A CRITICAL APPRAISAL OF ENVIRONMENTAL ACCOUNTING PRACTICES AND REGULATIONS IN NIGERIA ECONOMY (A CASE STUDY OF NIGER MILL CALABAR)
1.1 BACKGROUND OF THE STUDY
The need for environmental accounting has become the concern and focus of nations and responsible corporate management. It became one of the foremost issues on the agenda of nations and businesses earlier in the 1990’s and the reasons for this were varied emanating from both within and outside of the firm and particularly at the global level (Okoye and Ngwakwe, 2004). A lot of government enactments, laws and regulations on environmental protection have been made in several nations of the world and Nigeria is slowly responding.
In the light of the awakening to environment protection, various laws and regulations were enacted and one of such is the Environmental Impact Assessment Act, 1992. These require corporate management to consider the environmental implications of all internal decisions of their management. Also all organizations monitored by environmental policy agencies in Nigeria are expected to demonstrate much consideration in decision making.
It is rightly said that the World’s two greatest challenges are poverty and the systematic destruction of the environment. These two challenges have the capacity to destroy the entire world. It is considered that the world’s poverty level, particularly in the less developed nations is largely due to the inability to management environment which is fast degrading. Whereas industrial emission and effluence constitute great threat to the atmosphere, the native farmers are no less a threat to the effect of the ozone layer, the seas, oceans and land. Local farmers also systematically destroy the biodiversity through continued crude method of farming, falling of trees and bush burning and fishing methods without replacement of the natural resources.
Environmental issues for purpose of economic and cost accounting have also been controversial even though the topic has been identified for discussion for the past years. This is so because common criteria for value measurement of non-marketed, non-monetized resources and impact on externalities have not been agreed.
In the past, corporate organizations have ranked business considerations based on profitability. Companies have also recognized all indirect expenditure as overheads without paying attention to the environment. Conventional accounting practice has not recognized environmental accounting for materials, water, energy and other natural resource usage. Also it have not provided for such practice and particularly for accounting for impact on externalities. According to B. Field and M. Field (2002:xv) little was recognized of the environmental depletion and degradation to the environmental until a few well meaning people in the developed countries realized that it was no good having great corporate profits and material well-being if they come at the cost of large scale of ecosystem by which we are nourished. It became clear that degradation, pollution and accelerated destruction of the ecosystem and the depletion of non-renewable environment biodiversity would soon become very dangerous to human existence.
In the light of the background of increasing environmental attention, and the fact that the manufacturing sectors have profound production impact on the environment, the study has explored an assessment of environmental accounting in that sector in Calabar, Cross River State.
1.2 STATEMENT OF THE PROBLEM
Cost accounting constitutes the central tool for management decisions such as product pricing and is not regulated by law. The primary purpose of cost accounting is to determine the production costs for different products in order to set the selling price of the products. The main stakeholders in cost accounting are various managers, such as executives and site, product and production managers. The fact that environmental costs are not fully identified in conventional management accounting often leads to distorted evaluations of options for improving production. The full benefits to the enterprise of environment protection projects, aiming to prevent emissions and waste at their source, improve the utilization of raw and auxiliary materials, and use less harmful operating materials, are not recognized and therefore may not be implemented. Executives and managers are often not aware that that the costs of producing waste and emissions are often greater than the cost of disposing of them.
The study seeks to find out answers to the following problems; does a conventional approach of cost accounting adequately cover important environmental costs? What are the effects of corporate neglect and avoidance of environmental costing in financial reporting? Does a financial statement that lacks vital environmental issues and activities reveal a ‘true and fair view” of the affairs of a company? Is there any legislature that enforces companies to report that environmental activities? What are the bases of measuring environmental cost? These questions constitute the problems that this study has to address.
1.3 OBJECTIVES OF THE STUDY
The investigation of best practice of environmental accounting in selected manufacturing companies operating in Calabar, Cross River State is the broad objective of the study. The specific objectives of the study include the following:
- To assess the independence of tracking of all cost impacting on the environment.
- To investigate the level of environmental cost awareness in manufacturing companies
- To examine measurement procedure of environmental cost assessment in manufacturing companies.
- To investigate internal barriers affecting the collection of environmental cost information
- To examine the techniques used to evaluate the feasibility of environmental projects.
1.4 RESEARCH QUESTIONS
The following questions are addressed in this study:
- To what extent are environmental operating expenses tracked independently of other operating expenses.
- What is the level of awareness of manufacturing companies in environmental cost.
- What are the measurement procedures of environment cost assessment adopted by manufacturing companies.
- What internal barriers affect the ability of the companies to collect environmental cost information?
- What are the techniques used to evaluate the feasibility of environmental projects.
1.5 SCOPE OF THE STUDY
The study is an investigation on the development of environmental accounting and disclosure practices in manufacturing Companies in Calabar, Cross River State with emphasis on the Niger Mill Nigeria Plc.
1.6 RESEARCH HYPOTHESES
In this study, the following null hypotheses are postulated to guide the study;