Physical Constraints and Climate Change in Australia

There are some environmental issues that act as physical constraints to companies and industries in Australia according to the case study. These natural barriers have negative and at times positive implications for investors in the country. The government has been on the frontline to implement policies that reduce the adverse effects of the physical constraints. The case study discusses the theory of constraints with the environment surrounding industries in the country and the possible ways of reducing them. Barriers in a business limit the overall performance of the organization (Harich, 2010, p. 61). There have to be several assumptions for the theory of constraints to be applicable to a survey or case study. The first hypothesis is that the accomplishments of the companies are based on their speed of production in relation to the physical barriers that are in place. The other crucial assumption is that the current company processes are essential to their production, and the modes of manufacturing are the same.

Climate Change

            Manufacturing industries depend a lot more on climate changes of the country than other environmental factors to determine their production. Climates act as positive or negative barriers to the growth of companies.  The manufacturing trade in Australia is considerably influenced by the hot and wet weather in the area. However, in recent times, different climatic patterns have been experienced in the country due to many reasons. Global warming is on the rise because of deforestation and pollution. The hot season in the area under study has been taking a long duration than other subsequent seasons (Dilling & Lemos, 2011, p. 685).

            Manufacturing businesses have been forced to incur extra costs of production due to abnormal hot climatic changes in the region. The quantity of annual rainfall that scientists’ record have tremendously reduced by 30 % from the recommended amount. Therefore, factories that deal with crop manufacturing have to incorporate the use of greenhouses and irrigations to maintain their productions. These additional technologies used by investors require the injection of more capital into their companies (Booker, Howitt, Michelsen, & Young, 2012, p. 190).

            The theory of constraints can be used to eliminate this excess cost of production being created by the availability of climatic changes as a physical barrier. The government has the responsibility of formulating policies that protect companies from environmental obstacles; changing weather patterns is the restriction in question at this particular point. Policies that restrict the destruction of natural resources can be implemented in Australia to avoid this physical constraint. Paper making industries can be advised to plant trees that will be used for their production and ensure that reforestation takes places each time that the plants are cut down. This policy will serve as a possible solution to the stop of water bodies drying up or natural forest becoming extinct (Grebner, Grala, & Joshi, 2015, p. 299). 


            Environmental contamination is on the rise in Australia due to the emergence of several industries. Pollution to the atmosphere can take different forms from sound, noise, water, and soil pollution. Emissions from factories go straight to the surrounding air. Contents of the discharge include toxic gases that are harmful to human beings and the vegetation. Some of the dangerous waste products are discharged into rivers and other water bodies. Living things in the rivers and oceans are immensely affected by the toxic by-products that are released in their habitat. Respiratory diseases are caused by dangerous gases emitted to the atmosphere by the industries in the country. As a result of the intense pollution effects by the factories, the locals are subjected to many diseases as well as the loss to their natural vegetation (Robitaille, Saucier, & Chabot, 2015, p. 531).

The government has implemented several policies to counter the adverse effects being brought about by pollution to the environment. The law requires all the industries to have alternative methods of disposing their toxic wastes instead of releasing them into the air and water bodies. Non- biodegradable waste materials are not supposed to be released to the environment because they cannot decompose. Industries are, therefore, advised to formulate techniques of recycling their by-products. Materials like plastic bottles and papers are recycled into other useful products. Several companies have emerged that deal with the manufacture of objects from waste products. These organizations assist in the disposal of used harmful products and help in the reduction of pollution. Therefore, the physical constraint of atmospheric effluence has been reduced by the creation of industries that manufacture commodities from waste products (Kastenhofer, Bechtold, & Wilfing, 2011, p. 840).

Natural Calamities

            Natural disasters like earthquakes, floods, and tsunamis have hit Australia from one time to another. These tragedies act as a physical constraint to companies and industries when they occur.  Buildings that house the industries usually get destructed during the natural processes that involve immense damages. At times, lives are lost and properties worth millions of cash destroyed. Industries that are affected by the disasters incur a lot of losses. The theory of constraint assumes that the success of an organization is based on the speed of production and stability of the company. Therefore, when a natural calamity like an earthquake hits a nation, the business industry is immensely affected due to the stoppage of the production process (Fielding, McDonald, & Louis, 2008, p. 318). Most companies are likely to close their operations indefinitely as they await professional help from natural disaster management officials and the government.

            Building and renovating physical structures of firms that have been destroyed by calamities is an expensive process. The costly construction of industries requires the financial managers of business to solicit for loans and grants from banks and financial institutions. These investors will owe their creditors a lot of money which will be paid back within a specified duration. Companies that have so much debt are likely to go into liquidation because all the profits that they make will be directed to off-setting the loans. The government has developed rules that all businesses should have resources set aside for disaster management preparedness. Thus when calamities hit the country, companies will have enough funds to help in the process of building structures that are destroyed by the disasters. Allocation of public grants is a way of helping small businesses to grow when they have been affected by catastrophes. Grants are interest-free and have long durations for payments.

The Valuation of Costs and Benefits

Environmental issues and natural resources are very critical in analyzing the sustainability of a project. It is therefore, important that business managers engage in environmental economics analysis before starting any project. Doing an environmental economics analysis allows the manager to be in a better position to decide whether the project is worth it or not. Techniques such as multi-criteria analysis can be very useful when it comes to cost and benefits evaluation of natural resource assets. The business must first establish the environmental impacts of the policies by calculating the economic costs and benefits. Natural resource assets are non-monetary units thus determining their economic valuation can be quite complicated and therefore, requires the use of analytical methods (Dono, Webb, & Richardson, 2010, p. 180).


The land is one of the highly valued natural resources in Australia. Different sectors of the economy have proven the importance that land has on improving the welfare of every citizen. Despite being very crucial, there are some challenges that stakeholders face when trying to make use of the land available to them. The case study on the greatest environmental challenges survey in Australia supports this point.

Evaluating the costs of land requires looking at different aspects of how various activities are done to make the land ready to produce the expected outputs. One of the considerations is the cost of hiring or buying land. In the survey of Australia, land hiring is considered a core challenge to some investors in the country. The cost is very high according to some global entrepreneurs and farmers (Boyd, den Exter, & Lloyd, 2013, p. 42).

The cost of preparation is also an aspect checked when calculating the price of the land according to this case study. All the charges that one incurs when preparing the land to start producing should be included as part of the cost of a space in Australia. The survey has it that land preparation in the country is usually expensive in most cases. The preparation activities include tilting for farmers, construction for real estate investors, and paying land taxes and rates to the government. It is clear that despite dealing with land as a natural resource, other services must be incorporated to make it useful (Duerden & Witt, 2010, p. 392).

Valuation of the benefits of land as a natural resource is also demonstrated in this case study taken from Australia. The benefits must be connected to the costs of acquiring and using this property. According to the survey, the natural resources can only be considered beneficial if the output of the land surpasses the cost of acquisition and use. At this point, the total economic value (TEV) of the piece of land must be considered. The quality of products, quantity of products, and the output per square area of the land are to be used in determining the benefits and total economic value of land as a natural resource (Smith, 2013, p. 67).


Security is an environmental asset that most governments in the world put a lot of interest. The business community is usually keen to make sure that the areas investments are directed to are adequately secured. The reason for this is because for efficient operations of companies there has to be maximum safety. In the case study of the environmental challenges facing Australia, security is on the list of the setbacks.

Calculating the cost of security may vary from one continent to another depending on a lot of factors. Some of these factors include political stability and terrorism threats. For example, nations that are used to having civil wars may not consider some small wars that they experience as security threats. On the other hand, those states that have been having total peace are always keen on every level of insecurity they might face.

However, security is a crucial environmental asset that is crucial to all types of businesses. In Australia, theft is one of the insecurity issues that are affecting some economic activities in the country. Therefore, the costs of eliminating such theft cases constitute the cost of security in that environment. The tax portion that investors direct to national security matters, and the cash corporations spend on private safety facilities add up to the cost of security (Fischer, 2010, p. 130).

Valuing the benefits of security as an environmental asset is another important thing that worries the corporate world. It is good to remember that for economists and entrepreneurs, the benefits of a facility should always be high than the costs attached to attaining it. To check the positive impacts of different security projects, we can look into a variety of things.

One element to consider is the rate at which new investors get into the Australian economy. It is clear that these business people are always keen not to enter into an insecure environment. The other element that we can look at is the level of expansion of existing companies. Effective security would ensure businesses grow instead of closing operations in the region. For the last four years, strict security measures have been enacted in Australia after relevant stakeholders warned of insecurity issues being a major threat to the area’s economy. As a result, industries have been reported to expand their operations as more multinational corporations find their way into the Australian markets. In this case, the benefits of security are calculated through valuing the project impacts.


It is one of the most valued natural resource assets that investors always look for before making a move into a particular area. Electricity, geothermal energy, and biogas are among the frequently used types of energy in Australia. Valuation of this natural resource depends on three major factors. One of them is the price of acquiring the energy from its source. For instance, calculating how much it costs to move power from the turbines and the costs of converting them to useful states. The second factor is the charges for installation and using the energy being produced. Finally, the costs of getting rid of wastes associated with power source are also factored into the general cost of energy.

Valuation of the benefits associated with this natural resource is where some challenges are being faced. Most governments and stakeholders usually use the general value of an energy source when calculating the benefits associated with it. It is the total economic value that should be considered after separating the use value (UV) from the non-use value (NUV) of the natural asset (Holz, Richter, & Egging, 2015, p. 38). For instance, the value of geothermal energy in Australia should be considered in terms of how much of it is used in the country rather than the global value of this resource. Apart from that, assessing the benefits of energy should be done in consideration of the costs of acquiring this natural resource. The high cost of energy in Australia has led to it being ranked fifth among the environmental challenges affecting businesses in the country (Boyd, den Exter, & Lloyd, 2013, p. 43).

In the context of energy resource in Australia, it is obvious that organization must own their electrical power generation plant for the procurement of continuous and reliable sources of energy. One emerging factor that managers must be consider while thinking about energy supply is the Renewable Energy Target (RET) scheme. Many reforms has been proposed in the RET scheme by the Commonwealth Parliament on the June 23, 2015 (, 2015). As previous, RET scheme has been operating in two parts including the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). Both schemes encourage business organization through incentives to install and produce clean energy sources. The LRET offers large financial remunerations for organizations for the establishment, generation, and expansion of renewable energy sources including hydroelectric, solar or wind power generation plants. Accredited power generation plants that can produce large amount of clean energy are given a certificate namely for Large-scale Generation Certificates (LGCs) for each megawatt-hour of energy production capability. LGC shows organizations’ capabilities to meet RET scheme targets and earns substantial amount of additional money over regular energy selling price. The Small-scale Renewable Energy Scheme (SRES) is mostly applicable to households, small businesses, and community groups.

The cost associated with the new LRET schemes is that organizations must install new renewable energy generation capacities to meet the target and enjoy incentives. The cost of installation is likely to be well compensated by the incentives from the government and the sales revenue of energy. Organizations may also realize the benefits of renewable energy production from the saving from waste disposal cost; renewable energy does not involve any harmful or large amount of wastage, which requires costly disposal. However, in order to run down large surplus that is most likely to incur from sudden increase in energy production, the government has taken a long-term proposal in which gradual increase in the target of renewable energy is proposed. The proposal aims at reaching a new target by the end of 2020 and avoiding sharp change in target instantly (, 2015).


In the case study; current issues in environmental management in Australia it suggests that environmental performance and environmental impact are very significant when it comes to valuation of natural resources and decision-making. Australian firms need to analyze the impact of their environmental policies on its population and the habitat. The population is growing at a rapid rate thus businesses must ensure that their policies are flexible enough to accommodate changes in the population. To analyze the economic costs and benefits of its policies on the population, the managers should consider the social welfare of the community (Kennedy, 2012, p. 29).

The human population is imperative especially for its ability to provide labor. Labor is the most fundamental requirement of the economy, without labor there can never be growth. It is therefore, very critical that businesses adopt business strategies and activities that not only meet the requirements of the firm and its stakeholders but also sustain, protect and enhance the natural resources and human beings. All organizations must be fully responsible for their activities and ensure they do not destabilize the eco-static balance by interfering with the social events of the population. Environmental considerations relating to human beings are always considered the costs of economic growth. The public have for a long time blamed the lack of efficient environmental management policies for the environmental problems. The concept of social identity is however also very significant when it comes to the development of environmental management policies. The environmental policies and practices adopted by businesses and governments should aim at influencing the characters of individuals in the society (Heath & Gifford, 2006, p. 48). By taking this move, human beings will be able to appreciate and accommodate the role of environmental science in the society. The cost of conserving the populations involves things such as the cost of delivering information and knowledge on the risks of the environmental problems to the humanity. In Australia, business organizations are required to educate the public on any negative impacts that their activities may have on human beings.

The population context may be viewed in terms of recent reform in Renewable Energy Target (RET) scheme. This scheme offers a great integration of common interests of the population of Australia and the organizations that like to grow in the country. The new increased target of renewable energy generation might benefit the local population in two ways: it can help build a more sustainable and clean environment for the population and it can create more employment opportunity for the population. On the other hand, the population resource might help the organizational purpose in meeting the RET scheme. A skilled population can accelerate the process of achieving RET goals by providing labor as well as it can create more demand for energy produced by the organization, which in turn help organizations earn revenue and remain competitive in the industry. However, the extra cost that the organization must bear in order to employ large population base must be realized in payroll. Organization might enjoy their growth by achieving self-sufficiency in energy production. It is obvious that population might demand better environmentally friendly approach from the organization, they also help in achieving this goal by providing different logistics support as well as financial revenue to organization. In Australia, increasing population can be utilized to achieve RET goals


Ecosystem services and biodiversity are scarce resources therefore; their degradation comes with enormous costs to the society. The rapid growth in the Australian corporate sector is devastating the ecological health of the residents. This situation has made the need to adopt effective restorative policies quite pressing and unavoidable. The policies should also ensure there is no habitat or biodiversity loss. For proper cost and benefits evaluation of natural resources, key stakeholders must be included in the process. In the Australian case study the key stakeholders include government, environmental scientists, environmental managers and the community. As much as environmental professionals in Australia are increasingly participating in the management of natural assets, they still need to ensure that their involvement is more formalized, planned and bounded. Biodiversity being a natural asset is paramount because of its role as a sign of extensive environmental well-being (Heath & Gifford, 2006, p. 65). The value of biodiversity is thus best explained it terms of the services it supplies. The total economic value of a natural asset must comprise of the non-use values, use values and future use values.  Valuation plays a very significant role in building policies that ensure conservation of ecosystem services and biodiversity. In Australia the appropriation process in designed in such a way that the attained ecosystem services gains are distributed among the individuals who incur the costs of conservation.

Biodiversity and ecosystems generate a number of benefits to the community. To begin with, when the quality of the biodiversity and the ecosystem are well maintained then the society stands to benefit from food security. The survey conducted in Australia established that majority of the citizens feel that food security is a major problem, and the governments need to do something about the issue. Secondly, biodiversity is very helpful when it comes to climate regulation. The world is experiencing drastic climatic changes with rising temperatures and stormy rains, Australia can on the other hand, preserve their ecosystem to reverse these consequences. Lastly, the other benefits of biodiversity include recreational value and tourism. Due to its unique ecosystems and biodiversity, Australia is one of the world’s major tourist attraction sites thus earning substantial government revenue.

Conservation of biodiversity also comes with some costs, for instance in Australia the government has implemented many policies to ensure the protection of ecosystem services. The residents have been lamenting about the pollution of oceans, rivers and lakes. The government is spending a lot of money in the prevention of water wastage, treatment of the water and its storage. Additionally, implementation of the environmental policies also costs the governments a huge sum of money. In Australia, the government has implemented the carbon tax in a bid to reduce environmental pollution (Boyd, den Exter, & Lloyd, 2013, p. 42). All firms must incur the cost of social responsibility thus conservation of the environment being a social responsibility all the firms are thus liable to pay the carbon tax. The carbon tax makes use of the polluter pays principle to reduce pollution and biodiversity loss in Australia. The carbon tax is therefore, the cost of preserving the biodiversity incurred by the business organizations. Environmental policies are only effective if they reduce biodiversity degradation at the least possible social cost. This achievement can however, be attained only when social costs and private costs are aligned in a manner that externalities are included in the decision-making procedures.

The recent reform proposal for RET scheme is highly favorable for retaining biodiversity in Australia. The scheme focuses on increasing renewable energy generation as compared to non-renewable energy generation, which in turn helps biodiversity to sustain. The ecological imbalance that the non-renewable sources of energy and power generation create must be reduced down with the increased renewable energy production. The new RET is proposed with this environmental goal in mind. The government has legislated that specific amount of total energy produced by each organization must come from renewable sources and offers incentives to organizations that comply with the legislation and increase their renewable energy production rate. Being clean sources of energy, renewable energy production is likely to reduce environmental degradation and fosters the growth of biodiversity in the locality.  The government regulates amount of emissions from electric power generation under the proposed RET scheme and encourages clean energy production (, 2015). Business organizations should consider utilizing renewable energy resources for electric power generation to avoid penalties and to gain financial incentives. Organizational growths being tied to the amount of renewable energy generation, an improved environment for the growth of biodiversity can be assumed in Australia. Another benefits that might come through the preservation of biodiversity is that it might offer environmental balance, which in turn would help in the generation of more renewable energy, read about this in the essay on ecosystem.