Discuss about the BHP Billiton Brazil Mine Disaster for Stakeholders.
In the year 2015 and incident took place in Brazil which raised many questions over the integrity as well as responsibility of BHP. A dam which was co- owned by BHP in order to hold back the waste water which was released from the iron ore mine situated in Brazil got burst because of which a thick layer of red toxic mud was released which killed nearly 17 people and wiped out a whole village. Many were injured as well as many went missing and the number kept on increasing day by day (ABC News, 2015). This disaster is considered as the worst environmental disaster that has been faced by Brazil in its history. Many rivers of the nearby area were also polluted affecting the normal routine of the people. After the one year of disaster the Gualaxo do Norte River situated in the south eastern part of the Minas Gerais is said to still run red iron ore such is the impact of this disaster (Phillips, 2016). The Age Newspaper have said that the incident that took place in Brazil was no less than disaster that has been taken place because of the carelessness of the company as well as which could have been avoided if the company have taken responsible efforts (Szoke, 2015). All these raises a question in front of us that, what was the main reason behind this and was it the fault of the company, was there any chance that this disaster could have been avoided. The answer to all this question will be found in the below discussion.
According to some of the unreported documents it was found out that the mining company had got an idea about the damage but did not took any efforts and were busy in increasing their production as well as profits. According to a document which was submitted to the court by the prosecutors it was found that the company had an idea about a possible loss in the near future because of “liquification break” which may harm peoples as well as villages and also may have serious negative impact on the land, water as well as biodiversity of the area (The Guardian, 2018).
It has been seen that the expectations of consumers, employees as well as other stakeholders of the company has increased; hence, it is recommended that organizations should have proper principles as well as codes that help them to carry on their business properly and ethically. Constant demand is being raised by the Government authorities as well as NGO’s and other local communities in order to increase the transparency as well as accountability in daily operations of the company as well as in order to find out that how these operations have an impact on the society. Toukabri Mohamed and others in their article have discussed about the social responsibilities of the company as well as the corporate social disclosures of the company. Today companies are aware that the shareholders do not suffice themselves with the profits earned by the company they also look at the corporate social responsibilities performed by the organizations. Corporate social disclosure in simple terms can be understood as the declaration of the financial as well as non financial information regarding the interaction of the organization with its surrounding environment (Dierkes & Antal, 1985). The corporate social disclosure helps to know about the information which helps to confirm that the activities of the organization are in sync with the environment and are taking all the possible efforts to save the environment (Haron, Yahya, Chambers, Manasseh, & Ismail, 2004). Many researchers also suggest that stakeholders play a major role in influencing and encouraging or forcing the organizations to undertake corporate social responsibilities activities towards their society as well as the environment (Aaronson & Reeves, 2002).
There are many different theories that provide a theoretical framework which helps the organizations to get the necessary clarification related to the corporate social responsibility disclosures. Some of the theories include agency theory, politico contractual theory, theory of stakeholders as well as the legitimacy theory that is going to be discussed below.
Legitimacy theory helps in knowing about the incentives related to social reporting. The theory of legitimacy is based upon two basic fundamental concepts namely the organizations need to legitimize all their activities and the second is the process related to legitimacy that offers certain benefits to the organization. From the first concept it can be understood as that social disclosure puts a social pressure on the organizations. The level of the social pressure depends on the corporate social disclosure of the company as well as the benefit attached to the legit8imate behaviour of the company depending upon the social responsibility activities being undertaken by the company, hence, it can b said that the need for legitimacy differs from company to company (Mohamed, Olfa, & Faouzi, 2014). Legitimacy theory has become one of the most used theories when it comes to social as well as environmental accounting. Legitimacy theory suggests constructing standards that are qualitative in nature as well as serve the social responsibilities of the company. There are different phase in the legitimacy theory starting from establishing, maintaining, extending as well as defending legitimacy (Tilling, 2004).
In order to employ legitimacy theory the organizations undertake corporate social responsibilities as well as corporate social responsibility reporting. One of the most common ways adopted by the companies is by including their corporate social responsibilities in their sustainability report. BHP Billiton also publishes sustainability report on an annual basis in which the organization includes about the corporate social responsibilities activities being undertaken by the company. The sustainability report 2016 of the BHP has dedicated a different section related to corporate social responsibilities in order to legitimize their activities. The Framework Agreement of the company has adopted few key environment related activities that include management of tailings; preservation as well as environment safety; sustainable use of land; conservation of biodiversity; retaining the water quality; etc. the activities that are being showcased by the company in their sustainability report legitimizes their activities and to improve their tarnished image after the dam failure taken place in 2005. The sustainability report of the company also includes about the delay in their activities related to controlling the sediments flow spilled over after the dam was burst. The organization is also constructing a series of sediment dams in order to reduce the negative impact of tailing. The company has also highlighted that they have treated the water of River Rio Doce and hence, people can consume it (BHP Billiton , 2016). So, it can be said that the organizations corporate social responsibility is in line with the legitimacy theory that is BHP is trying their best to legitimize their activities as well as this will benefit them by regaining their image in the market.
According to Letícia Couto Garcia and others in the report published in Ecological Society of America (ESA), it was found that the damage caused by this incident was not limited to only human and socioeconomic tolls but it had a serious negative impact on the environment as well. The estimated damage to regional environmental services is expected to be USD 521 million per year. The organizations that cause a serious damage are required to compensate as well as and this is taken from them in the shape of penalty. The damage to the environment that has been estimated is six times higher than that of the penalty paid by the company. In order to bring a balance between this the authors of this article has suggested coming up with an environmental bond that will help to find out about the potential risks as well as the environmental services that can have possible impacts by eh working as well as irresponsible acts of the mining company (Garci, Ribeiro, Roque, Ochoa?Quintero, & Laurance, 2017). Lucília Souza Miranda and Antonio Carlos Marques brought into notice about the damage to the marine fauna that has been caused because of the mud flow after this disaster took place. The mud flow was not been able to contain and as a result it reached to seas and oceans risking the lives of a lot of marine fauna. The main aim of the authors of this article is to attract the attention of the important stakeholders in order to take necessary actions against the criminals of environmental crime. The authors have also discussed that it is very important to identify as well as punish the culprits for activities like negligence of licensing so that such incidents can be avoided in future (Miranda & Marques, 2016).
After the incident took place the need for having an active risk management was required in order to keep a check on the activities as well as manage the dam properly so that any such event does not place in the future. In the Sustainability Report 2017 the organization has stated many factors that will help the organization to improve their tarnished image. The organization have come up with “Our Requirements for safety Standards’’ in order to achieve zero fatalities by their activities as well as have an effective risk management team. The organization has also adopted Field Leadership program in order to improve safety issues with the help of appropriate leadership. The organization has also adopted collaborative community approach in order to recognize the key stakeholders as well as undertake their social as well as environmental activities. The organization has also highlighted that they undertake security as well as security related human rights training in the organization on a regular basis. “Our Requirements for Environment and Climate Change” is the initiative of the organization taken towards the protection of the environment by using the land strategically as well as adopting changes according to the changes in the climate (BHP Billiton , 2017). So, it can be said that the corporate social responsibilities of BHP after the incident are in sync with the legitimacy theory in which the society is considered as a whole by the organization instead of giving importance to an individual separately. Organizations can never work in isolation and hence, has to maintain a close and continuous relationship with the community and other important stakeholders which is the demand of the legitimacy theory and which is being undertaken by BHP (Fernando & Lawrence, 2014). So, it can be said that after the dam disaster took place BHP gave special emphasis to legitimize their activities so that they can show that their activities are eco friendly as well as the company compensate for any damages caused through their CSR activities.
Conclusion
So, to conclude it can be said that the organization was in a fault by avoiding the report of possible “liquification break” in the dam because of which such a huge disaster took place in Brazil. It is very important these days that the organization fulfils their corporate social responsibility as today the shareholders of the company like the government, community, NGOs etc. does not only look at the profits of the company but rather they also look at the efforts and the role played by the company towards the society. Protecting the environment is an integral and important part of the corporate social responsibility which helps the organization to legitimize their activities. After the incident took place by the Sustainability reports of the company it was found out that the CSR activities and efforts of the company were in line with the legitimacy theory.
References
Aaronson, S. A., & Reeves, J. (2002, February 5). The European Response to Public Demands For Global Corporate Responsibility. Retrieved from Issuelab.org: https://www.issuelab.org/resource/the-european-response-to-public-demands-for-global-corporate-responsibility.html
ABC News. (2015, November 6). BHP-owned mine dam bursts in Brazil, killing 17 people and devastating nearby town. Retrieved from Abc.net.au: https://www.abc.net.au/news/2015-11-06/bhp-owned-mine-dam-bursts-in-brazil-devastating-nearby-town/6919074
BHP Billiton . (2016). Integrity Resilience Resilience Sustainability Report 2016. BHP Billiton .
BHP Billiton . (2017). Sustainability. BHP Billiton .
Dierkes, M., & Antal, A. B. (1985). The Usefulness and Use of Social Reporting Information. Accounting Organizations and Society, 10(1), 29-34.
Fernando, S., & Lawrence, S. (2014). A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and institutional theory. The Journal of Theoretical Accounting, 10(1), 149-178.
Garci, L. C., Ribeiro, D. B., Roque, F. d., Ochoa?Quintero, J. M., & Laurance, W. F. (2017). Brazil’s worst mining disaster: Corporations must be compelled to pay the actual environmental costs. Ecological Applications, 27(1), 5-9.
Haron, H., Yahya, S., Chambers, A., Manasseh, S., & Ismail, I. (2004). Level of Corporate Social Disclosure in Malaysia. Fourth Asia Pacific Interdisciplinary Research in Accounting Conference. Singapore.
Miranda, L. S., & Marques, A. C. (2016). Hidden impacts of the Samarco mining waste dam collapse to Brazilian marine fauna – an example from the staurozoans (Cnidaria). Biota Neotropica, 16(2).
Mohamed, T., Olfa, B. J., & Faouzi, J. (2014). Corporate Social Disclosure: Explanatory. International Journal of Academic Research in Management (IJARM), 3(2), 208-225.
Phillips, D. (2016, sept 15). Samarco dam collapse: one year on from Brazil’s worst environmental disaster . Retrieved from theguardian.com: https://www.theguardian.com/sustainable-business/2016/oct/15/samarco-dam-collapse-brazil-worst-environmental-disaster-bhp-billiton-vale-mining
Szoke, H. (2015, November 19). Brazil mine disaster exposes BHP’s failures. Retrieved from Theage.com.au: https://www.theage.com.au/opinion/brazilian-dam-disaster-shows-bhp-falls-short-of-global-expectations-20151119-gl2i8c.html
The Guardian. (2018, March 1). Brazil dam disaster: firm knew of potential impact months in advance. Retrieved from Theguardian.com: https://www.theguardian.com/world/2018/feb/28/brazil-dam-collapse-samarco-fundao-mining
Tilling, M. V. (2004). Refinements to Legitimacy Theory in Social and Environmental Accounting. Retrieved from Flinders.edu.au: https://www.flinders.edu.au/sabs/business-files/research/papers/2004/04-6.pdf
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