By Nneka Nwogwugwu
Accountants in South Africa have been called to employ environmental management accounting practices as tools that can be used to identify, analyse, manage and reduce environmental costs.
These tools can identify occurrences and activities in mining processes where waste production can be reduced, resulting in cost-cutting opportunities.
These practices include material flow cost accounting, activity-based costing and life cycle costing. The first looks at the flows of materials, energy and water.
The second identifies activities that drive costs, those that don’t add value (if the activity is not necessary in the process) and can be reduced.
The King IV report provides background to how companies can operate regarding the economy, environment and society.
The Carbon Tax Act and the National Environmental Management Act 107 of 1998 are fairly stringent. But the industry still produces acid mine drainage and other waste as part of its daily activities. This has to be managed.
To refine decision-making framework, some South African researchers interviewed supervisors, senior managers, general managers, chief executive officers and employees of different mining companies. We wanted to know what kind of information they felt they needed to make decisions on environmental impacts. We also held a focus group to identify associations between the different information components of the framework.
They found that only 27% of the interviewees were familiar with the concept of environmental management accounting.
But all the focus group participants agreed that reduced water pollution, improved health, and improved costing and decision-making would benefit investors, coal mining employees and the natural environment. They agreed that environmental management accounting would add value for all these stakeholders by providing useful information.
In 2019 a study comparing Australia and Sri Lanka showed that environmental management accounting was gaining traction in various companies. The study showed that professional accounting bodies should incorporate it into training programmes to meet industry requirements. They also made the point that this approach to accounting as the basis for decision-making brings new challenges. For example, accountants have to work closely with other departments to track materials and processes.
Our study showed that more training is needed in South Africa. From the interviews it became clear that there is a need for the harmonisation of production and environmental management activities.
The work showed the value of green industrialisation. We hope that more executives with decision-making powers will use the tools of environmental management accounting in future.
More case studies in the South African coalmining industry would help to enhance the framework and determine its industrial scalability.
