Home Accountant Accountants can reduce the environmental impact of mining: tips for South Africa

Accountants can reduce the environmental impact of mining: tips for South Africa


South Africa’s coal mining industry has a long history, dating back to the late 19th century, and contributes significantly to the economy. The coal sector employs 92,230 people and annual revenues are R27.9 billion (approximately US $ 2 billion). But the industry poses serious environmental problems.

For example, Emalahleni, a town in Mpumalanga province, has been exposed for more than a century to continued coal mining. He experiences land sterilization due to underground fires, water pollution, surface collapse and topsoil acidification.

Communities near a mine can face serious health problems and may even need to be relocated.

Read more: Air pollution, temperature and respiratory diseases: a South African study

South Africa has environmental and other regulations that mining companies must adhere to. The King IV report provides information on how businesses can operate with respect to the economy, environment and society. The Carbon Tax Act and the National Environmental Management Act 107 of 1998 are quite strict. But the industry still produces acid mine drainage and other wastes as part of its daily operations. It needs to be managed.

There are of course scientific and technical aspects of environmental management, but there are also accounting practices that could promote greener mining. Management accountants can reduce the environmental footprint of businesses while keeping them profitable, reducing costs and waste. The original purpose of environmental management accounting was to provide information for internal use. But it can be included in a company’s financial statements and other annual reports to enable external stakeholders to make informed decisions.

Read more: The case for transforming South Africa’s coal fields into a renewable energy hub

We worked on a framework that would guide management accountants in making decisions about these environmental issues. We first formulated a set of proposals on mining and its environmental impacts. Next, we interviewed coal mining practitioners to get their perspective on the proposals.

We found that most of them did not know the concepts of environmental management accounting. They viewed various laws as punitive rather than helping to balance corporate profits with environmental concerns. They also indicated that our new framework should focus on risk management to guide coal mining decisions.

Environmental management accounting practices

Environmental management accounting practices are tools that can be used to identify, analyze, manage and reduce environmental costs. They can identify occurrences and activities in mining processes where waste generation can be reduced, resulting in cost reduction opportunities.

These practices include cost accounting of material flows, costing by activity, and life cycle costing. The first is concerned with the flow of materials, energy and water. The second identifies activities that generate costs, those that do not add value (if the activity is not needed in the process) and can be reduced. The life cycle cost takes into account the costs of all mine activities from the day it starts operating until the mine closes. It even includes post-closure activities if something happens at the mine site that needs to be managed to reduce its environmental footprint.

Read more: How rural communities in South Africa are benefiting from mining

To refine our decision-making framework, we interviewed supervisors, senior managers, general managers, general managers and employees of various mining companies. We wanted to know what kind of information they thought they needed to make decisions about environmental impacts. We also organized a focus group to identify associations between the different information components of the framework.

We found that only 27% of those surveyed were familiar with the concept of environmental management accounting.

But all of the focus group participants agreed that reducing water pollution, improving health, and improving costs and decision-making would benefit investors, coal mine workers and others. to the natural environment. They agreed that environmental management accounting would add value to all these stakeholders by providing useful information.

In 2019, a study comparing Australia and Sri Lanka showed that environmental management accounting was gaining ground in various companies. The study showed that professional accounting bodies should incorporate it into training programs to meet industry requirements. They also pointed out that this approach to accounting as the basis of decision-making brings new challenges. For example, accountants must 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 to harmonize production and environmental management activities.

Read more: Climate change: Give up 90% of global coal and 60% of oil and gas to limit warming to 1.5 ° C – experts

Our work has shown the value of green industrialization. We hope that more executives with decision-making powers will use the tools of environmental management accounting in the future. More case studies in the South African coal industry would help improve the framework and determine its industrial scalability.


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