global innovation index (2020), India ranks 48th overall in terms of
innovation and ranks amongst the top 15 nations in Information and Communication
Technology and R&D-intensive global companies.

India’s gross expenditure in R&D was forecast to reach US$ 96.50 billion in 2020. By 2022,
R&D expenditure is targeted to reach at least 2 per cent of the country’s GDP. The
engineering R&D and product development market in India is forecast to post a CAGR of
~12% to reach US$ 63 billion by 2025, from US$ 31 billion in 2019.

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IT spending in India is estimated to reach US$ 93 billion in 2021 (7.3% YoY growth) and
further increase to US$ 98.5 billion in 2022.

India's National Artificial Intelligence Strategy prepared by NITI Aayog outlined a way
forward to harness the potential of Artificial Intelligence (AI) in different fields. Accenture
offers a framework for assessing the economic effect of AI for selected G20 countries in its
latest AI research studies and forecast that AI will raise India's annual growth rate by 1.3%
points by 2035.

India ranked 46th in the Global Innovation Index for 2021. In the Bloomberg Innovation
Index, 2021, India ranked 50th in terms of innovations. In South Asia, India is the only
country to be represented on the index. India ranks 10 th in the Global Cyber security Index
2020 that was launched by the International Telecommunication Union.

Trends in Technology Management:

AI-as-a-service. Artificial Intelligence (AI) is one of the most transformative tech evolutions
of our times. ...
5G data networks. ...
Autonomous Driving. ...
Personalized and predictive medicine. ...
Computer Vision. ...
Extended Reality. ...
Blockchain Technology…
cybersecurity
greater emphasis on automation…
tech-assisted shopping…
influencer marketing and social media advertising.

Industrial Revolution 4.O

As mentioned above, the Fourth Industrial Revolution is called “Industry 4.0″, this industry is
based on automated production and data analysis applied to new technologies, which are
based on Big Data, Virtual Reality, Internet of Things and different means that can facilitate
the manufacturing process of goods and services.

Factories are being transferred from human capital to technological capital, artificial
intelligence creates a great advantage by replacing human force with a cleaner process, which
can be carried out in a more controlled manner, and which is based on data.

Industry 4.0 is the digital transformation of manufacturing/production and related industries

and value creation processes.

Industry 4.0 is used interchangeably with the fourth industrial revolution and represents a
new stage in the organization and control of the industrial value chain.

The Fourth Industrial Revolution, 4IR, or Industry 4.0, conceptualizes rapid change to
technology, industries, and societal patterns and processes in the 21st century due to
increasing interconnectivity and smart automation. The term has been used widely in
scientific literature, and was popularized by Klaus Schwab in 2015, the World Economic
Forum Founder and Executive Chairman.

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Advantages of Industrial Revolution 4.O are as follows:

1. Higher productivity

This happens with each industrial revolution and apparently productivity of each industrial
era goes up 50 times over the preceding age. In the next 5-10 years, it’s estimated that
productivity will increase by 5-8%. This is mainly because of increased automation.

2. Improved quality of life

Technology has made possible new products and services that increase the efficiency and
pleasure of our personal lives. One Channel CEO, Bernard Ford, exemplifies this by
mentioning how “ordering a cab, booking a flight, buying a product, making a payment,
listening to music, watching a film, playing a game” and even controlling the lights and
temperature in our homes can be done remotely. Not to mention that soon we’ll have fully
autonomous cars, or maybe we already do – depending when you’re reading this, and who
knows what else.

3. New markets

Klaus Schwab mentioned that “a fusion of technologies that is blurring the lines between
physical, digital, and biological spheres” will create new markets and growth opportunities. It
will blend improvements from several fields that were often previously separated, to create a
new product or a new service. Not only there will be more knowledge workers, but
knowledge workers in new fields.

4. Lower barrier to entrepreneurship

We can already see that with new technologies such as 3D printing for prototyping, the
barriers between inventors and markets are reduced. Entrepreneurs can now establish their
companies and test various products with lower start-up costs without the traditional time and
cost constraints often encountered with traditional prototyping methods. The typical barriers
to entry are removed from the entrepreneurship equation.

Disadvantages of Industrial Revolution 4.O are as follows:

1. Inequality

It is all about who gets the benefits of these technologies and of the results they help produce.
The reality is that the largest beneficiaries tend to be the providers of intellectual and physical
capital (shareholders, investors, and innovators). Technology is one of the main reasons why
incomes have stagnated, or even decreased, for a majority of the population in high-income
countries. Shocking, isn’t it? The demand for highly skilled workers has increased while the
demand for workers with less education and lower skills has decreased and the part in
between them will start to wear thin. So this could also lead to potential job losses. Not to
even mention that for developing countries there are technological and infrastructure
challenges and skill challenges that are not easy to overcome.

2. Cyber security risk

When everything is connected, the risk of hacking data and tampering with it or using it for
malicious intent is now more prevalent. It is not as contained as before. It’s more and more
frequent that we hear the dreaded news of a new data security breach. So often, in fact, that it

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does not shock us anymore. Not to mention that it challenges the very nature of identity and
privacy, especially with the increased use of data analytics and machine learning.

3. Core industries disruptions

We see this already. Taxis are competing against Uber and Lyft, Traditional television and
cinema compete with Netlfix and YouTube, the hotel industry with Zomato and any store is
competing against Amazon. This has ramifications in the type of services being offered and
the model through which they are offered as well as the jobs associated with them.

4. Ethical issues

With improved AI, genetic engineering, and increased automation, there are new ethical
concerns and questions of morality that already differ greatly from individual to individual.
With access to more data about an individual and a group of individuals, the risk of using it
for personal gain and manipulation is even greater. I think we all remember Cambridge
Analytica data scandal in early 2018 when it was revealed that Cambridge Analytica had
harvested the personal data of millions of peoples’ Facebook profiles without their consent
and used it for political advertising purposes. Plus, this is only an example of those data
missuses that we know of.

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Module: 2 Managing Environmental Issues and Sustainable Development
Natural Environment:

The natural environment is another important factor of the macro-environment. This includes the
natural resources that a company uses as inputs that affect their marketing activities. The
concern in this area is the increased pollution, shortages of raw materials and increased
governmental intervention.

Business is also affected by the quality of natural environment in a particular country. 'There are
some businesses which can be established only at a source where raw material is available. For
example, a sugar industry is possible only at those places where sugarcane can be grown because
of suitable climatic and soil conditions. The industries which get raw material and inputs from
the natural resources can similarly Ile also established near the source of availability of inputs
otherwise increased transportation cost of raw materials and inputs will make the industrial unit
uncompetitive.

Another dimension of natural environment is the ecology. In the past, the industry has given
scant regard to the ecological and environmental issue. It degraded the environment by
contaminating water and polluting air, and disturbed the ecological balance by way of
indiscriminate cutting of forests and exhausting mineral resources. : Such adverse effects were
being overlooked by the governments as we11 as by the people in the past. But now there is high
degree of consciousness among the, government as well as the society to protect the natural
environment and maintain the ecological balance. Business, therefore, has become more aware
of its natural environment and is engaged in recycling of products, development of new
technologies where the further damage to the environment could at least be stopped.

Demographics in business environment

Demography is the study of human population in terms size, age, density sex, location, gender,
race, occupation and other statistics. Demographics is defined as statistical data about the
characteristics of a population, such as the age, gender and income of the people within the
population.

 Size of population

 Literacy and education

 A vast educated manpower: It is a paradox; on the one hand, India has the highest
concentration of illiterates in the world; and on the other, it has the second highest
concentration of literates and third largest pool of educated and technically trained
manpower in the world. India has a strong pool of engineers, scientists and technically
educated persons. In modern fields like information technology, India has been
displaying its strength very clearly in recent years.

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  Diversity: Indian consumers are not a homogeneous lot. They are marked by great
diversity. It is this diversity that strikes us first when we look at Indian consumers that is
diversity in religion, language, culture, tradition, social customs, and dress and food
habits.

 Religious diversity: The one billion people of India belong to seven different religious
groups” Hindus, Muslims, Christians, Sikhs, Buddhists, Jains and Zoroastrians. In
addition, there are other persuasions and there are sects, sub-sects, castes and sub-castes.
Each religion has its own hierarchic structure, concretized through centuries of practices.
Each caste has its own customs established over generations. In birth and death, in
marriage and family life, the individual is entangled in the chores of his religion or caste.
What is welcome for one religion is taboo for the other; and something totally banned in
one religion is an accepted practice in another.

 Linguistic diversity: The same diversity is seen in the matter of language. Sixteen
languages have been specified in the Constitution of India as national languages. In
addition, there are hundreds of dialects. In several places, many amalgams of languages
have been formed as a result of shifting populations. If a marketing man has to approach
the entire national market of India, this linguistic diversity is a big challenge.

 Diversity in dress and food habits: As far as dress is concerned, India holds out the
picture of widely varying styles. Almost every state, or religious community, has its own
traditional styles of dress. The same is the case with ornaments and Jewellery. As regard
food, rice is the staple food in the South and wheat in the North. Of course, in several of
the southern states people now consume wheat products as co-food items. Likewise,
certain southern dishes have become popular in the north. Still the basic difference in
food habits remains. There are certain communities, which are strict vegetarians. For
meat eaters, there are several restrictions; for the Hindu, beef is taboo, for the Muslim,
pork is taboo, for the Christian, both are delicious. Some use coconut oil as the cooking
medium, some use groundnut oil, and some others, mustard oil. If a marketer wants to
market his products in India he has to consider all the above diversified aspects before
planning the marketing strategy. Accordingly the advertisements, sales promotion
activities, distribution channels and retailing plans must be drawn in order to successfully
sell the goods whether for B2B or consumer goods through malls and retailers.

Advantages & Disadvantages of a Demographic Environment

A demographic environment is a set of demographic factors such as gender or ethnicity.
Companies use demographic environments to identify target markets for specific products or
services. This practice has both advantages and disadvantages. Marketers have to take both sides
of the demographic environment coin into account when deciding what strategy to apply. When
a company looks at a demographic environment, it focuses its attention on the people who are
most likely to buy a product. This is good from the marketing standpoint because it means the
company does not waste money trying to get people to buy who have no interest in the product.
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Branding and Strategy Demography provides very specific information about different
populations. Once a company has this data, the company can develop well-defined strategies
about how to reach each population -- that is, it tells companies exactly how to market and
develop their brands so people in the demographic environment will respond. For instance, if
people in the demographic environment tend to be busy, young workers, then a company might
promote the quick use and convenience available with the product.

Trending and Comparison When companies examine demographic environments, they usually
do so under the same lenses, such as age or gender. By collecting demographic data over
extended periods of time and comparing information from different points, companies can
identify trends within the population. This lets them forecast what might happen with sales in the
future and make some decisions about upcoming production or offered services.

Assumption and Culture Perhaps the largest problem with a demographic environment in terms
of marketing is that even though marketers use accurate data to make predictions about what will
happen with consumers, there is no guarantee that what the company predicts actually will come
to pass. In other words, much of marketing with demographic data is based on assumptions.
Additionally, those assumptions are based largely on the cultural norms surrounding the
company. Demographic information has little meaning unless marketers examine it with this in
mind, as culture has such a large influence on what those in the demographic environment do.

Change Populations are never constant. People migrate from place to place, and people pass
away and are born. Subsequently, marketers cannot simply collect demographic data one time.
They have to collect the information constantly in order to have a realistic picture of what is
happening at any given point. This requires a great deal of effort and means a constant expense
to a business.

Customer Loss Focusing marketing based on demographic information means that a company
may lose potential customers who do not fit the general demographic mold because the company
does not concentrate on attracting those customers. This includes the loss of sales from people
who might buy the product or service for someone else, as those people might not be aware the
company offers the product or service. India being very vast geographically, consumers here are
naturally scattered over a vast territory. As the country is also marked by great diversity in
climate, religion, language, literacy level, customs and calendars, lifestyles and economies status,
here consumers present a complex and bizarre group. The heterogeneity holds many implications
for a marketer, especially to those going in for national marketing.

Geographical And Ecological Environment

Geographical environment refers to climatic conditions and natural resources, which determines
the manufacturing scope and the nature of the products that could be marketed. For example, a
country like Kenya has to manufacture more of products based on forest resources, while the gulf
countries can produce only crude, japan can have business on fish, fruits, etc., Countries in the
tropical region would produce products from largely available geographical resources in that
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region, organizations in Mediterranean countries have a different business scope, Scandinavian
countries have scope in dairy products and so on. On the other hand, steps towards balanced eco-
system are taking place at an alarming rate in the world today. Deforestation and hunting of rare
species of animals for food have been prohibited. Hence, while identifying the business
opportunities, business organizations have to be conscious of the limitations posed by the
geographical and ecological considerations.

Geographical and ecological Hazards: Natural hazards are extreme natural events that can
cause loss of life, extreme damage to property and disrupt human activities. Some natural
hazards, such as flooding, can happen anywhere in the world. Other natural hazards, such as
tornadoes, can only happen in specific areas.

The environmental hazards you face depend on where you live. For example, if you live in
northern California you are more likely to be impacted by a wildfire, landslide, or earthquake
than if you live in Charleston, South Carolina, but less likely to be hit by a hurricane. This is
because the physical conditions in each place are different. The active San Andreas fault runs
through California and causes regular earthquakes, while the warm waters transported by the
Gulf Stream can intensify a storm heading for South Carolina. These environmental hazards
shape human activity regionally. Building codes in California require builders to meet standards
set to minimize structural damage in an earthquake and coastal cities have building code to
reinforce roofs and walls to resist a storm’s high winds.

1. Geological Hazards
These are associated with Earth's structure and tectonic activities. Common geological hazards
include:
 Earthquakes: Sudden ground movements primarily caused by the release of stress along
geological faults or by volcanic activity.
 Volcanoes: Eruptions can produce lava flows, ash falls, pyroclastic flows, and lahars, all
of which pose significant risks to life and property.
 Landslides: Movements of rock, earth, or debris down a slope can be triggered by rain,
earthquakes, volcanic activity, or human actions like deforestation.
 Tsunamis: Sea waves triggered by undersea earthquakes, landslides, or volcanic
eruptions, causing widespread coastal destruction.
1. Meteorological Hazards
These hazards are related to weather and climate conditions:
 Hurricanes, Typhoons, and Cyclones: Large storm systems characterized by strong
winds, heavy rain, and storm surges, leading to flooding and significant damage.
 Tornadoes: Violently rotating columns of air touching the ground, capable of destroying
buildings and uprooting trees.
 Heatwaves: Extended periods of excessively hot weather, which can be fatal, particularly
for the elderly, the very young, and people with chronic diseases.
 Droughts: Long periods of abnormally low rainfall, leading to severe water shortages.
1. Hydrological Hazards
These involve disturbances in the hydrological cycle:

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  Floods: Overflow of water onto land that is normally dry. Floods can result from intense
rainfall, overflow of rivers, dam breaks, or storm surges.
 Glacial Lake Outburst Floods (GLOFs): Sudden releases of water from a glacier or a
glacially dammed lake, often due to melting or destabilization of the glacier.
1. Climatological Hazards
These are longer-term processes driven by climate change:
 Melting Ice Caps and Glaciers: Leading to rising sea levels and altering ocean currents.
 Desertification: Degradation of land in arid, semi-arid, and dry sub-humid areas,
primarily due to climate change and unsustainable land use.
1. Ecological Hazards
These affect ecosystems but can have profound indirect effects on human societies:
 Wildfires: Uncontrolled fires that spread across vegetation, exacerbated by dry
conditions, lightning, or human activity.
 Invasive Species: Non-native species that cause ecological disruption, affecting native
biodiversity and altering habitats.
 Algal Blooms: Rapid increase of algae in water systems, often due to excessive nutrients
(from fertilizers), leading to ecosystem imbalances and affecting water quality.

Mitigation and Adaptation Strategies

Efforts to manage and reduce the impacts of these hazards include:
 Early Warning Systems: Technologies and protocols that predict hazardous events and
warn populations in advance.
 Infrastructure Adaptation: Building resilient structures, improving drainage systems,
and constructing barriers like levees.
 Environmental Management: Sustainable land and water use practices, reforestation,
and habitat restoration to mitigate impacts and enhance resilience.
 Policy and Planning: Integrating risk assessments into development planning and
enforcing regulations that limit human exposure to hazards.

Corporate Governance or Government role and Intervention:

1. Formal and informal controls:

Formal controls are usually those emanating from legislation, as for, example, the FEMA, the
companies act, 1956 and the competition act 2002. Formal controls are very powerful and
when we think of government control over business, we generally mean formal controls.

Informal controls refer to the controls which various groups impose upon themselves out of
need and custom. Business firms in various lines of activity develop conventions, informal
agreements and accepted ways of doing things that have important regulative implications.

2. Coercive and inductive controls:

Coercive regulations require performance of certain actions or retaining from others in order
to avoid penalties. For instance, taxes must be paid or line or imprisonment may result.

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 In contrast, inductive controls hold out a promise of reward for compliance with the desired
line of action. For example, subsidies may be granted to stimulate certain activities.

3. Direct and indirect controls:

When the government fixes prices of certain products or services, it is an example of direct
control. The administered price policy of the government of India is a direct control measure.
The variation of corporate income tax to influence economic activity is an indirect control
measure. Businessmen prefer indirect controls to direct regulations.

Effect on competition:

Depending on the relationship to competition, regulations may be:

a. Government regulations designed to make competition work, the competition act,

b. Government competition with business firms as a means of setting standards of competition,

or

c. Direct government ownership and operation to supplement competition.

4. Promotional and regulatory controls:

Promotional measures are of a positive nature, and include such activities as expansion of public
sector establishment and operation of development banks, revival of sick units, encouragement to
small-scale units, and removal of regional imbalances, provision of incentives and subsidies and
export promotion.

Regulatory measures ensure orderly development of industries with the least wastage of
resources. Regulatory measures include direct controls like the industries (Development and
Regulation) Act, the competition act, the companies act, the foreign exchange management act
and price and distribution controls, labour laws and indirect controls like monetary policy and
fiscal policy.

Key Elements of Corporate Governance:

1. Board of Directors: The board is pivotal in governance, bearing the ultimate
responsibility for the business's affairs and decision-making. Its members should bring
diverse expertise and viewpoints, ensuring strategic guidance and oversight.
2. Management Structure: Clearly defined roles and responsibilities for the CEO, CFO,
and other senior management help in maintaining accountability. There needs to be a
balance in power, ensuring no single individual has unfettered powers of decision-
making.
3. Shareholder Rights: Protecting the rights of shareholders and ensuring their fair
treatment is essential for a company's stability and attractiveness to existing and potential
investors.

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 4. Transparency and Disclosure: Adequate disclosure and transparency in operations are
critical to building shareholder trust and can also ensure that an organization is held
accountable for its actions.
5. Stakeholder Interests: Recognizing and protecting stakeholder interests, including
employees, customers, suppliers, and the community, can enhance corporate reputation
and long-term sustainability.
6. Ethical Behavior and Corporate Integrity: A culture of ethics and integrity should be
promoted, with clear codes of conduct and robust policies against corruption and fraud.

Government Role and Intervention in Corporate Governance:

Governments play a crucial role in shaping the environment for corporate governance through
legislation, regulation, and enforcement. Here are some key areas where government intervention
is significant:
1. Legislation: Governments create laws that set the foundation for corporate governance,
such as company law, securities law, and laws covering employment, environment, and
anti-corruption.
2. Regulatory Bodies: Through regulatory bodies, governments enforce compliance with
laws and norms. For example, the Securities and Exchange Commission (SEC) in the
U.S. oversees securities markets and protects investors by ensuring fair play.
3. Policy Making: Governments can influence corporate governance through policies that
dictate acceptable behavior within corporations. For instance, policies related to
disclosure requirements, board composition, and executive remuneration.
4. Promoting Best Practices: Governments often promote best practices in corporate
governance by supporting guidelines issued by industry groups or international bodies,
such as the OECD Guidelines for Multinational Enterprises.
5. Direct Intervention: In some cases, particularly during periods of economic crisis or
where companies become 'too big to fail,' governments might intervene directly in the
market, as seen during the 2008 financial crisis with bank bailouts.

Examples of Government Intervention:

 Regulatory Reforms Post-2008 Financial Crisis: Governments worldwide, particularly
in the U.S. and Europe, enacted comprehensive financial reforms aimed at tightening
corporate governance. The Dodd-Frank Act in the U.S., for instance, introduced stringent
regulations for banks and other financial institutions to prevent future crises.
 Antitrust Laws: Through antitrust or competition laws, governments regulate and
prevent monopolistic practices, ensuring fair competition and preventing abuse of
dominant positions.
 Corporate Tax Policies: By setting corporate tax rates and rules, governments influence
corporate behavior. Policies aimed at preventing tax evasion and avoidance are also
significant in ensuring corporations contribute fairly to the economy.
Environmental Management as a competitive advantage:

Although the environment includes everything outside the system, it takes its origin from
sciences, especially from ecology. The importance of ecological problems is due to their
visibility. For several decades, “business” and “environment” are perceived as unfriendly terms.

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The public sensitivity to the impact of industrial activities is amplified by global
environmental problems that can only be solved through collaboration on a global scale.

Environmental management has become a very important business topic, particularly in recent years.
Stakeholders show interest in environmental management mainly in developed countries. The
popularity of this concept has grown through the development of international environmental
standards and voluntary programs. According to Cramer environmental management can be
defined as “technical and organizational activities aimed at reducing the environmental impact
caused by a company’s business operations.” I n s u m m a r y , environmental management can
reduce negative effects on the environment primarily through the development of products and
processes.

Competitive advantage is the result of a value creating strategy that is not carried out by current
and potential competitors. It is a relative concept and cannot be owned by a single firm. Indeed, a
firm may have a competitive advantage over a competitor, a group of competitors, a strategic
group or all firms in the industry. More specifically, Firm A have a competitive advantage
over firm B which may have a competitive advantage over Firm C. Porter (1985)
distinguishes between competitive advantage based on costs and competitive advantage based
on differentiation.

A competitive advantage is sustainable if it is able to resist to the competition. The

sustainability of competitive advantage is achieved if competitors are unable to duplicate the
positive consequences of a strategy. Neither time nor duration determines sustainable competitive
advantage, but it is the inability of rivals to achieve the same benefits.

Greening of Management

It is the organization process in which environmental targets and strategies are fully integrated
into the operation in order to gain competitive advantage through waste disposal, sustainability,
continuous learning and social responsibility.

Green management is a paradigm that includes improving environmental awareness, using

energy resources and eco-friendly technologies, reuse of wastes, and recycling activities starting
from production activities of businesses to packaging and delivering to consumers.

For many years, businesses have been carried out their functions by adopting general
management systems without paying attention on environmental damages. The gases which are
spreading out, natural damages caused by chemical materials, environmental damages caused by
solid wastes and environmental contamination are not paid attention. Along with global
warming, businesses direct their businesses towards green management which are focused on
environment by realizing on environmental damages. In the 21th century, businesses product
environment-friendly productions to be able to carry on their existence, increase their
profitability and productivity because they are in interaction with environment. Businesses adopt
green management applications to decrease the damages on environment. Along with

25
environment-friendly productions, environment-friendly technologies, environmental
consciousness businesses gain edge over their competitors.

Almost every sector develops environment-friendly activities in themselves by means of

different applications. Environment-friendly hybrid vehicles in automotive sector, producing
papers which are suitable for recycling in paper industry, green star applications in tourism field,
convenience for recycling of packing in food sector and production of environment-friendly
productions can be counted as various activities which take place in green management focused
environment.

There are factors and powers which encourage businesses to green management. Government
encourages the businesses to green management by means of its rules and applications.
Government supplies some privileges and grants for businesses which adopt green management.
Businesses prioritize their matters adopting green management in their aims, visions, targets,
tactics, strategies and politics. Along with applied strategies, businesses which are adopting
green management focusing on environment provide a competitive advantage against their
competitors by means of their environment friendly productions and their manner of rule which
are adopted. Businesses create environment consciousness for their customers and workers by
producing environment friendly productions and they give information about environment.

The concept of green management and the application of green management in business
functions are dealt in the research. The aim of the research is to analyze the success of green
management in businesses, activities and green management visions of businesses. In this
research, a business which is applying green management is dealt within the concept of case
study from qualitative researching methods.

ISO Standards: International Organization for Standardization (ISO), founded in 1947 is the
world’s largest developer of voluntary international standards which has also set norms for
business practices. Every organization needs to instigate actions aimed at making the world a
better place. The ISO 26000 Standard published in 2010 provides guidance on the underlying
principles of social responsibility and ways to integrate socially responsible behaviour into
organizational strategies, systems, practices and processes.

The ISO 26000 develops an international consensus on what social responsibility means and the
social responsibility issues that organizations need to address. It also provides guidance on
translating principles into effective actions. It adds value to existing social responsibility work by
refining best practices that have already evolved and disseminating the information worldwide
for the good of the international community.

Unlike many other ISO standards, ISO 26000 is not for certification purposes. Instead,
it provides guidance for all types of organizations, regardless of their size or industry, on:
 Concepts, terms, and definitions related to social responsibility;
 Background, trends, and characteristics of social responsibility;
 Principles and practices relating to social responsibility;

26
  Integrating, implementing, and promoting socially responsible behavior throughout the
organization and, through its policies and practices, within its sphere of influence;
 Identifying and engaging with stakeholders; and
 Communicating commitments, performance, and other information related to social
responsibility.

Key Principles of ISO 26000

ISO 26000 defines seven key principles of social responsibility:
1. Accountability: Organizations should be accountable for their impacts on society, the
economy, and the environment.
2. Transparency: Organizations should be transparent in their decisions and activities that
impact society and the environment.
3. Ethical Behavior: Behavior should be based on the values of honesty, equity, and
integrity.
4. Respect for Stakeholder Interests: Organizations should respect, consider, and respond
to the interests of their stakeholders.
5. Respect for the Rule of Law: An organization should accept that respect for the rule of
law is mandatory.
6. Respect for International Norms of Behavior: Organizations should respect
international norms of behavior, while adhering to the principle of respect for the rule of
law.
7. Respect for Human Rights: Organizations should respect human rights and recognize
both their importance and their universality.

Core Subjects of Social Responsibility

ISO 26000 also details seven core subjects which an organization can use as a guide to integrate
social responsibility into its decisions and activities:
1. Organizational Governance: Effective governance practices to underpin social
responsibility.
2. Human Rights: Includes due diligence and remediation processes to promote human
rights.
3. Labor Practices: Focuses on fair labor practices, healthy working conditions, and social
dialogue.
4. The Environment: Guidance on preventing environmental damage and mitigating
negative environmental impacts.
5. Fair Operating Practices: Concerns ethical conduct in dealings with other
organizations, such as in anti-corruption measures.
6. Consumer Issues: Addresses the delivery of fair and honest products and services to
consumers.
7. Community Involvement and Development: Involves active engagement,
empowerment, and support for community development.

Implementation
ISO 26000 is designed to be used by all organizations, regardless of their activity or sector.
Organizations are encouraged to take into account societal, environmental, legal, cultural,

27
political, and organizational diversity, as well as differences in economic conditions, while being
consistent with international norms of behavior.

The standard emphasizes the importance of results and improvements in performance on social
responsibility. While it does not include requirements and, thus, is not intended for certification
like some other well-known ISO standards (e.g., ISO 9001, ISO 14001), it does aim to help
organizations in contributing to sustainable development. It encourages them to go beyond legal
compliance, recognizing that compliance with law is a fundamental duty of any organization and
an essential part of their social responsibility. It is intended to promote common understanding in
the field of social responsibility worldwide.

ISO 14000 is a family of standards related to environmental management that exists to help
organizations to minimize how their operations/ processes negatively affect the environment by
causing adverse changes to air, water or land. It also aims at complying with applicable, laws,
regulations and other environmentally oriented requirements and continually to improve in the
same. The standard is designed to address the delicate balance between maintaining profitability
and reducing environmental impact.

Key Components of ISO 14001: Environmental Management Systems

1. Environmental Policy: Establishing an environmental policy that commits to
compliance with relevant laws and regulations, as well as continuous improvement of the
EMS.
2. Planning: Identifying potential environmental impacts of operations, setting objectives
and targets to mitigate these impacts, and planning actions to achieve these objectives.
3. Implementation: Structuring an organization to execute the environmental management
plan, including necessary training, communication, and operational controls.
4. Evaluation: Monitoring and measuring the effectiveness of the EMS, evaluating
compliance with environmental laws and regulations, and conducting internal audits of
the EMS.
5. Review: Top management regularly reviews the EMS to ensure its continuing suitability,
adequacy, and effectiveness, promoting continual improvement.

Benefits of Implementing ISO 14000 Standards

 Improved Environmental Performance: Reduced resource consumption and waste
production, along with a structured approach to setting objectives and targets for
improving environmental performance.
 Compliance: Enhanced ability to comply with environmental laws and regulations.
 Operational Advantages: Increased efficiency and potential reduced costs due
to more systematic approach to environmental management.
 Stakeholder Confidence: Improved public image and credibility, leading to a
competitive advantage, as customers, clients, and stakeholders recognize the commitment
to proactive environmental management.

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  Employee Engagement: Workers in organizations certified to ISO 14001 often express
increased job satisfaction as they engage with initiatives that lead to positive
environmental impacts.

Other Standards in the ISO 14000 Family

 ISO 14004: Provides additional guidance to organizations on the implementation of
environmental management systems.
 ISO 14031: Focuses on evaluating environmental performance.
 ISO 14040 to ISO 14049: Addresses different aspects of life cycle assessment, providing
guidelines for environmental impact review over the life span of a product or service.
 ISO 14050: Terms and definitions in the field of environmental management.
 ISO 14064: Specific methodologies for quantifying, monitoring, reporting, and verifying
greenhouse gas emissions.

Adoption and Certification

Organizations of all types, sizes, and sectors can adopt ISO 14000 standards. While ISO 14001
certification is not mandatory, it is frequently pursued by organizations looking to validate their
environmental management efforts through a third-party audit. Achieving ISO 14001
certification can help an organization improve its environmental performance, meet various
stakeholder expectations, and gain a competitive advantage in the market.
The implementation of ISO 14000 and certification to ISO 14001 can provide a systematic
approach to managing environmental aspects of business activities, products, and services that
can lead to sustainable development.
Industrialization: The industrial sector which possesses a relatively high marginal propensity to
save and invest contributes significantly to a self-sustaining economy. Besides, the process of
industrialization is associated with the development of technical knowledge, attitudes and skills
of industrial work, with experience of industrial management and with other attributes of modern
society which in turn, are beneficial to the growth of productivity in agriculture, trade, Service
and other related sectors of the economy. As a consequence of these factors, any successful
transfer of labour from agriculture to industry contributes to economic development.
Industrialization is thus inseparable from substantial, sustained economic development because it
is both a consequence of higher incomes and means of higher productivity. With the rise in
income level people tend to spend more on manufactured goods than on food. The differential
income elasticity of demand confers an advantage on the manufacturing countries in the form of
providing expanding market, higher productivity makes it an attractive occupation to diminishing
returns in agriculture. Industrialization acts as an instrument for creating capacity to absorbed
excess labour, and for catering to the diversification of the market required at higher stages of
economic development

THE PATTERN OF INDUSTRIALIZATION:

While there is now almost universal agreement on the importance of industrialization, there is
still much debate regarding the proper pattern of industrial development. Historically industrial
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development has proceeded in three stages. In the first stage, industry is concerned with
processing of primary products; “Milling grain, extracting oil, tanning leather, spinning
vegetable fibres, preparing timber and smelting ores.” The second stage comprises the
transformation of materials making bread and confectionery, footwear, metal goods,
manufacturing of machines and other capital equipment’s. In first stage the consumer goods
industries are of over whelming importance, their net output being on the average five times as
large as that of capital goods industries. This ratio is 2.5: 1 in the second stage and falls to 1:1 in
the third stage and still lower in the fourth stage. Both these types of classifications emphasize
the increasing role of the capital goods industries in the economy as industrial development takes
place. Though the general development of industry itself proceeds from consumer goods to the
capital goods, there are many variations of this pattern, both in terms of time taken to attain later
stage and in terms of relative importance of each of the stages. Soviet pattern of industrialization
involves a straight jump from the first to the third stage while British pattern is that of a gradual
evolution. Similarly, underdeveloped countries may also evolve a different pattern of
industrialization suitable to their economic conditions. It has been suggested that the pattern of
industrialization in under-developed countries should be guided primarily by considerations
arising from the relative scarcity of capital. Since labour is relatively plentiful and capital scarce,
the development of labour-intensive consumer goods seems quite legitimate. However the basic
premise of this approach is inappropriate. The problem is not how to economize the use of
capital but how to increase its supply. Since most underdeveloped countries do not produce these
goods at home, the only alternative to increasing their supplies is through imports. This depends
upon the rate of growth in exports of primary commodities and manufactured goods.

Industrial development depends upon the rate of capital formation. Supply of capital goods can
be augmented either through imports or through domestic production. Increase in the imports of
capital goods depends upon the rate of growth of exports. Since the scope for the expansion of
the exports of primary commodities is limited, export promoting manufacturing industries may
be developed or alternatively, certain import substituting domestic industries may be developed,
the effect of which will be to release foreign exchange for the imports of capital goods. In
addition within the current volume of imports, capital goods may be substituted in place of
consumer goods. Simultaneous development of all the three classes of industries will prove to be
the most effective strategy of industrialization. The relative role of each is likely to vary with the
particular economic circumstances of individual countries as well as with their current phase of
industrialization.

The pattern of industrialization historically and globally varies considerably due to differences in
economic structures, cultural influences, political systems, resource availability, and historical
timing. However, some common patterns and stages can be identified, illustrating how countries
move from agrarian-based economies to industrial powerhouses.
1. Pre-Industrial Stage
 Characteristics: Economies are primarily agrarian and rural, with most of the population
engaged in subsistence farming. Manufacturing is conducted on a small scale, typically
within family units or by artisans.
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  Infrastructure: Limited infrastructure, with transport largely dependent on animals and
waterways.
1. Initiation of Industrialization
 Trigger: Often spurred by technological innovations, significant capital investment,
or changes in policy that favor industrial development.
 Early Industries: Typically begins with textiles, clothing, and basic metal works, which
are labor-intensive but require relatively lower capital and technology.
 Infrastructure Development: Improvement in transportation (e.g., railroads, ports) and
communication facilities to support manufacturing and distribution.
1. Expansion of Industrial Sector
 Diversification: More industries come up, including heavier industries like steel,
machinery, and chemicals. The economy begins to experience diversification away from
agricultural reliance.
 Urbanization: Significant movement of population from rural to urban areas seeking
jobs in factories. Rapid growth of new urban centers.
 Capital Accumulation: Increased capital accumulation within the industrial sectors,
often supported by domestic savings and foreign investment.
1. Technological Maturity and Innovation
 Technological Advancements: Adoption and innovation in technology become crucial,
leading to increased productivity and expansion of new industrial sectors like electronics
and automobiles.
 Skilled Workforce: The focus shifts towards more skilled labor and specialized
education systems to support advanced industrial sectors.
 Economic Integration: Increased role in global trade, with industrial goods forming a
significant part of exports.
1. Transition to a Service-Oriented Economy
 Deindustrialization: In many advanced economies, there's a shift towards services, such
as finance, information technology, and healthcare. Manufacturing declines as a
proportion of GDP and employment.
 Innovation and R&D: Emphasis on research and development, leading to advancements
in technology and the emergence of knowledge-based sectors.

Global Variations
 Western Europe and the USA: These regions followed the classical pattern of
industrialization starting in the late 18th century, spurred by the Industrial Revolution.
The process was marked by rapid urbanization, technological innovation, and eventual
transition to service-oriented economies.
 East Asia (Japan, South Korea, Taiwan, China): Post-World War II, these countries
experienced rapid industrialization, heavily focused on export-oriented industries,
benefiting from government policies, investment in education, and technology transfer.
 Late Industrializers (India, Brazil): These countries have faced challenges like over-
dependence on agriculture, population pressures, and political instability which have
influenced their industrial paths. They have a mixed pattern with simultaneous
development in multiple sectors, including services.

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Current Trends
 Sustainability and Green Technology: Modern industrialization patterns now also
consider environmental impacts, leading to the rise of green technologies and sustainable
practices within industrial processes.
 Digitalization: The Fourth Industrial Revolution (Industry 4.0) introduces digitalization
and automation with technologies such as AI, robotics, and the Internet of Things (IoT),
transforming traditional industrial practices.
Overall, while the pattern of industrialization has common stages, each country's path reflects its
unique socio-economic and historical context, policies, and technological adoption rates. As
industries continue to evolve, these patterns are subject to further changes driven by
technological, environmental, and economic factors.
Urban Development and Environment:

Urban development covers infrastructure for education, health, justice, solid waste, markets,
street pavements and cultural heritage protection. These constructions usually form part of
specific sector programmes, including capacity building measures. Special attention is also paid
to slums of large cities.

The environmental impact of economic growth includes the increased consumption of non-
renewable resources, higher levels of pollution, global warming and the potential loss of
environmental habitats

At the beginning of the 21st century more than 50% of the world’s population lived in cities. By
2050, this percentage will exceed 60%, with the majority of growth occurring in Asia and Africa.
As of 2020 there are 31 megacities, cities whose population exceeds 10 million, and 987 smaller
cities whose populations are greater than 500 thousand but less than 5 million in the world. By
2030 there will be more than 41 megacities and 1290 smaller cities. However, not all cities are
growing. In fact, shrinking cities, those whose populations are declining, occur throughout the
world. Factors contributing to population decline include changes in the economy, low fertility
rates, and catastrophic events. Population growth places extraordinary demand for natural
resources and exceptional stress on natural systems. For example, over 13 million hectares of
forest land are converted to agriculture, urban land use, and industrial forestry annually. This
deforestation significantly affects both hydrologic systems and territorial habitats.

Habitat loss is the greatest threat to biodiversity. Urbanization not only destroys and fragments
habitats but also alters the environment itself. For example, deforestation and fragmentation of
forest lands lead to the degradation and loss of forest interior habitat as well as creating forest
edge habitat. These changes shift species composition and abundance from urban avoiders to
urban dwellers. In addition, roads and other urban features isolate populations causing local
extinctions, limit dispersal among populations, increase mortality rates, and aid in the movement
of invasive species.

The negative effect of the expansion and urbanization itself can be minimized through proper
planning and design. Planning with nature is not new but it has only recently been recognized
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that human survival is predicated on coexisting with biodiversity and native communities.
However, if cities apply recommendations for sustainability depends entirely on the people
themselves.

Global Environmental Issues:

1. Climate Change
Climate change, driven by global warming due to increased concentrations of greenhouse gases
(GHGs) in the atmosphere, is one of the most pressing environmental issues. Its effects include
more frequent and severe weather events like hurricanes, droughts, and heatwaves, rising sea
levels, and changing precipitation patterns. These changes impact agriculture, water
supply, health, and can lead to the displacement of people.
1. Biodiversity Loss
The Earth is currently experiencing a significant loss of biodiversity, often described as the sixth
mass extinction. Habitat destruction, overexploitation, pollution, invasive species, and climate
change are among the leading causes of biodiversity loss. This decline affects ecosystem
resilience, reducing nature's ability to provide services like pollination, water purification, and
carbon sequestration.
1. Deforestation
Deforestation primarily occurs in tropical regions and is driven by agricultural expansion,
logging, and infrastructure development. It results in the loss of habitat for millions of species,
contributes to biodiversity loss, and is a major contributor to climate change, as forests act as
significant carbon sinks.
1. Ocean Acidification and Overfishing
The oceans absorb a large part of the atmospheric CO2, leading to ocean acidification, which
affects marine life, particularly organisms with calcium carbonate structures like corals and
shellfish. Additionally, overfishing has led to the depletion of many fish stocks, affecting the
balance of marine ecosystems and the livelihoods of communities dependent on fishing.
1. Pollution
Air pollution, water pollution, and soil contamination pose severe risks to human health and the
environment. Major pollutants include particulate matter, plastics, heavy metals, and chemicals
that enter ecosystems through industrial processes, waste disposal, agricultural runoff, and other
means.
1. Water Scarcity and Security
Water scarcity is increasingly a problem due to overuse of freshwater resources, pollution, and
changes in precipitation due to climate change. This issue is critical because it affects the ability
to produce food, maintain ecosystems, and sustain human populations.
1. Land Degradation
Land degradation, including desertification, is primarily caused by unsustainable farming
practices, deforestation, overgrazing, and poor irrigation practices. It results in less productive
landscapes, which can exacerbate food insecurity and cause communities to fall into poverty.
1. Waste Management
Improper waste management, particularly of hazardous and non-biodegradable waste like
plastics, can lead to environmental pollution, endanger wildlife, and pose health risks to humans.

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The issue is exacerbated by the growing volumes of waste generated by increasing consumption
patterns.
1. Urbanization
Rapid urbanization leads to environmental degradation if not managed sustainably. It stresses
water resources, contributes to air and water pollution, increases energy consumption, and can
lead to unplanned urban sprawl.

Solutions and Global Initiatives

Addressing these issues requires coordinated international actions. Global agreements like the
Paris Agreement on climate change, the Convention on Biological Diversity, and the United
Nations Sustainable Development Goals (SDGs) are frameworks designed to guide nations
towards sustainability. Solutions include transitioning to renewable energy sources, enforcing
sustainable fishing practices, promoting sustainable land and water management, enhancing
recycling and waste management systems, and protecting natural habitats.
Individuals, governments, non-profits, and businesses all have roles to play in mitigating these
environmental challenges through policy-making, education, technological innovation, and
changes in consumption and production patterns.
Globalisation leads to both positive and negative impact on environment as discussed below:

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Sustainable development concepts:

The concept of sustainable development was described by the 1987 Bruntland Commission
Report as “development that meets the needs of the present without compromising the ability of
future generations to meet their own needs.”

Sustainable development can be defined as the practice of maintaining productivity by replacing

used resources with resources of equal or greater value without degrading or endangering natural
biotic systems. Sustainable development binds together concern for the carrying
capacity of natural systems with the social, political and economic challenges faced by
humanity. Sustainability science is the study of the concepts of sustainable development and
environmental science. There is an emphasis on the present generations' responsibility to
regenerate, maintain and improve planetary resources for use by future generations.

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Need for Sustainable Development

Sustainable development always encourages us to conserve and enhance our resources, by

gradually changing the manners in which we develop and use technologies. All Countries should
meet their basic needs of employment, food, energy, water, and sanitation.

Sustainable Development Goals

The Sustainable Development Goals (SDGs) or Global Goals are a collection of 17 interlinked
global goals designed to be a "blueprint to achieve a better and more sustainable future for
all". The SDGs were set up in 2015 by the United Nations General Assembly (UN-GA) and are
intended to be achieved by 2030. They are included in a UN-GA Resolution called the 2030
Agenda or what is colloquially known as Agenda 2030. The SDGs were developed in the Post-
2015 Development Agenda as the future global development framework to succeed
the Millennium Development Goals which ended in 2015.

Relevance of Sustainable in modern business:

Companies and organizations who have built sustainability into the DNA have only one choice
to succeed: make sure that everyone are engaged with the sustainability goals. Internal and
external stakeholder engagement results in several benefits. Here is a glimpse of those business
benefits:

1. It provides competitive advantage

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Placing climate actions in business strategy, showing environment, social and governance
impacts and communicating transparently about what you do, give you competitive edge against
competitors. A sustainable company attracts new talents, new customers and new investors
because they positively affect the society. In other words, companies who make a difference for
customers, employees and other groups in society attract impact investors and increase the
overall stakeholder engagement.

2. It increases the bottom line

Businesses who create sustainable growth will be eventually rewarded. Providing products
and services that are sustainable throughout their life cycle and social aspects, attract clients who
are increasingly aware of the responsible production and consumption patterns. The fact is that
customers are more and more seeking sustainable products and services and companies who
answer to this need are growing quicker than their unsustainable competitors.

3. It reduces costs

All businesses look for growth but what matters is how its achieved. Becoming more circular
in design state of everything by applying circular economy principles or making investments for
equipment and innovations that optimize product manufacturing process all save costs. One
single aspect that increases costs are stranded assets, unnecessary loss and waste of materials that
are composed in production phase. By reducing or completely eliminating these waste and infra
trails, business increases savings.

4. It builds employer image and brand

The company consists of values, goals and practices that form the working culture. A
sustainable business commits in zero tolerance of discrimination, bullying, illegal practices and
inequalities linked to diversity (sex, age, status, nationality and disability) as well as making no
harm to the environment. It builds your image as an employer and how stakeholders see your
brand.

5. It is absolutely necessary

Speaking of planetary boundaries, the global pressure and what we already experience, there is
only one option; to develop businesses into more sustainable direction. Companies must adapt
and improve reactivity in the rapidly changing world.

World Business Council for Sustainable Development (WBCSD) Report

The World Business Council for Sustainable Development (WBCSD) is a CEO-led

organization of over 200 international companies. The Council is also connected to 60 national
and regional business councils and partner organizations.

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Its origins date back to the Rio de Janeiro Earth Summit of 1992, when Stephan Schmidheiny, a
Swiss business entrepreneur, was appointed chief adviser for business and industry to the
secretary general of the United Nations Conference on Environment and
Development (UNCED). He created a forum called "Business Council for Sustainable
Development", which went on to become Changing Course, a book that coined the concept
of eco-efficiency.

The WBCSD was created in 1995 as a merger of the Business Council for Sustainable
Development and the World Industry Council for the Environment

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