- 20 Marks
Question
Orgamed Mining Company is located close to Erin river in Owode town and it has over 4,000 workers on its payroll, 1,250 of whom come from the town. Since the company started its operations 5 years ago, the town has witnessed considerable development in infrastructure such as hospitals, schools, and electricity. Before commencement of operations of Orgamed Mining Company, Erin river had served as the main source of livelihood for the natives, most of whom are fishermen. A thriving fish market and small scale industries had emerged from the fishing activities. A few neighbouring towns also depend on water from Erin river for domestic activities.
Lately, chemical pollution from the company’s mining activities has become a threat to the survival of fish in the river. Marine experts have pointed out that within the next three years, all the fish and other living organisms in Erin river would be dead as waste water from the mining operations containing sulphuric acid, iron and sulphate particles are lethal to most organisms living within the aquatic environment. There is also a record of health hazards in the neighbouring towns which have been traced to the water from Erin river finding its way into these towns’ water supplies.
When delegates from Owode town and the affected neighbouring towns met with the management of Orgamed Mining Company to discuss this problem of water pollution, it became evident that the costs of controlling the pollution will have significant consequences on the operations of the company. One of these is that there would be a reduction of over 50% of the workforce, and to put Erin river back to its normal state would require closing down the mines.
Required:
a. Explain the forms of accounting that would be applicable to the situation described above.
(6 Marks)
b. How would you advise the management of Orgamed to minimize its social costs and liabilities?
(8 Marks)
c. Using the idea of retributive justice and the utilitarian approach, explain why Orgamed Mining Company should bear the costs of the water pollution.
(6 Marks)
Answer
a. Forms of Accounting Applicable to the Situation (6 Marks)
- Environmental Management Accounting (EMA): This involves identifying, analyzing, and managing both financial and non-financial environmental costs to improve resource efficiency and reduce environmental impacts. It is critical for Orgamed to assess the environmental costs associated with pollution to manage remediation effectively.
- Environmental Cost Accounting (ECA): This approach allocates costs directly to environmental activities, such as pollution control and waste management, ensuring accountability for environmental impacts. By implementing ECA, Orgamed can link environmental costs to the specific mining activities that caused the water contamination, thus improving financial transparency.
b. Recommendations to Minimize Social Costs and Liabilities (8 Marks)
- Implement a Pollution Control Program: Orgamed should establish processes to reduce contaminants released into the water, such as installing filtration systems and containment measures.
- Engage in Community Outreach and Compensation: Providing financial compensation and support for affected community members can help address the negative impacts on their health and livelihood.
- Invest in Sustainable Mining Practices: Transitioning to eco-friendly mining technology and reducing waste output would reduce ongoing and future liabilities.
- Establish a Monitoring System: Regularly monitoring pollution levels can prevent further contamination and ensure compliance with environmental regulations.
c. Ethical Justifications for Bearing Pollution Costs (6 Marks)
- Retributive Justice: This principle requires Orgamed to take responsibility for the harm caused. Since their mining activities directly resulted in water pollution, retributive justice mandates that they compensate the affected communities.
- Utilitarian Approach: From a utilitarian perspective, addressing the pollution benefits the greatest number by restoring the community’s health and agriculture, which outweighs the cost to Orgamed.
- Topic: Stakeholder Management
- Uploader: Kofi