© Jakob Utgård 2025
Chapter contents
Business example: Resource use and pollution from Yara ASA’s activities
Resource use
Pollution
Managing natural resources
Learning goals
- Describe how business activities depend on natural resources
- Identify the main types of pollution and resource depletion
- Describe some economic models of natural resource use
Business example: Managing resource use and pollution in Yara ASA
Yara ASA is a Norwegian company founded in 1905 and one of the world’s largest producers of fertilizers and crop nutrition solutions. Yara operates in more than 60 countries and plays a crucial role in global food supply.
Pollution is a central issue for Yara. Fertilizer production release nitrogen oxides into the air and nutrients into water, harming ecosystems. In 2024, Yara used abatement technology on over 90% of its nitric acid production. Still, the company discharged about 1,536 tonnes of nitrogen and 247 tonnes of phosphorus into water. These numbers have been fairly stable in recent years. Compared with earlier this is a major reduction, since older fertilizer plants had far higher discharges. Yara also works with farmers to apply fertilizers more precisely, which helps cut runoff and local water pollution.
Fertilizer production requires large amounts of water, mostly for cooling. In 2024 Yara withdrew 216 million cubic meters of freshwater. Thanks to recycling, 89% of all the water it used was returned to nature after treatment, similar to past years. The company pays special attention to plants in water-stressed regions, where withdrawals could affect local communities. Over time, Yara has managed to keep total withdrawals relatively steady even as production has increased, showing improvements in efficiency. Biodiversity is affected both by raw material extraction and by farming practices. Yara’s phosphate mine in Siilinjärvi, Finland, is an example of land disturbance linked to fertilizer production. On the farming side, too much fertilizer can trigger nutrient runoff and algal blooms that suffocate life in water. To limit these risks, Yara promotes “regenerative agriculture,” focusing on soil health and balanced fertilization. However, the company admits it does not yet have global biodiversity targets and is still building the knowledge base to measure and reduce its overall impact on ecosystems.
Resource use highlights Yara’s dependence on finite materials. Its main input is natural gas, which supplies the hydrogen needed for ammonia production. In 2024 the company consumed 260 million gigajoules of gas, slightly down from 2023, reflecting improved energy efficiency (33.1 GJ per tonne of ammonia, compared with 34.0 the year before). Yara also imported 2.6 million tonnes of phosphate rock and 1.3 million tonnes of potash, essential for producing compound fertilizers. These inflows have remained broadly stable over the past few years. Yara is exploring circular solutions, such as recovering nutrients from waste streams, but for now its production still depends heavily on conventional resource inputs. Source: Yara sustainability report 2024.
Resource use
Energy use. All economic activity depends on the use of energy. How much energy depends on the product and processes. All types of energy production have costs and consequences for society, and a sustainable business therefore must manage its energy use. Hydropower has negative consequences for fish, plants and wildlife. Wind power: Large windmills are built by metals and plastic, destroy the view and require long access road. Nuclear power use little space and resources but waste must be stored safely for thousands of years. Coal and gas have large physical impact of mines and production. One of the main causes of climate change and air pollution. Solar power requires large amounts of space + metals and chemicals in their production.
Land use and land change. More and more of land is impacted by human activity, with negative consequences for wildlife and biodiversity. Deforestation is high in several parts of the world, leading to reduced opportunities for plants and wildlife (biodiversity) and large amounts of carbon emissions.
Water use: Clean water is a scarce resource in most parts of the world. Raw material production and industrial processes often use large amounts of water. Examples are cotton production (the plant needs water) and data centres (for cooling).
Material use: How much metals, minerals and biomass does a business use? The global material extraction grew from 30.9 billion tonnes in 1970 to 95.1 billion tonnes in 2020.
Planetary boundaries
The planetary boundaries are suggested boundaries for the “Earth system”. Due to human activities, we have now moved out of the stable and warm climate in which human society developed (lasting from the last ice age around 10 000 years ago and until the 19th/20th century), and into the “Anthroposcene”, with increasing risk that the Earth system stops functioning in the stable way that we know it (Richardson et al. 2023). The nine planetary boundaries are climate change, change in biosphere integrity, biochemical flows, ocean acidification, land use, freshwater change, ozone depletion, atmospheric aerosols, and novel entities. The earth is currently outside the safe space/have crossed the boundaries for 6 out of 9 boundaries
Pollution
Pollution is “the presence in or introduction into the environment of a substance which has harmful or poisonous effect, or excessive levels of light, noise, organic waste, etc”.
Air pollution is small particulate matter, gases and metals released into the air. Main sources are fossil fuels, road transport (fossil fuels, tires, roads), agriculture, and industrial production. Air pollution is an important cause of health problems and premature deaths, in particular indoor air pollution from cooking on open fires in poor countries, but also in Oslo and the UK due to road transport and wood burning. The air quality varies across countries and cities but have generally improved in Europe.
Water pollution comes from sewage, agriculture, and industry spills. The organic matter, nitrates and phosphates in sewage creates microorganism growth and reduces oxygen levels, endangering life in the water. Sewage treatment plants are often not enough. Agricultural runoff is pesticides, nitrogen and phosphorus fertilizer, as well as livestock manure and soil erosion. This can reduce oxygen levels and endanger fish, wildlife and plants. Industrial pollution also goes to water. Water pollution can also influence drinking water. Ocean plastic. Large amounts of plastic end up in rivers, lakes and the ocean. Bigger pieces of plastics are broken down to microplastics. Sources are consumer waste, business and industry, agriculture, but also sea-based sources. In Norway, fishery, aquaculture, and shipping are important sources of plastic waste.
Land pollution is waste materials disposed on land and can be household waste, construction waste and different types of hazardous waste. Internationally, much of waste is sent to landfill, in certain European countries 50-80% of waste is sent to landfill, but the percentage has significantly decreased the last years. In Norway, around 18% of waste goes to landfill, mainly construction waste and hazardous waste.
Other types of pollution. Light pollution creates problems for animals and wildlife, but also for humans, for instance through sleeping problems. Noise pollution creates stress, sleeping problems and reduced health. More than 2 million Norwegians are exposed to excessive noise, mainly from road traffic.
Managing natural resources
The tragedy of the commons. In Garrett Hardin’s “The Tragedy of the Commons” (Hardin 1968), he described a pasture open to all (common). In a farmer’s choice whether to add one more cattle, he will rationally consider that he will get all the income of the extra cattle, while he will only cover a small part of the cost of the cattle (the use of the grass from the pasture), since this is a common resource. He will therefore add one extra cattle. Since all rational farmers will do the same, the pasture will soon be overcrowded by cattle, eating all the grass and destroying the pasture. This is a tragedy, since each farmer’s self-interest leads to the destruction of a resource that is valuable to all.
Pollution, including carbon emissions, can be seen as an example of the tragedy of the commons. Each rational business (or consumer) benefits from the activity leading to pollution (e.g. driving a car), but only must pay a small price for the activity (the climate change, but each person’s extra cost of climate change is very small). In this sense, the common, valuable resource – a stable climate – is destroyed since everybody follows their self-interest.
There are many ways of managing the tragedy of the commons. The extremes are to either privatize resources (not always possible), or to let the resources be governed by a superior authority such as the state, who can use regulations, taxes and incentives to manage the resource. In many situations, the users themselves can develop systems to govern the common resource. This is easier when the resources easily can be monitored, the resource is stable, communities have social bonds, outsiders can be excluded, and users support monitoring and sanctions (Dietz et al 2003).
The IPAT equation. I = P x A x T is an equation to describe human impact on the environment, where I = Impact, P = Population, A = Affluence, and T = Technology. The equation was developed in the 1970s following discussions about what was the main source for environmental degradation in the 20th Century. Some claimed that the technology used (after industrial revolution and expansion) was responsible, while others maintained that the population level and levels of affluence also contributed (Chertow 2000). The equation highlights how the three factors are interrelated. Population levels and affluence have increased considerably since then, technology has become more efficient but not enough to compensate for the other factors.
The Environmental Kuznets curve. According to the Environmental Kuznets curve, the relationship between economic growth and pollution is inversely U-shaped, meaning that pollution increases with economic growth, but at one point stops increasing and starts decreasing, going down in the long term. This relationship can be explained by several factors, including citizens prioritizing environmental protection more as they grow richer, changes in the economy (from production to services), and increasing reliance on imports (Kaika & Zervas 2013). The theory has been influential but has limited empirical support, it may be true for some types of pollution but not all (Stern 2017).
Comprehension questions
- How do resource use and pollution arise from normal business operations?
- What kinds of environmental problems are associated with business activities?
- What are planetary boundaries, and why are they relevant for understanding limits to business growth?
- What is the tragedy of the commons, and how does it help explain environmental degradation?
Exercise
Choose a company or industry you are familiar with. Identify its main resource inputs, and describe the key types of pollution it creates. Assess which of these impacts are most important for the environment.
Discussion case: Should IKEA Build its New Store on Agricultural Land?
Read the discussion case Should IKEA Build its New Store on Agricultural Land?, and answer the questions at the end of the case
References
Chertow, M. R. (2000). The IPAT Equation and Its Variants. Journal of Industrial Ecology, 4(4), 13–29. https://doi.org/10.1162/10881980052541927.
Dietz, T., Ostrom, E., & Stern, P. C. (2003). The Struggle to Govern the Commons. 302. Hardin, G. (1968). The Tragedy of the Commons. Science, New Series, 162(3859), 1243–1248.
Kaika, D. & Zervas, E. (2013). The Environmental Kuznets Curve (EKC) theory—Part A: Concept, causes and the CO2 emissions case. Energy Policy, 62, 1392–1402. https://doi.org/10.1016/j.enpol.2013.07.131.
Richardson et al. (2023). Earth beyond six of nine planetary boundaries. Science Advances, 9(37), eadh2458. https://doi.org/10.1126/sciadv.adh2458.
Sovacool, B. K., Kim, J., & Yang, M. (2021). The hidden costs of energy and mobility: A global meta-analysis and research synthesis of electricity and transport externalities. Energy Research & Social Science, 72, 101885.
Stern, D. I. (2017). The environmental Kuznets curve after 25 years. Journal of Bioeconomics, 19(1), 7–28. https://doi.org/10.1007/s10818-017-9243-1.