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IB DP Economics Study Notes

4.7.4 Sustainable Business Practices

Sustainable business practices are essential for businesses aiming to uphold and promote environmental, social, and economic stewardship. These practices entail a commitment to profound transformative actions, affecting every aspect of business operations, from supply chain management to employee relations and product development.

Green Technology


Green technology implies the development and application of products, equipment, and systems used to conserve the natural environment and resources, ultimately reducing and minimising ecological impact.


  • Ecosystem Conservation: It aids in protecting ecosystems from degradation and is pivotal for biodiversity conservation.
  • Climate Change Mitigation: It helps in reducing greenhouse gas emissions, thus playing a crucial role in combatting climate change.
An infographic illustrating the exports of Green Tech from developed/developing nations

Image courtesy of statista


  • Energy-Efficient Technologies: Using advanced technologies that consume less energy.
    • Example: Employing energy-efficient appliances and machinery reduces overall energy consumption.
  • Waste Management Technologies: Implementing technologies to reduce, reuse, and recycle waste.
    • Example: Incorporating waste-to-energy technologies and recycling systems.
  • Sustainable Building Design: Constructing buildings with minimal environmental impact through the use of eco-friendly materials and energy-efficient designs.
    • Example: Green building certifications such as LEED (Leadership in Energy and Environmental Design).


  • Operational Efficiency: Improved energy and resource efficiency can lead to reduced operational costs.
  • Market Differentiation: The incorporation of green technology can serve as a unique selling proposition.
  • Regulatory Compliance: It ensures businesses adhere to environmental laws and regulations, avoiding legal ramifications.

Understanding the negative externalities of consumption is crucial in recognising the full impact of green technology adoption on environmental and social welfare Negative Externalities of Consumption.

Responsible Sourcing


Responsible sourcing is the integration of ethical and sustainability considerations into procurement processes and decisions, ensuring the products, services, and raw materials are obtained in a sustainable and ethical manner.


  • Accountability: Ensuring that businesses and their suppliers are accountable for their social and environmental impact.
  • Equity: Fostering equality and fair treatment throughout the supply chain.
  • Environmental Stewardship: Upholding environmental protection and conservation in sourcing processes.


  • Sustainable Procurement Policies: Developing and implementing policies that prioritize sustainability and ethics in procurement decisions.
    • Example: Implementing sustainability clauses in supplier contracts and agreements.
A diagram illustrating raw material responsible sourcing policy

Image courtesy of syne

  • Supply Chain Audits: Conducting thorough assessments of supply chain practices to ensure adherence to sustainability standards.
    • Example: Regular audits of suppliers’ environmental and social practices.
  • Supplier Development: Working with suppliers to enhance their sustainability performance.
    • Example: Providing training and resources to help suppliers improve their sustainability practices.


  • Supply Chain Resilience: A more sustainable and ethical supply chain is less susceptible to disruptions and reputational damage.
  • Stakeholder Trust: Gains the confidence and trust of stakeholders, including customers, employees, and investors.
  • Long-Term Value Creation: It helps in building a sustainable brand, ensuring long-term viability and success.

The role of subsidies in encouraging businesses to adopt more sustainable and responsible sourcing practices is evident, allowing for a more sustainable economy overall Subsidies.

Fair Trade


Fair trade is an equitable and fair partnership between marketers and producers in Asia, Africa, Latin America, and other parts of the world. It offers better trading conditions to marginalized producers and workers in developing countries.

An infographic illustrating fair trade awareness in the US

Image courtesy of fairtradecertified

Key Principles

  • Empowerment of Producers: Fair trade empowers producers to improve their livelihoods and well-being.
  • Consumer Transparency: It provides consumers with assurances that producers are receiving fair prices and working in acceptable conditions.
  • Sustainable Development: It contributes to sustainable development by offering better trading conditions and securing the rights of marginalized producers and workers.


  • Price Stability: Offering producers a stable price that covers the cost of sustainable production.
    • Example: Paying a consistent, fair price for coffee beans, regardless of market fluctuations.
  • Social Premiums: Additional payments above the fair price that communities invest in social, economic, or environmental development projects.
    • Example: Funding for community healthcare, education, or infrastructure projects.
  • Long-Term Relationships: Developing lasting relationships with producer groups, providing them with financial and technical assistance.
    • Example: Entering into long-term contracts and providing pre-financing options.


  • Socio-Economic Development: Enhances the standard of living of producers and workers in developing countries by providing them with fair wages and working conditions.
  • Environmental Conservation: Encourages sustainable farming and production practices that are environmentally sound.
  • Ethical Consumerism: Offers consumers an ethical choice, allowing them to support producers in developing countries through their purchasing decisions.

Fair trade practices also significantly contribute to the mitigation of welfare loss through externalities in trade, ensuring a more equitable system Externalities and Welfare Loss.

Assessment and Integration of Sustainable Practices

Corporate Assessment

  • Environmental Impact Assessments: Rigorous evaluation of the environmental risks and impacts of business activities.
    • Example: Assessing carbon footprint and water usage to identify areas for improvement.
  • Social Impact Assessments: Evaluation of the social implications and contributions of the business.
    • Example: Assessing the impact of business operations on local communities and stakeholders.


  • Policy Development: Formulating robust policies that embed sustainability into the core business strategy.
    • Example: Developing a comprehensive sustainability policy addressing environmental, social, and governance aspects.
  • Stakeholder Collaboration: Engaging with stakeholders to develop and implement sustainability initiatives.
    • Example: Collaborating with NGOs, government agencies, and community organisations on sustainability projects.
  • Innovation and Improvement: Continual enhancement of sustainability practices through innovation and learning.
    • Example: Investing in research and development for sustainable products and practices.

The role of international organisations in promoting economic development through sustainable practices cannot be understated, providing a framework for businesses to align their strategies with global sustainability goals Role of International Organisations in Economic Development.

Through a commitment to sustainable business practices, businesses can not only mitigate their environmental impact and contribute to societal well-being but can also realize significant business benefits such as enhanced brand reputation, risk mitigation, and long-term value creation. The incorporation of green technology, responsible sourcing, fair trade, and a continual assessment and integration of sustainable practices are instrumental in achieving sustainability in the business domain.

Aid and development are crucial elements in supporting sustainable business practices across the globe, ensuring businesses in developing countries have the resources and knowledge to implement these practices effectively Aid and Development.


Companies can ensure responsible sourcing by implementing stringent supplier selection criteria, conducting regular audits, and maintaining transparency in their supply chains. Developing clear sourcing policies, focusing on environmental conservation, human rights, and ethical business practices, is paramount. However, challenges may arise due to the complexities and lack of transparency in global supply chains, making it difficult to trace the origin of raw materials. Additionally, ensuring compliance with sustainability standards may be challenging due to varying legal frameworks and standards across different countries, necessitating continuous effort and commitment.

Fair trade contributes significantly to sustainable development and poverty alleviation by ensuring that producers in developing nations receive equitable prices for their products, thereby enabling them to maintain sustainable livelihoods. By adhering to social, economic, and environmental standards, fair trade fosters decent working conditions, fair wages, and respect for workers’ rights, while also encouraging sustainable farming practices and environmental conservation. This model empowers local communities by investing in social projects like education and healthcare, thus promoting social equity, economic stability, and sustainable development in developing nations.

Innovation plays a crucial role in the development and implementation of green technology and sustainable business practices. It drives the creation of new technologies, products, and services that reduce environmental impact and resource consumption. For instance, innovations in renewable energy, waste management, and material science enable businesses to operate more sustainively, mitigate climate change, and conserve biodiversity. Furthermore, innovation fosters the development of circular economy models, promoting resource efficiency and waste reduction. In this context, continuous innovation is vital for addressing environmental challenges and achieving sustainability in business operations.

Indeed, initially adopting responsible sourcing can incur additional operational costs, as ethically and sustainably produced products and services often have higher production costs due to fair wages, sustainable materials and ethical production methods. However, responsible sourcing can result in long-term cost savings and risk mitigation by ensuring supply chain resilience and reducing the likelihood of disruptions linked to environmental or social issues. Additionally, it enhances brand reputation and can attract a more loyal customer base, potentially leading to higher revenues and offsetting the increased costs associated with responsible sourcing.

The adoption of sustainable business practices and green technology significantly influences consumer perceptions and behaviours. Consumers are becoming increasingly eco-conscious and prefer to support businesses demonstrating a commitment to sustainability and environmental preservation. The incorporation of green technology conveys corporate responsibility, often enhancing brand image and customer loyalty. This shift in consumer preference can lead to increased market share and profitability for sustainable businesses. It also encourages other businesses to adopt similar practices, fostering an overall increase in industrial sustainability and contributing to global environmental conservation efforts.

Practice Questions

Explain how the implementation of green technology can contribute to sustainable business practices and the potential benefits it can bring to a business.

The implementation of green technology is pivotal for sustainable business practices as it involves the development and use of products and systems that minimize the detrimental impact on the environment. By adopting energy-efficient technologies and sustainable waste management systems, businesses can significantly reduce their carbon footprints and resource usage. This not only aids in ecosystem conservation and climate change mitigation but also leads to operational efficiency, reducing overall operational costs. Furthermore, it can act as a market differentiator, enhancing brand reputation and ensuring compliance with environmental regulations, thereby creating long-term value and resilience.

Analyse how responsible sourcing as a sustainable business practice impacts supply chain management and describe its potential benefits to a business.

Responsible sourcing integrates ethical and sustainability considerations into procurement processes, focusing on obtaining products, services, and raw materials in a sustainable and ethical manner. It necessitates a commitment to accountability, equity, and environmental stewardship in supply chains, fostering equality and environmental conservation. By implementing sustainable procurement policies and conducting regular supply chain audits, businesses ensure that their suppliers adhere to established sustainability and ethical standards. This practice augments supply chain resilience and garners stakeholder trust, ultimately leading to the development of a sustainable brand and ensuring the long-term viability and success of the business.

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Written by: Dave
Cambridge University - BA Hons Economics

Dave is a Cambridge Economics graduate with over 8 years of tutoring expertise in Economics & Business Studies. He crafts resources for A-Level, IB, & GCSE and excels at enhancing students' understanding & confidence in these subjects.

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