The Strategies of Internalizing the Negative Externalities in the Company’s Sustainable Development

Keywords: positive externality; negative externality; internalization of externalities; sustainable development; analysis of externality of the company; defensive strategies; offensive strategies


The study focuses on externalities which play the important role in sustainable development. They indicate the impact of the company’s activity on the third persons. On the basis of findings, the externalities from the company’s financial reports are monetarized. The externalities exerting influence on the profit or loss as well as on the total balance of the company are analysed. Positive and negative externalities are identified in order to internalize the negative externalities with the help of definite strategies of sustainable development. It is emphasized that the long-term action plans to ensure competitiveness, environmental protection and social legitimacy help to adapt to expected market, environmental and social developments. The study discusses current strategies: defensive (reactive), offensive that are viewed from the economic, environmental and social perspective. It is investigated that the defensive strategies are limited to the implementation of relevant laws or agreements in order to avoid negative consequences for the legislator. On the other hand, offensive, inward-looking strategies are aimed at aligning the company’s structures (organizations) and systems (environmental management systems) with the requirements of sustainable development, motivation and qualification of employees for sustainable development. The environmental sustainable development strategies are focused on a variety of ecological aspects. The emergence of economic, environmental and social risks and opportunities in machine-building company with their potential solutions is underlined. As the matter of fact, using the right strategy, the company can easily go through the internalization of negative externality to exert more substantial impact on the society, environment and the economy.


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Kozlov, D. (2021). The Strategies of Internalizing the Negative Externalities in the Company’s Sustainable Development. Virtual Economics, 4(3), 7-19.