Assessing the use of environmental management accounting in identifying the environmental costs in the mining industry- Case study of Cullinan Diamond Mine.
Khambule, Mordecai
Khambule, Mordecai
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Abstract
The mining and extractive industries are among the most significant contributors to environmental degradation. Most companies have environmental mitigation measures but lack the systems to account for benefits in physical and monetary terms. Environmental Management Accounting (EMA) has been proven to be the accounting system of choice for costs, benefits, and positive or negative environmental impacts. Despite many studies demonstrating the positive impact of EMA in the mining industry, EMA implementation is still lagging in South Africa, especially in the mining sector. Most mining companies are still using traditional costing systems, which have been proven in many studies to be as unable to account for the actual environmental costs incurred by mining companies, as much of these costs are hidden in the overhead accounts. Therefore, this failure of traditional accounting systems to account for environmental costs leads to distorted financial information, increased risks, misallocation of resources, and damage to a company's reputation and competitive position. To address these issues, mining companies should adopt more comprehensive accounting practices that accurately reflect the true costs of their operations, including environmental impacts. EMA is identified as an environmental management tool that traces environmental costs directly to the processes and products responsible for those costs, thereby highlighting problem areas that need to be prioritised when considering the adoption of cleaner production. This study aimed to assess the use of EMA to identify the environmental costs at Cullinan Diamond Mine (CDM).
To achieve the study aim, quantitative structured questionnaires and qualitative unstructured interviews were used to source primary and secondary data. Qualitative interviews were used to complement the quantitative data by providing in-depth insights into participants' perspectives, experiences, and motivations. This helped validate the results generated by triangulating them for consistency confirmability and to reduce research bias. The purposive sampling method was used to reach 15 participants out of the entire population. Using purposive sampling allowed the researcher to select participants with relevant knowledge, experience, or characteristics related to the research topic. This targeted approach ensures that the sample represents key stakeholders or experts within the population of interest. The study's findings indicated that CDM is not using EMA. However, environmental practices are being applied, and the mining company is aware of the need to comply with legislation. Although the mining company is not using EMA to trace and allocate environmental costs, employees know about the ISO14001:2015 accounting standard, which helps allocate resources. It was discovered that CDM is using the ISO14001:2015 standard as a guide to achieving environmental sustainability. By applying the ISO14001:2015 standard, environmental-related information is generated and reported to drive the need for continuous improvement. The study recommended that the current accounting system at CDM be improved in CDM by implementing EMA. Secondly, comprehensive awareness and training programs should be implemented at CDM to educate employees and management about the benefits and importance of EMA in managing environmental costs. Thirdly, as regulations only cover environmental management and not environmental accounting, regulatory bodies should incorporate environmental accounting requirements into their existing regulations. Lastly, pilot projects should be initiated to demonstrate EMA's practical application and benefits in specific areas of CDM's operations. Before full-scale implementation, these pilot projects should gather feedback, identify challenges, and refine EMA processes and methodologies.
Description
Submitted in fulfilment of the requirements for the degree of Master of Business Studies in Finance in the Department of Finance and Investment, Faculty of Economics and Finance
at the Tshwane University of Technology
Date
2024-03-01
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Tshwane University of Technology
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Keywords
EMA, Environmental costs, Environmental impacts