7 Key Impacts on the World
Global businesses and multinational corporations have reshaped the world we know today. However, the history of business can be traced back through time far beyond the advent of the stock market and the buying and selling of shares.
While it’s hard to say when the idea of business first took off, Kongo Gumi, the world’s oldest still-operating business, was founded nearly 1,500 years ago. Since then, businesses like Kongo Gumi have driven industrial revolutions, reshaped our social structures, and paved the way for improved infrastructure and a higher quality of life.
However, many businesses have a negative impact on the world around them. Companies that operate without a clear corporate social responsibility program undermine the environment, exploit vulnerable communities, and exacerbate economic inequality. This means that business owners today must be aware of the key impacts that business has on the world before they wade into the deep waters of global supply chains and international trade.
Economic Growth
Businesses are crucial for the advancement of society and the creation of stable economic growth. High-performing corporations create jobs, drive innovation, and generate wealth for employees and shareholders alike.
Today, the business sector creates 72% of all gross domestic product (GDP) in “developed” nations and is responsible for the flow of wealth from corporations to households. This means that, when regulated correctly, private firms should pass on their profits to households in a way that rewards hard work, innovation, and creativity.
Economic Inequality
Unfortunately, the desire to pad profit margins and reward shareholders can push some firms to make dubious ethical choices. This is understandable, as private organizations are primarily motivated by profitability rather than utility and the common good. This can turn free-market trade into a dystopian vision of global markets where the “have-nots” are exploited by those with more wealth and, by extension, power.
Some businesses exacerbate wealth inequality by monopolizing markets and power. This undermines the ideals of private business and stifles creativity, innovation, and entrepreneurship. Fortunately, no nations are considered entirely free markets, and global businesses are beholden to some form of governmental oversight.
Infrastructure and Housing
Businesses need reliable infrastructure to thrive. Companies would flounder without transportation links, safe housing for employees, clean water, and high-quality education. This means that many firms are incentivized to improve their local infrastructure and give back to local schools and non-profit organizations.
Shifts in business trends have a knock-on impact on infrastructure and housing, too. For example, the recent rise of remote work has prompted a shift toward the suburbs as more people work from home. This has resulted in reduced office rents and tanked commercial property value as demand for city-based spaces has dipped since the start of the pandemic.
Energy Consumption and the Environment
Most businesses rely on fossil fuels to power their operations and produce reliable products or services. The massive amount of energy required to run a profitable business can derail global efforts to reduce our reliance on greenhouse gasses (GHG). In the U.S. alone, 33% of GHG is attributable to industry and agriculture.
Some private businesses deplete natural resources and pollute ecosystems, too. For example, an area of forested land the size of Switzerland was cleared in 2022 alone — the equivalent of 11 football pitches a minute — to provide land for agriculture and private business.
Innovation and Social Enterprise
Recent shifts in consumer preferences and an increase in climate awareness have prompted many firms to take a proactive approach to carbon neutrality and environmental protection. Put simply, consumers who care about the environment will turn away from companies that fail to take their commitments to climate change seriously.
This means that many businesses are becoming social enterprises. Social enterprises position themselves as climate-conscious, socially aware firms that appeal to conscientious consumers. For example, some computing firms are reducing their emissions by using AI-driven predictive analysis in response to climate change. This big-data approach proves that innovation and environmental protection can go hand-in-hand, so long as consumers incentivize firms to clean up their operations.
Consumerism and Consumption
Consumerism and the consumption of goods change the way we think about our identity and our place in the world. While overconsumption may lead to pollution, a people-first approach to business can empower consumers and give them greater choices about how they live their lives.
Competition is particularly good for folks who have been traditionally marginalized or under-served. The ethos of competition pushes brands and businesses to improve the affordability, value, accessibility, and quality of their goods to appeal to a larger audience. This means that for-profit businesses can boost consumer choice and improve everyone’s quality of life.
Globalization and Trade
The history of globalization is more than a little murky. However, the expansion of global business has improved relations between nations and reduced the risk of conflict in at-risk nations.
Global trade has also been a catalyst for reduced poverty and increased wealth. Since 1988, average income grew by 24% and the global poverty headcount ratio declined from 35% to 10.7%. While inequality and exploitation do occur, the general rise in wealth shows that businesses can have a net-good effect on the well-being of the world’s population.
Conclusion
Businesses shape the way the world works. Private firms drive innovation, spark periods of economic growth, and give consumers the goods they need. However, business owners should also be aware of the potential harm that companies can cause. A robust ESG program is necessary for any firm that wishes to reduce its environmental impact, improve social structures, and promote the ideals associated with an egalitarian society.
By Indiana Lee, BOSS contributor
Leave a Reply