Parks Spice Company is considering making dramatic changes to the company. It currently has production facilities in Wollongong. New South Wales. as well as in South East Asia. The CEO, Jayne Mitchell, is concerned about several issues currently facing the company and she would like to solve these using a sustainability approach.
First, the major supplies of spices are imported from the small countries of Vendora and Celadon in both countries toxic chemical sprays are used on plantations, and these sprays have a long life. The spice processors in both countries pay their employees only A$3 per hour. The employees work long hour and breathe in chemical fumes, which over time may burn their lungs. Jayne is considering setting up a factory for preliminary processing of spices in Vendora. Finance manager. Cedric Blanche believes that setting up this factory is a good idea, as the setup costs will be only A$1.2 million. The current cost of processing spices at Wollongong is $0.33 per kilogram but will fall to $0.33 per kilogram if pre-processing is undertaken in Vendora. The Wollongong figure is based on the following costs:
Geoff Tureen, the production manager, believes that the quality of the final spice products will not reduce if the pre-processing is undertaken off shore.
Second, although the Wollongong plant currently meets the required environmental emissions standards, it has been prosecuted in the past for several violations of air pollution standards and neighbours still complain about the smell. An improved filtering system would cost $290,000 to purchase and $17,500 per annum to run. Cedric believes there would be no financial benefits in improving the air quality since the facility meets government standards. He does not think that the new system should be purchased. The quality manager, Ravi Nath, disagrees and believes that the improvements would enhance the Company’s reputation and reduce discoloration of the buildings. The local newspaper has twice run Stories that were critical of Parks Spice. A recent story suggested that they were also water polluters, an assertion that the company claims is untrue. No contaminated water is released into the Waterways; it is all evaporated using recycling ponds and a septic system.
The third problem is continuing low employee morale at the Wollongong plant. The previous production manager came to the plant from the army, and ran the factory very smoothly and efficiently, but using a military style. This led to serious clashes with some of the production staff and 12 of these staff continue to be unhappy. Jayne has thought about offering these staff redundancies at a total cost of $285,000. Another alternative is to engage an external consultant to act as a mediator between management and staff, to see if problems can be resolved and to help improve the morale. The approximate cost of the consultant would be $43,000. Cedric is opposed to this as the performance indicator for staff in the Company’s social and environmental report is already satisfactory and is getting better every year. The money would therefore be wasted in trying to calm only 12 staff.
For each of the three problems previously outlined:
1. Outline the financial, environmental, social and broader economic issues that the company takes into account.
2. Highlight any further information that the company may need to gather before it can resolve these issues.