Which is an example of a negative externality from costs to society?

Prepare for the SASB Fundamentals of Sustainability Accounting Level II Test. Study with multiple choice questions, gaining hints and explanations. Enhance your sustainability reporting skills and ace your exam!

Negative externalities are costs imposed on others or society that aren’t reflected in market prices. Offshoring and outsourcing that lead to degradation of ecosystems and loss of biodiversity illustrate this clearly: production is moved to locations where environmental costs are borne by local communities and the global environment rather than by the company’s own price, so society pays for ecosystem damage, reduced biodiversity, and related long‑term costs. Pollution is also a negative externality, but this option highlights the broader and longer‑term societal costs from ecological degradation that aren’t captured in the price of the goods. Public infrastructure represents a societal asset rather than a cost imposed by a firm’s actions, and increased profits are private gains for the company, not external costs to society.