Jan Marielle N.

Abaca

2002713

Case Analysis #1

SOUTH COPPER CORPORATION (SCC) CASE

I. Brief Summary

South Copper Corporation (SCC) is a mining company founded in 1952. They

are one of the largest integrated copper producers in the world yielding copper,
molybdenum, zinc, lead, coal and silver. Their mining, smelting, and refining facilities are
located in Peru and Mexico, and they conduct exploration activities in both countries as
well as in Chile.

The companies’ activities resulted in the production of bad smell, which was
referred to by the people as “Mexico Aroma”, as well as emissions of high amounts of
arsenic. Arsenic, which was classified by the International Agency for Research on
Cancer as a known human carcinogen, when consumed in a large amount over a
lifetime, can increase the risk of cancer in internal organs such as the bladder, lungs,
and liver. Thus, in the 70’s, SCC invested more than $40 million to reduce arsenic
emission. However, in 1983, the agency for environmental protection informed the
company that the law demands reduction of the arsenic emission by at the very least,
25%. This is because the agency estimated that the arsenic emissions of the company
led to four cases of lung cancer a year. The law then aims to reduce the number of
cases into just one case yearly.

II. Statement of the Problem

How can the South Copper Corporation (SCC) reduce the arsenic emission of
their mining activities in order to decrease the number of lung cancer cases per year?

III. Objectives

A. To conduct semi-annual environmental audits in order to monitor and ensure that

the company is complying with environmental regulatory programs for mining.

B. To acquire advanced technologies and implement protocols in order to reduce

arsenic emissions of the company’s activities.

C. To establish and disseminate information to the public which will serve as health
and safety precautions.

IV. Areas of Consideration

THEORETICAL FRAMEWORK

Industrial mining refers to formal, large-scale mineral extraction operations.

Typical minerals extracted at these sites include manganese, copper, tin, lead, nickel,
aluminum ore, iron ore, gold, and coal, and the toxicity and value of these materials can
range from inert to hazardous, and from common to precious. Smelting refers to the
process of heating ores to concentrate and process metals from the ore. Mining and
smelting sites often pose serious risks to local communities. This is because such
activities lead to emission of harmful compounds such as arsenic.

Arsenic is a natural component of the earth’s crust and is widely distributed

throughout the environment in the air, water and land. It is highly toxic in its inorganic

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 form. Atmospheric arsenic emissions from copper smelting represent the largest
contribution of arsenic from the mining and metals industry by far and have been the
focus of pollution control technologies and increasingly stringent regulations. It cannot be
destroyed, and thus remains in surface soil long after the event that released the arsenic
has ceased. Inorganic arsenic is classified as a known human carcinogen by the
International Agency for Research on Cancer. Consuming a large amount of arsenic
over a lifetime can increase the risk of cancer in internal organs such as the bladder,
lungs, and liver. Other adverse health effects that may be associated with long-term
ingestion of inorganic arsenic include developmental effects, diabetes, pulmonary
disease, and cardiovascular disease. Arsenic-induced myocardial infarction, in particular,
can be a significant cause of excess mortality.

The symptoms and signs caused by long-term elevated exposure to inorganic

arsenic differ between individuals, population groups and geographical areas. Thus,
there is no universal definition of the disease caused by arsenic.

SITUATIONAL ANALYSIS

A. Strengths

a. Southern Copper Corporation (SCC) is one of the largest integrated copper

producers in the world.

b. They have one of the best copper ore reserves in the industry which is the Cananea
Mine, located in northern Mexico. It is among the world's largest copper mines in
terms of reserves, and has the longest remaining mine life of any major open-pit
copper mine in the world, based on current production levels.

c. The company focuses on copper production, cost control, production

enhancement and maintaining a prudent capital structure to remain profitable.

d. They have strong free cash flows that provide resources in enabling the company
to expand into new projects and invest into technologies.

B. Weaknesses

a. The company’s reputation is associated with “Mexico Aroma”, which is what the
people use to call the foul smell emitted by SCC’s giant chimney.

b. Their operating activities have a negative impact on the environment such as

emission of high amounts of arsenic.

c. It has failed to merge with firms of different cultures, preventing further growth
and variety of its products.

d. Even though Southern Copper Corporation is spending above the industry

average on Research and Development, it has not been able to compete with the
leading players in the industry in terms of innovation.

C. Opportunities

a. The Southern Copper Corporation has been investing on its online platform in
which they can get track on customers' current needs as well as maintain its loyal
customers with great service and lure new customers through other value
oriented propositions.

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 b. Green mining technology provides an opportunity for Southern Copper
Corporation to improve its operations and increase sustainable management
practices thereby creating good public image.
c. Stable free cash flow provides opportunities to invest in adjacent product
segments.

d. New government and environmental policies represent a great opportunity for

Southern Copper Corporation to drive home its advantage in new technology and
gain market share in the new product category.

D. Threats

a. Changing consumer buying behavior from online channels could be a threat to

the existing physical infrastructure driven supply chain model.

b. Operating in different countries makes the company exposed to currency

fluctuations.

c. Continuous revision and implementation of environmental regulations could be a

threat to certain existing product categories.

d. Imitation of the counterfeit and low quality product especially in the emerging
markets and low income markets.

V. Alternative Courses of Action

A. Implement an environmental management system to reduce environmental

impacts as well as increase operating efficiency.

Environmental management system is a set of processes and practices which

addresses the environmental impact of the organization's activities and establishes
goals and procedures that will improve the impact it has on human health and
environment.

Pros:

1. It involves conducting an environmental audit which helps monitor and ensure

that the organization maintains compliance with environmental regulations.

2. It protects public health and safety as it is an evolving policy that seeks to

continually lessen or eliminate the negative impacts on the environment.

3. Part of it is an emergency response plan which establishes procedures to be

followed in the event of an accident or emergency with potential environmental
impact thus preparing organizations to quickly and efficiently respond to
emergencies or accidents.

Cons:

1. Implementation and maintenance of an environmental management system is

costly.

2. Designing and implementing an environmental management system is

challenging and cumbersome. It is a continuous, systematic approach that needs
to be followed through in order to work properly.

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 3. Employees will spend time and effort on learning about and implementing the
new environmental management system.

B. Integrate green mining technologies which aims to reduce environmental

impacts associated with the extraction and processing of metals and minerals.

Integrating technology into mining projects has a number of impacts on mining

operations such as safety, productivity, and environmental protection.

Pros:

1. Safer working conditions through improved underground communication.

2. There are recently discovered green mining technology methods such as: mining
from tailings, dust suppression techniques, liquid membrane emulsion
technology, sulphuric acid leaching extraction process, impermeable tailings
storage, and improved energy efficiency.

Cons:

1. There is a need to invest in the research and development of green mining

technology methods.

2. The integration of new technologies in the mining process involves years of

production which might delay resolutions and create further setbacks.

C. Promote transparency to provide public information and participation.

Require companies to disclose mining operations, and opportunities for members

of the public and local government to participate in evaluation and regulation of mining
approaches.

Pros:

1. This can improve the responsiveness of mining operations to local,

environmental and social concerns.

2. This will reflect the company’s innovative development for proactive resolutions.

Cons:

1. Transparency and/or disclosure of policies to the public might be unclear and

misunderstood, and promote risk.

2. The innovation in response to public concerns can be a gradual process which

can also be a competitive disadvantage.

VI. Proposed Solution

Based on the given case, I would like to propose ACA number one as the
solution to the problem. I believe that implementation of an environmental management
system can help the company in determining its environmental impact as well as provide
policies and procedures to address said impact. As it is an evolving policy, the company
can continually make adjustments or proper actions in order to lessen or eliminate
negative impacts that harms the environment as well as the public health of the people
of the surrounding community. It also includes an establishment of an emergency
response plan which prepares the organization to quickly and efficiently respond in case

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 of accidents and emergencies, not only within the company but also in the surrounding
community environment.

VII. Recommendation

In order to design and implement the environmental management system, the

following procedures are recommended:

1. Determine existing environmental policies and assess the current operational

processes of the organization.

2. Define new and improved organizational goals for the environmental

management system subject to environmental requirements of the government.

3. Build an implementation team consisting representatives from key management

functions in which they need to meet regularly in order to identify and assess
issues, opportunities and existing processes. Costs associated with training of
personnel, any potential consulting assistance and environmental impact
analyses or other studies that might be needed must be evaluated.

4. Identify potential sources and types of pollution that may arise in the three
phases of mining activities which are: exploration, active mining operations, and
closure.

5. Formulate pollution prevention strategies on the three phases of mining activities

through integrating legal and policy tools as well as considering public health and
safety. Include an emergency response plan for accidents and emergencies not
only in the company but also in the community and environment.

6. Adopt and implement sustainable management practices such as: purchase of

eco-friendly equipment; water recovery systems to conserve water and minimize
impact on nearby streams; vegetation programs to stabilize the surface of the tailings
dumps; implementation of scrubbing technology in the mines to reduce dust
emissions. and other practices that are suited for the operations of the company.

7. Conduct environmental audits in order to assess the effectiveness of policies and

practices implemented. Maintain records and documentation for evaluation and
improvement.

8. Continue improving policies and procedures to ensure compliance with

environmental regulations as well as mitigate harmful effects caused by the company
operations. Invest in research and development to further improve operating
efficiency while reducing environmental impact of the company.

9. Public involvement through conduct of community outreach or seminars to provide

health and safety precautions, as well as determining and addressing their issues
and concerns regarding the company’s operations.

VIII. Case Questions

1. What is the ethical issue in the case?

The ethical issue in the case is that the activities of Southern Copper
Corporation affects the environment and public health of the surrounding
community. A foul smell was emitted by the SCC's giant chimney which was
named by the people "Mexico Aroma". Aside from the foul smell, high amounts of
arsenic were also released into the environment.

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 2. If you are the President of the Southern Copper Corporation, what would
you do and why?

If I was the President of Southern Copper Corporation, I would implement

an environmental management system which addresses the environmental
impact of a company's activities and establishes policies and procedures that will
improve the impact it has on human health and environment.

Aside from investing in technologies in order to reduce arsenic emissions,

I would establish policies and sustainable mining practices to reduce the
environmental impact of mining operations as well. Assessments of said
technologies, policies and practices will be done in order to determine their
effectiveness. Continuous improvement will be made based on the assessments
to further eliminate harmful elements like arsenic which causes diseases such as
lung cancer. There will also be continuous investment in research and
development to find better ways on minimizing or eliminating harmful elements in
order to have a safe and healthy community and environment.

3. Discuss the ethical implications of the case using utilitarian principle.

Utilitarian Principle is an ethical theory that determines right from wrong

by focusing on the outcomes. It is a form of consequentialism in which the most
ethical choice is the one that will produce the greatest good for the greatest
number. According to utilitarianism, morally “good” actions are those which
maximise the overall amount of well-being and minimise harm. So a good
utilitarian argument must take into account all harms and benefits – including
those affecting future generations.

In this case, the company’s activities were causing harm to the

environment as well as to the health and safety of the surrounding community.
Thus, the ethical implication would be for the company to further invest in
technologies that will help lessen the arsenic emissions, or release of other
harmful elements into the community resulting in to less cases of diseases such
as lung cancer in a year. Through this, not only will the company be able to
comply with environmental regulations and protect public health, they can also
improve their public image.

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