CSEET · Economic and Business Environment

Environmental Governance: formula sheet

Full chapter guide

Key formulas

Definition: Business environment = internal factors + external factors; Internal factors are controllable. External factors are largely uncontrollable.
Classification of external environment: External environment = Micro (task) environment + Macro (general) environment; Micro: customers, suppliers, competitors, intermediaries, financiers, public. Macro: economic, political, legal, social, technological, natural, demographic.
Internal environment link: Internal environment → strengths and weaknesses; External environment → opportunities and threats. This is the base of SWOT analysis.
Definition of sustainable development: Sustainable development = meeting present needs without compromising future generations' ability to meet theirs; Brundtland Commission definition (1987). Quote it in your own words in definition questions.
Three pillars: Economic + Social + Environmental; Always name all three. Sustainability needs balance among them.
SDG count and timeline: 17 Sustainable Development Goals, adopted 2015, target year 2030; Part of the UN 2030 Agenda. Do not mix up the number of goals.
Governance chain: Law → Policy → Institution → Enforcement → Compliance by business; A simple frame to organise any answer on how environmental governance works.
Water Act, 1974: Water Act = prevention and control of water pollution + Boards (CPCB/SPCBs); First major pollution law. Sets up the Boards and controls discharge of effluents into water bodies.
Air Act, 1981: Air Act = prevention, control and abatement of air pollution; Covers air quality and emissions from industry and vehicles. Boards can declare air pollution control areas.
Environment (Protection) Act, 1986: EPA 1986 = umbrella Act; Central Government takes all measures to protect and improve environment; Enacted after the Bhopal gas tragedy. Allows rules on standards, emissions and hazardous substances.
National Green Tribunal Act, 2010: NGT = specialised tribunal for environmental cases; appeal lies to the Supreme Court; Handles civil cases on environmental laws and gives relief and compensation.
Key bodies: CPCB (Centre) + SPCBs (States) = enforcement; NGT = adjudication; Boards regulate and monitor. NGT decides disputes.
Guiding principles: Polluter pays + Precautionary principle; Used to justify liability for damage and early preventive action.
ESG: ESG = Environmental + Social + Governance; Three pillars. Give one or two examples under each pillar in your answer.
CSR provision (Companies Act, 2013): CSR spend = prescribed percentage × average net profit of the preceding financial years; Applies only to companies meeting the prescribed net worth, turnover or net profit limits. Learn the exact rate and limits from your study material; do not guess them.
BRSR: BRSR = Business Responsibility and Sustainability Report; Issued by SEBI's framework for listed companies; reports ESG performance in a standard format.
Types of environmental audit: Compliance audit, management system audit, risk or liability audit; Use these as a simple classification. The central idea is a systematic check against laws and policy.
Carbon credit unit: 1 carbon credit = 1 tonne of CO₂ (or CO₂ equivalent) reduced or removed; Core definition for carbon market questions.
Kyoto vs Paris: who is bound: Kyoto = binding targets for developed countries; Paris = nationally determined targets for all countries; Most common comparison question.
Paris temperature goal: Well below 2°C, pursue 1.5°C above pre-industrial levels; Write both figures.
UNFCCC principle: Common but differentiated responsibilities; Everyone acts; richer countries carry more responsibility.
Cap and trade logic: Emissions above cap → buy credits; emissions below cap → sell credits; Explains how a compliance carbon market works.

Quick revision

Business environment means all external and internal factors that affect a business.
External factors include economic, political, legal, social, technological and natural forces.
Pollution is a negative externality, which is why governments regulate it.
Sustainable development meets present needs without harming future generations' ability to meet theirs.
Environmental governance covers the rules, institutions and processes that guide how the environment is managed.
Indian environmental law works through Acts, rules, authorities and courts together.
ESG stands for Environmental, Social and Governance.
Companies are judged on environmental impact, treatment of people and quality of governance.
Climate change is addressed through international agreements where countries make commitments.
Always add one Indian example to a descriptive answer.
Structure answers as definition, points, example, short conclusion.

Common mistakes

Treating customers and competitors as macro factors. Fix: Remember that micro factors deal directly with the firm. Macro factors affect all firms in general, such as inflation or laws.
Calling the micro environment part of the internal environment. Fix: Micro is still external. Internal means within the firm's own structure and resources.
Treating sustainable development as only environmental protection Fix: State all three pillars: economic, social and environmental, and show they are balanced.
Writing the wrong number of SDGs or the wrong year Fix: Remember: 17 goals, adopted in 2015, to be achieved by 2030.
Mixing up the Water Act and the Air Act years or subject. Fix: Remember order: Water 1974, Air 1981, EPA 1986. Water comes first, then Air, then the umbrella Act.
Saying the EPA 1986 only deals with pollution of air and water. Fix: Call it an umbrella law giving the Central Government wide powers to protect and improve the environment, including standards and hazardous substances.
Treating CSR and ESG as the same thing. Fix: CSR is spending on social and environmental activities, mainly governed by Section 135. ESG is a framework for measuring and reporting performance across three pillars.
Writing that all companies must do CSR under Section 135. Fix: State that it applies to companies meeting the prescribed net worth, turnover or net profit limits.
Saying Kyoto bound all countries. Fix: Write that Kyoto's binding targets applied only to listed developed countries.
Saying Paris targets are legally binding emission cuts like Kyoto. Fix: Say Paris requires every country to set and report its own NDC; the targets themselves are nationally determined.

Exam tips

Draw a small classification chart in your answer: business environment splits into internal and external, and external into micro and macro. It saves words and shows structure.
For a 'distinguish' question, write at least four comparison points in a table-like list of lines.
Use an Indian example for every component, such as RBI interest rate changes, GST, UPI or Start-up India.
Attempt the compulsory question first if it is on this chapter, and keep definitions precise, since examiners look for correct classification.
Spend the 15 minutes of extra reading time spotting which questions ask for classification and which ask for explanation.
Begin every answer with a crisp definition. Examiners usually give marks for it first.
Always write the three pillars when sustainable development appears, even in a long answer.
Use Indian examples: NITI Aayog, pollution control boards, National Green Tribunal, CSR.