Functional requirements specify what a product must be able to do to satisfy the needs of the user.
For example, a cars functional requirement is that it must transport people/goods from point A to point B in such a way that the user has to put minimum efforts (ie: A car must have an engine or some other means by which a driver can put little efforts and get high speed). Other functional requirements include cooling/ heating of the car for user comfort. Reliability so that the user is not inconvenienced.
Almost all products while doing what they should do interact with the environment. In doing so, the product "must behave responsibly", or should not have undesirable effects on its environment.
For example, the car's environment includes the road on which it is driven, the garage where it is parked, the other vehicles in whose proximity the car is driven, the atmosphere with which it comes into contact. So, these are the circumstances or environment in which the car operates. An environmental requirement in this case is that the car should not damage the surface of the road. Another environmental requirement is that it must not come in contact with other cars.
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