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Unilever Company Externalities


The Unilever Company deals with the production of consumer goods and was recently listed among the top three consumer goods companies in the world. The range of goods the company produces includes beverages, personal care products, cleaning products and food. It is a multinational company operating in about 140 countries around the globe. Its headquarters are based in Rotterdam and England.

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The Pollution Externality

Just like all major companies in the world the that deal in the production of consumer goods, the company faces a number of externalities with the most common negative externality being pollution. The companys subsidiaries in a number of countries have found themselves on the wrong hand of the law due to both air and water pollution. The most noticeable incident of pollution was in the case where the company had to plead guilty following the charges of water pollution in its Clinton plant. The company was accused of deliberately directing waste water from its Clinton plant, which is now closed, into a nearby clean source of water.

Why the Externality Was Generated

The pollution externality in this case was generated due to the companys failure to keep in mind the US Clean Water Act, which requires companies to ensure that no waste water from manufacturing plants is discharged into other sources of water. In addition to that, the calls for all members of the American community to have access to contamination free water. Not only was the plant closed down, but the company was fined $ 1 million and was required to contribute a total of $ 3.5 million to both local and state environmental programs. There are various reasons why this externality was generated, not only did the pollution bring about economic costs, but it also brought about social and environmental costs.

Economic costs generated include damage of infrastructure, property and the lands productivity and that of the people who used the contaminated water. The people who used the contaminated water fell sick and had to seek health services and had to incur the treatment costs by themselves. Additionally, their productivity was reduced during the periods they were sick. Environmental costs, on the other hand, involved the general damages that the ecosystem suffered. The waste water probably had a number of harmful chemicals that negatively affected plants and animals the resided within and along the water channel the waste water was directed into. This externality was generated deliberately since the bypass of the waste water was intentionally done and the illegal discharge of waste water by the same plant had been done on several occasions.

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How the externality could be reduced

The externality could have been reduced had the company adhered to the set policies that required clean sources of water not to be contaminated by waste water from industries. The permit to control the plants waste water required the company not to discharge any given amount of waste or treated water into another channel that the public uses. This could only happen if the discharge were accidental, unavoidable or done to protect a persons life or prevent damage of property. In addition to that, it could have been reduced had the company adhered to earlier warnings and corrected the mistakes permanently.


Pollution as an externality affects most companies and the society. The mode of production one company employs may have a negative impact on the productivity of another company or the society. Factories and manufacturing plants should ensure that their modes of production do not result to the society or other producers incurring extra costs. Their production should not be at the expense of other people in the society. In Unilevers case, the production plant placed its interest before the safety of the public and the ecosystem.


This involves expressing ideas honestly and clearly. After engaging with the group members, we arrived at a common idea that laws and other policies are in place to ensure that such externalities are minimized. Heavy fines will make manufacturers re-think their production methods and reduce both air and water pollution. The policies in place and the law saw to it that the plant rectified the waste water bypass and that the Unilever Company was appropriately fined. Companies should try to minimize such externalities given the financial implications it has. In addition to that, such externalities result to the companys image being tainted.


Listening is the key skill in the inquiry process. It involves listening to the views and thoughts of other people. The group members had varying thoughts and ideas on the negative externalities that companys experience. Different members of the group also had varying ideas on why the pollution externality was generated in Unilevers case and how it could be reduced. In addition to that, we had different views on the matter. The following points outline the conclusion the group reached after the inquiry process:

  • Negative externalities results to unplanned costs on one or more parties.
  • Laws and policies are in place to ensure that externalities such as air and water pollution are minimized. These do not only ensure fair competition among producers, but it also ensures consumers and the general public is protected from negative externalities.
  • Companies have to impress better modes of production in order to prevent losses that come about due to pollution externalities.
  • Most negative externalities are avoidable. In Unilevers case, the waste water discharge problem was avoidable but only came about as a result of the companys ignorance and failure to follow the set laws and regulations.
  • Any kind of waste as a result of production activity is a negative environmental externality. Negative externalities result to market failures since some producers heap extra costs on others and the consumers who are directly affected.
  • The government and other agencies play an important role in curbing negative externalities. Most governments and agencies around the world are increasing providing incentives to companies that manage their wastes appropriately.
  • Imposing of environmental taxes will go a great length in reducing pollution as a negative externality.

Points that would be Useful to the Organization

The government ensures that negative externalities are minimized by employing a number of strategies that include imposing high taxes on goods whose manufacturing process produces a lot of pollutants. Additionally, it fines firms that exceed the set limit of pollutant emissions and bans both the consumption and production of goods and services that result to extra costs being incurred by the society. It is upon the producers of consumer goods to ensure that their production procedures and methods do not result to waste products that would exceed the companys ability to manage. Appropriate waste management systems and adherence to the set environmental policies and laws is the key to ensuring that pollution as a negative externality is avoided. Not only should Unilever Company ensure that its waste management systems are in place, but they should also engage in production processes that do not degrade the environment. The company should be active in environment conservation activities such as tree planting and recycling of plastics, glass and other materials.

This information would be shared through the companys email as well as the social media platform. Most companies tend to respond faster on their social media platforms, and it would be a better strategy if the company is informed about this information on social media before an official mail is sent.

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