C1739 LO17.8 Analysis of environmental, social and economic information for decisions: manufacturer 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 hours 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 $0.11 per kilogram if pre-processing is undertaken in Vendora. The Wollongong gure is based on the following costs: Cost per kg Direct labour $19 per hour to process 126 kilograms $111508 Variable overhead $5 per hour to process 126 kilograms 0.0397 Fixed overhead $145 000 per annum to produce 1039 427 kilograms 0.1395 Total cost per kilogram $ 033 Geoff Tureen, the production manager, believes that the quality of the nal spice products will not be reduced if the pre-processing is undertaken offshore. 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 ltering system would cost $290000 to purchase and $17500 per annum to run. Cedric believes there would be no nancial benets in improving the air quality sincethe facility meets government standards. He does notthinkthatthe new system should be purchased. The quality manager, Ravi Nath, disagrees and believes that the improvements would enhance the company's reputation and reduce discolouration 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 efciently, but using a military style. This led to serious clashes with some of the production staff and 12 ofthese employees continue to be unhappy. Jayne has thought about offering these people redundancies, at a total cost of $285000. 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 employees. Required: For each ofthe three problems outlined above: 1. Outline the nancial, environmental, social and broader economic issues that the company needs to take into account. 2. Highlight any further information that the company may need to gather before it can resolve these issues