B0001 S2-2014/15 Sustainability: Issues, Reporting and Finance

| March 31, 2017

Question
AB0001 S2-2014/15
Sustainability: Issues, Reporting and Finance
Ethical Reasoning Case: Rare Earths or Bare Earths?

Dynas Corporation Ltd is a rare earths mining company in Australia. The company operates a mining
and concentration plant in Northern Territory producing high grade rare earths concentrate for
export to other countries.
Dynas has planned to diversify its operation to include refining of rare earths concentrate. The plan
did not take off although it has obtained approval to set up refinery operation in Northern Territory.
Instead of Australia, the company constructed its first refinery plant in Malaysia 2009. In 2013, the
company established another refinery plant in Bangladesh. The Bangladesh plant is situated in a
town with 35,000 people living within a 2km radius and 600,000 reside within 30 km of the refinery.
This location was chosen due to the site having all the resources required. The combination of large
resource and technology with low cost manpower make it a particularly attractive commercial
proposition to Bangladesh. It was estimated that the project will generate US$200 million a year in
exports and create 2,000 jobs for the country. The Bangladesh government granted the company
"pioneer" status and offered it a 10-year tax exemption.
Brandon Hu was recently hired by Dynas as a plant engineer to oversee the operation of the new
refinery plant in Bangladesh. The plant was designed according to the similar facilities operating in
Malaysia, which had obtained its operating license only in 2012 after fulfilling certain pollution
control requirements stipulated by the authority. According to newspaper reports, one important
consideration for the Bangladesh government to grant license to the new plant was because the new
plant satisfied the same level of pollution control as that in Malaysia. Besides government approval,
the company also stated publicly that it would do all that it could to protect the environment from
harmful polluting materials.
The Bangladesh plant has had mediocre performance for the initial few quarters as a new operation.
In early 2015, company employees are excited to see improvement in sales. Morale in the company
has increased significantly because of the success of the plant and all employees are looking forward
to sizable bonuses from the company’s profit sharing plan.
Despite the optimistic outlook, Brandon is concerned about the rare earths solid waste containing
thorium, a mildly radioactive element that is toxic in large doses and easily spread through wind and
water. After commencing his job in 2014, Brandon discovered that the company had actually
developed filtering technology to treat rare earths solid waste that can reduce radioactivity of
thorium by an up to 80%. The technology was not used in both Malaysia and Bangladesh plants, due
to high costs of installing and operating the filtering devices in the refinery.
Brandon is upset on the company’s failure to install the additional filtering devices and fears that the
radiation released today will cause health and environmental problems in future. As a result, he
approached Mill Gates, the Plant Manager and his immediate supervisor with his concerns. The
following conversation ensued:
Brandon: Although we used protection suits in the plant, I am worried about the harmful effect of
radiation from the solid waste on the employees and residents. Why can’t we install the filtering
devices to enable the use the technology to substantially reduce radiation?
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Mill: It’s up to the government agency to protect the residents from radiation, and the company
only had to meet the agency’s standards. The amount of waste being released poses no threat to the
environment, according to the agency. Even if the agency made a mistake, the additional devices
and waste reduction process can be added later when it becomes necessary.
Brandon: I still think that we should act fast as I have reservation on the agency’s standards. May I
quote you a recent incidence in Taiwan. As reported in their local newspapers, some of the ‘gutter
oils’ had passed the agency’s tests in its recycled oil scandal.
Mill: Brandon, do you realize that building the additional devices at this point would require costly
interruptions in the production process and might cause customers to switch to our competitors.
Environmental groups might become suspicious if production was stopped to add the additional
devices as they might see it as an admission of wrongdoing. Furthermore, do you want to deprive
the others from receiving bonuses in the next few months?
Brandon is confused and begun to wonder what he should do next.
Required:
Write a memo to advise Brandon. In the memo, you should help Brandon to sieve out the ethical
issues, dilemma and risk he is facing in the situation. Use the ethical concepts and theories you
possessed, raise pertinent questions to assist Bryan in analyzing the situation, and to propose viable
solutions with sound ethical reasoning and judgments for him.

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