Abstract
This study attempted to investigate
whether the profitability, the use of debt in the firm capital structure, the
size and environmental sensitivity of firms affect the extent of environmental
and corporate social reporting. Data were collected from annual reports of the
companies for the period of 2011 and the level of disclosure and determinants
of environmental and corporate social reporting were measured analyzed using
content analysis and Ordinary Least Square (OLS) estimation. The research work
found that environmental and corporate social report have significant positive
associations with the profitability, size and environmental sensitivity of
firms, except for the degree of leverage that was found to have an
insignificant and a negative association with the extent of environmental and
corporate social reporting in Nigeria. The findings also show that Nigeria
listed companies prefer to disclose environmental and corporate social
information in the director’s report, chairman’s statement and notes to the
accounts in the form of short qualitative information. As such, this study
recommends among others that themes and evidence must be established at the
national level to provide foundation for improving environmental information;
policy guiding and principles to improve financial and non-financial corporate
social and environmental reporting should be considered. Regulations on
environmental reporting that would identify and target mostly corporations that
fail to adequately report on their environmental practices should be
established and that companies should take environment and corporate social
reporting as a moral duty. Also, it recommends that government should formulate
policy decisions that would promote environmental and corporate social reporting
and thereby make entities more responsive to changes in the natural and social
environments.
TABLE OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgments iv
Abstract v
Table of Contents vii
Chapter One: Introduction 1
1.1 Background
to the Study 1
1.2 Statement
of Problem 2
1.3 Research
Questions 2
1.4 Objective
of the Study 3
1.5 Statement of
Hypotheses 4
1.6 Significance
of the Study 5
1.7 Scope
of the Study 5
1.8 Limitation
of the Study 5
1.9 Definition
of Terms 7
CHAPTER TWO: Review of Related
Literature 9
2.1 Introduction
9
2.2 Corporate
Social and Environmental Reporting 11
2.2.1 Meaning
of Environmental accounting 14
2.2.2 Scope
of Environmental Accounting 15
2.2.3 The
Concept of the Environment 17
2.2.4 Sustainable
Environment 18
2.2.5 A Brief History of
Environmental Accounting 20
2.2.6 Environmental Accounting and
Reporting 21
2.2.7 The Importance and Relevance of
Environmental Accounting 23
2.2.8 Review of financial Reports 25
2.3 The
Determinants of Corporate Social and Environmental Reporting 30
2.3.1 Legal
frameworks for Environmental Accounting 33
2.3.2 The
Global Reporting Initiative (GRI) 35
2.3.3 Accounting
for Environmental Degradation 37
2.3.4 Limitation of Financial
Accounting 38
2.3.5 The Users of Accounting Information 39
Chapter Three: Research Method and Design
42
3.1 Introduction
42
3.2 Research
Design 42
3.3 Description
of Population of the Study 43
3.4 Sample
Size 43
3.5 Sample Technique 44
3.6 Source
Data Collection 44
3.7 Method
of Data Presentation 44
3.8 Method
of Data Analysis 44
Chapter Four: Data Presentation,
Analysis and Interpretation
4.1 Introduction
46
4.2 Presentation
of Data 47
4.3 Data
Analysis 50
4.4 Hypothesis
Testing 53
Chapter Five: Summary of Findings, Conclusion and
Recommendations 56
5.1 Introduction
56
5.2 Summary of Findings 56
5.3 Conclusion
58
5.4 Recommendations 59
References 61
Appendices 65
CHAPTER ONE: INTRODUCTION
1.1 Background
to the study
Traditional accounting has lost its
instrumental ability of entailing the reporting entity’s activity in the
context of sustainable development. Environmental and Corporate social
accounting also called “sustainability” is considered a subcategory of financial
accounting that focuses on the disclosure of non-financial information about a
firm’s performance to external parties such as capital holders, mainly to
stakeholders, creditors and other authorities. These represent the activities
that have a direct impact on society, environmental and economic performance of
an organization. Environmental and Corporate social reporting can also be
viewed as a tool used by an organization to become
more sustainable (Guthrie & Parker, 1989).
To satisfy the information needs of
the market and provide the information needed for corporate transparency and
accountability there is a consensus that the business reporting model needs to
expand beyond the traditional financial reporting model that emphasizes
backward-looking, qualified financial information (Beattie, 2004). However,
integrating environmental and corporate social reporting has not gained an
overall acceptance yet but, more
and more entities tend to disclose
such information in order to give confidence to stakeholders. Therefore, the principles
espoused in traditional accounting a set of principles that underpin the role
of the society and of the environmental in this context will develop a holistic
version of entity’s report.
1.2 Statement
of Problem
Globally the issue of corporate
social responsibility had been an issue of concern to corporate entities and
other stakeholders. Over the years there have been failures of corporate
entities financial scandals, financial fraud and creative accounting taking the
centre stage of activities in the corporate world. Users of financial
information have claim that the main objective of corporate financial reporting
is to provide internal and external users sufficient information in other for
them to take an inform decision as regard their investment which is forgoing
problem. The researchers is of the view to carryout an investigation on the
effect of environmental and corporate social responsibility reporting as a
medium of providing users of accounting information for their effective
decision making.
1.3 Research
Questions
The following are the areas of
research problem involved in this research work
1. Is
the profitability of a firm positively associated with the extent of
environmental disclosure in the annual report?
2. Does
the use of debt in the firm’s capital structure affect the extent of
environmental and corporate social reporting?
3. Does
the size of the firm in terms of turnover affect the extent of environmental
and corporate social reporting?
4. Are
the firms belonging to environmentally sensitive industries providing more
environmental disclosures?
1.4 Objectives
of the Study
The following are provide as
objectives of the study.
i. To
determine whether the profitability of a firm is positively associated with the
extent of environmental disclosure in the annual report.
ii. To
ascertain whether the use of debt in the firm’s capital structure affects the
extent of environmental and corporate social and reporting.
iii. To
find out whether the size of the firm in terms of turnover affects the extent
of environmental and corporate social reporting.
iv. To determine whether the firms
that belong to environmentally sensitive industries providing more environmental
disclosures.
1.5 Statement
of Hypotheses
In order to provide a greater insight
into the specific research problems involved and the subject being explored in
general, the following hypotheses are defined:
Hypothesis One
HO: The profitability of a firm is not
positively associated with the extend of environmental disclosure in the annual
report.
HI: The profitability of a firm is positively
associated with the extend of environmental disclosure in the annual report.
Hypothesis Two
HO: The use of debt in the firm’s capital structure
does not affect the extent of environmental and corporate social reporting.
HI:
The use of debt in the firm’s capital
structure affects the extent of environmental and corporate social reporting.
Hypothesis Three
HO:
The size of the firm in term of
turnover does not affect the extent of environmental and corporate social
reporting.
HI:
The size of the firm in terms of
turnover affects the extent of environmental and corporate social reporting.
Hypothesis Four
HO:
The firms that belong to
environmentally sensitive industries are not providing more environmental
disclosures.
HI:
The firms that belong to
environmentally sensitivity industries are providing more environmental
disclosures.
1.6 Significance
of the Study
1. Investors:
It enables both existing and potential investor in making effective investment.
2. This
study will serve as a spring board for future researchers since is important to
existing literature on CSR.
3. It
relevant to academia, students as it exposes some grey area in CSR.
4. Firms
will also find this study relevant as it will expose some demand of firms
falling to the Host community.
1.7 Scope
of Study
The study is to examine environmental
and corporate social reporting. The period under cover is between 2008 and 2013
and the sample size was 30 firms selected from 10 different sections on the
NSE.
1.8 Limitation
of the Study
The first possible limitation to
social reporting of information is providing quantifiable information as
regards to comparing companies. Most large companies have to provide
information about employee and environmental statistics, but in some cases, it is
not good enough to make informed decisions between companies. Most companies do
not make information easy to interpret. For example, chevron Nigeria have
statistics on safety, environmental and ethical factors but do not compare them
to other companies or the industry standard, therefore the stakeholder cannot
make an informed decision as the social reporting does not make the statistics
they are using useful as it is not compared to industry standards and
competitors and government guidelines this shows that it is hard to measure CSR
performance as they stakeholder does not know the industry standards the
majority of the time, thus the lack of accurately on the report without the
stakeholder finding out other facts and figures which can be costly and time consuming
to measure the performance of the business. This is shown throughout the
chevron Nigeria sustainability report.
Another limitation in social reporting
understands the data; it can be very hard to understand the data which is
provided in the social report. For example, chevron Nigeria have shown in their
facts and figures that is provided such as profit and loss of different areas
in the industry and the fact that they have a lot of information being given at
once, which is hard for the stakeholder to understand, especially the
terminology they use within the social report. This also provides a lack of
justification to figures and explanations as it can also be biased and only
provide information they want to. This is possibly the reason why they have not
included averages and other company statistics.
1.9 Definition
of Terms
·
Corporate Social Responsibility: CSR also called corporate conscience, corporate
citizenship, social performance, or sustainable responsible business /Responsible
Business), it is a form of corporate self-regulation integrated into a business
model. CSR policy functions as a built-in, self-regulating mechanism whereby a
business monitors and ensures its active compliance with the spirit of the law,
ethical standards, and international norms.
·
Social Accounting: Emphasizes the notion of corporate
accountability. Crowther defines social accounting in this sense as “an
approach to reporting a firm’s activities which stresses the need for the
identification of socially relevant behavior, the determination of those to
whom the company is accountable for its social performance and the development
of appropriate measures and reporting techniques.” An example of social
accounting, to a limited extent, is found in an annual Director’s Report, under
the requirements of UK company law.
·
Social License: Generally refers to a local
community’s acceptance or approval of a company’s project or ongoing presence
in an area. It is increasingly recognized by various stakeholders and communities
as a prerequisite to development. The development of social license occurs
outside of formal permitting or regulatory processes, and requires sustained
investment by proponents to acquire and maintain social capital within the
context of trust-based
relationships.
·
Engagement Plan: An engagement plan will assist in
reaching a desired audience. A corporate social responsibility team or
individual is needed to effectively plan the goals and objectives of the
organization.
·
Brand Differentiation: In crowded marketplaces, companies
strive for a unique selling proposition that can separate them from the
competition in the minds of consumers.
·
Ethics Training: The rise of ethics training inside
corporations, some of it required by government regulation, is another driver
credited with changing the behavior and culture of corporations. The aim of
such training is to help employees make ethical decisions when the answers are
unclear.
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