Question

Ethics Issues

Should a firm exceed the minimum legal limits of government imposed environmental regulations and be responsible for the environment, even if this responsibility leads to a wealth reduction for the firm? Is environmental damage merely a cost of doing business?

Answer 1

Ethically the firm shouldn't exceed the minimum legal limits of the government imposed Environmental regulations and it should be responsible for the Environment because when the firm creates pollution it not only harms the Environment but also causes a negative externality for the people using those resources. And it therefore is a negative cost on those people who should be paid. Hence the firm should include these costs also in the cost of production. And the firm should be aware of the damage it does to the environmental and should he held accountable for damaging its surroundings as Environmental damage is not the opportunity cost of doing business.