ABSTRACT
This study examined the effect of green accounting on the performance of manufacturing firms in Nigeria. The specific objectives are; to determine the effect of disclosure on waste management (WM) on return on equity and to examine the impact of disclosure on employee health and safety (EHS) on return on equity. To achieve the objectives of the study ex-post facto research design was adopted. The study adopted secondary data. Data were sourced through the use of annual reports and accounts of selected firms. To test the hypotheses, multiple regression analysis was used. The findings revealed that disclosure on waste management (WM) has no significant effect on return on equity. The findings also revealed that Disclosure on employee health and safety (EHS) has no significant effect on return on equity. Nigeria. The study recommends that there should be an accounting standard for measuring, treatment and disclosure of firms environmental practices. This will enhance proper environmental reporting. Firms should adopt uniform reporting and disclosure standards of environmental practices for the purpose of control and measurement of performance.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Abstract ix
CHAPTER ONE: INTRODUCTION
1.1 Background
to the Study 1
1.2 Statement of
the Problem 4
1.3 Objectives
of the study 5
1.4 Research
Questions 5
1.5 Research
Hypotheses 5
1.6 Significance
of the Study 5
1.7 Scope of the
Study
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Conceptual Framework 7
2.1.1 Concept of Environmental Accounting 7
2.1.2 Concept or Social Accounting 8
2.1.3 Social and Environmental Accounting 10
2.1.4 Different Areas of Social and Environmental
Accounting 11
2.1.4.1 Corporate Social Responsibility (CSR) 11
2.1.4.2
Sustainability Reporting 12
2.1.4.3 Triple
Bottom Line 12
2.1.5 Benefits Of Social And Environmental
Accounting 13
2.1.5.1
Transparency And Moral Concern 13
2.1.5.2 Creating
Financial Value 13
2.1.5.3 Creating
Re-Enforcement Of Organization Image: 13
2.1.5.4
Encourage Innovation: 14
2.1.5.5
Competitive Advantage: 14
2.1.5.6 Attract
Long Term Capital and Favorable Financing Conditions: 14
2.1.5.7
Understanding of environment cost can promote more accurate costing and pricing of products. 15
2.1.6 Accounting Interest in the Environment 15
2.1.7 Environmental Information and their Users 16
2.1.8 Resource Based Perspective on Corporate
Environmental Performance And Profitability 17
2.1.8.1 Physical
Assets and Technology: 18
2.1.8.2 Human
Resources and Organizational Capabilities 18
2.1.8.3
Intangible Resources 18
2.1.8.4 Increase
Revenue 19
2.1.8.5 Social
And Environmental Performance Reduces Cost 19
2.2 Theoretical Framework: 19
2.2.1 Legitimacy Theory 21
2.2.2 Stakeholders Theory 21
2.2.3 Positive Accounting Theory 22
2.2.4 Social Contract Theory 22
2.3 Empirical Framework 23
3.6. Instrument Reliability 26
3.7 Instrument Validity 26
CHAPTER THREE METHODOLOGY
3.0 Introduction 27
3.1. Research Design 27
3.2 Area of the Study 27
3.3 Population of the Study 27
3.4 Sample Size and Sampling Technique 27
3.5. Data Analysis Techniques 28
3.6. Decision Rule 28
3.7. Instrument Reliability 28
3.8 Instrument Validity 29
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4. I Data Presentation 30
4.2 Data Analysis 30
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary of Findings 35
5.2 Conclusion 35
5.3 Recommendations 35
REFERENCES 37
CHAPTER
ONE
INTRODUCTION
1.1 Background to the Study
Green Accounting helps in accurate assessment of costs
and benefits of environmental preservation measures of companies (Schaltegger,
2000). It provides a common framework for organizations to identify and account
for past, present and future environmental costs to support managerial
decision-making, control and public disclosure (KPMG & UNEP, 2006). The
severity of environmental problems as a global phenomenon has its adverse
impact on the quality of our life. Measures are being taken both at the
national and international level to reduce, prevent and mitigate its impact on
social, economic and political spheres (GRI, 2002; GR1, 2006). The emergence of corporate environmental
reporting (CER) in Nigeria has been an
important development, both for better environmental management and overall
corporate governance (Banerjee, 2002). Global awareness of stakeholders on
corporate environmental performance has already made traditional reporting
redundant. Corporate houses run into the risk of loss of faith of their
stakeholders, if in future, environmental performance information is not
included in their main stream reporting (Swift, 2001).
The need for green or
environmental accounting has become the concern and focus of nations and
responsible corporate managements and has increased their explicit assessment
of the social impact to its financial performance. (Okoye &
Ngwakwe 2004).
Instructively,
green (environmental) accounting involves the
identification, measurement and allocation of environmental costs, and the
integration of these costs into business and encompasses the way of
communicating such information to the companies’ stakeholders. In this sense,
it is a comprehensive approach to ensure good corporate governance that
includes transparency in its societal activities. In recent years, the adverse
environmental effect of economic development has become a matter of great
public concern all over the world.
Accountants, as custodian of economic development can no longer shut
their eyes to the effect of environmental issues on business management,
accounting, auditing and disclosure system. A careful assessment of the
benefits and costs of environmental damages is necessary to find the tolerance
limit of environmental degradation and the required level of development. It
may appear that greater attention to environmental matters may lead to an
increase in costs and hence lower profits. Environmental costs and obligations
are significantly growing as the world is becoming more environmentally
conscious. Public corporations are being held more responsible and accountable
to the society. Many people are willing to pay more for a product that is
environmentally friendly. It cannot be denied that environmental accounting and
reporting thereof is of paramount importance today. Environmental accounting
needs to work as a tool to measure the economic efficiency of environmental
conservation activities and the environmental efficiency of the business
activities of company as a whole.
According to EMA, it can generate information about the use of
resources with environmentally related impacts and affects the financial
position and performance of Organization.
More so, at least the last 20 years has matters relating
to an organization interaction with the society being so widely accepted as central,
even both crucial to the future wellbeing of both the business and those who are
affected by it. Whether for moral, economic, legal or pragmatic reasons, every organization
has to make an increasingly explicit assessment of its social impact and
to attempt to reposition itself as the terms of environmental contract between business
and society come under increasing scrutiny. By redefining success in terms of
environmental impact, environmental accounting can strengthen the business
case for investment in social ventures (Auka, 2006).
Green accounting is however defined as the
identification, compilation, estimation and analysis of environmental cost
information for better decision making within the firm. It can be
defined as "The generation, analysis and use of financial, nonfinancial information
in order to optimize corporate, environmental and economic performance., achieving
a sustainable business" (Bennett and James, 2008). A very important function
of environmental accounting is to bring environmental cost to the managers; therefore,
motivating them to identify ways to reduce and avoid economic costs related
to the environment and at the same time reduces the company's environmental impact
(USEPA 2005).
Green accounting comprises of different areas like
corporate social responsibility, sustainability reporting and triple
bottom line. There
may be disagreement on how societal and environmental output are valued but the effort of placing a value on them recognizes
their presence and their relevant importance
to economic performance and documenting the assumptions behind these calculation enable readers to assess the basis of
these valuation. In addition, it provides
a set of societal performance criteria that allow funders and investors to
assess the impact of investment in societal and environmental venture.
According to Davies & Okorite (2007) where the
environmental activities of organizations are fairly reported in the financial
statements, duly audited, attested to and published by the organization for all
to see, some of the problems would be minimized, if not eliminated. This research work will therefore
assesses how environmental accounting can help firms identify and
implement financially desirable environmental innovations so
as to improve the profitability of firms.
1.2 Statement of the Problem
The increasing concern about environmental
degradation and resources depletion (especially in the Niger Delta area) is a
source of worry. And also, many manufacturing companies in Nigeria are usually
faced with youth restiveness as a result of unemployment, and non-availability
of social amenities. This has led to series of vandalization of Oil pipelines
and other valuable companies’ properties. The above problem could be averted if
the manufacturing companies manage their social and environmental cost
efficiently and effectively. Thus, unserious attitudes of several
firms not taking environmental accounting into consideration makes
performance below expectation this is because social and
environmental accounting helps the firm to record all environmental cost incurred by the
business thereby finding a way of reducing the cost (environmental expenses) so
that the business can increase profit. Also, environmental
accounting helps firms to disclose to the outside world their ability to be
socially and environmentally friendly.
More so, a conventional approach of accounting has become
inadequate since conventional accounting practices have ignored
important environmental cost and activities impacting
consequences on the environment. Corporate negligence and avoidance of environmental
accounting have len gap of financial incompleteness and absence of fair
view of financial information reporting to users of financial statement,
environmental regulatory agencies and the general public (Enahoro, 2009). Also,
the limited awareness of the need for social and environmental accounting,
its reporting principles and methodology has become an important issue to be
addressed.
If vital environmental issues and activities are not
disclosed, financial statement chariot be said to reveal state of a
"true and fair view of affairs". Also, the challenge of cost and
valuation for damage, depletion and degradation of the environment externalities
is a critical problem which continues to demand attention. According
to Salome & Gallucclo (2001) corporations are recognizing the benefits of
reducing environmental impacts on their long-term corporate profitability. Both
accounting and environmental areas are concerned about how to identify,
measure, report and manage environmental impacts on companies
financial situation requires improvement in external reporting
of environmental data.
1.3 Objectives
of the study
The main objective of this research
work is to investigate the effect of green accounting on
the performance of manufacturing firms in Nigeria. The specific objectives of
the study are to:
1.
To determine the effect of
disclosure on waste management (WM) on return on equity.
2.
To examine the impact of
disclosure on employee health and safety (EHS) on return on equity.
1.4 Research Questions
The research
questions to guide the study are as follows:
1.
To what extent does
disclosure on waste management (WM) affect return on equity?
2.
Does disclosure on employee
health and safety (EHS) affect return on equity?
1.5 Research Hypotheses
The following
hypotheses were formulated for the study:
Ho1: Disclosure
on waste management (WM) has no significant effect on return on equity.
Ho2: Disclosure on employee health and safety (EHS) has no significant
effect on return on equity.
1.6 Significance of the Study
The significance and justification for this study among
others are firstly, to engage corporate organizations to adequately
provide for societal issues such as environmental protection, fair
business practice etc in their internal policies on investment and projects which
impacts on the environment. Furthermore, it will also facilitate environmental
cost reporting responsiveness and disclosure to investors and internal regulatory
bodies.
Furthermore, it will assist in efficient
cost valuation of environmental
remediation and compensation to affected communities.
This study will moreover assure
commitment of the corporate organizations in Nigeria to
international agreements on environmental regulations which will in turn assure
sustainable development of the environment and the ecosystem in Nigeria. Besides, It will further
investigate companies that report environmental cost either financially, descriptively oř both and its impact on their
profitability. It will further enhance research in green accounting. It is hoped that this study will evaluate the
extent of profitability of a firm with regards
to its environmental accounting.
Ultimately, green accounting is imperative in corporate
organizations in Nigeria and elsewhere as it has become an issue of concern at
global level.
1.7 Scope of the Study
The research work studies the relevance
of the the effect of green accounting with emphases on the
performance of manufacturing firms. This research study
will be restricted to Nigeria Breweries located in Enugu State. The researcher
however, believes that the findings will be applicable to other manufacturing
industries.
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