Businesses can address externalities in several ways:
Internalization: Companies can take steps to internalize externalities, like adopting cleaner technologies to reduce pollution or providing employee health benefits that also improve public health. Corporate Social Responsibility (CSR): Through CSR initiatives, businesses can engage in activities that generate positive externalities, such as community development projects or environmental conservation efforts. Compliance with Regulations: Governments often implement policies and regulations to mitigate negative externalities, such as emission standards and taxes on harmful activities. Businesses must comply with these to avoid penalties. Market-Based Solutions: Businesses can engage in market-based solutions like cap-and-trade systems for emissions, which create economic incentives to reduce negative externalities.