EFFECTS OF ENVIRONMENTAL ACCOUNTING AND REPORTING ON CORPORATE PERFORMANCE (A STUDY OF SELECTED OIL AND GAS COMPANIES IN NIGERIA)

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ABSTRACT

This study examines the Effect of environmental accounting and reporting on corporate performance. The study adopted a cross section descriptive survey research design   and covers a period of ten years.   Data collected were analysed using multiple regression analysis. Finding of the study shows that environmental cost accounting is vital for effective performance of a firm.it was noted in the findings that environmental accounting disclosure enable a firm to fully understand the performance state of the organization, hence, making it possible for the firm to know exactly areas to adjust the activities in order to enhance the performance of the firm. The study recommends that Any firm that aim at continuous survival, profit making and effective performance should always carryout environmental cost analysis in order to know their performance level and results obtained from Environmental disclosure of a firm should never be neglected, since it is the bedrock for knowing much more about a firm’s performance. It was also recommended that managers of firm should always implement information’s obtained from environmental cost analysis in order to know areas to improve or adjust the performance of their firm.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The need for Environmental Accounting has become the concern and focus of nation’sand responsible corporate managements. It became one of the foremost issues on the agenda ofnations and businesses earlier in the 1990s and the reasons for these were varied emanating fromboth within and outside of the firm and particularly at the global level (Okoye and Ngwakwe:2004:220-235). A lot of government enactments, laws and regulations on environmental protection have been made in several nations of the world including Nigeria.In the light of the awakening to environment protection, various laws and regulations such as the Environmental Impact Assessment Act, 1992 and the Department of Petroleum Resources (DPR) Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN: 2002) were enacted. These require corporate managements to consider the environmental implications of all internal decisions of their managements. Also, all organizations monitored by environmental policy agencies in Nigeria are expected to demonstrate much consideration in decision making. Environmentalists agree that it could be more cost efficient and beneficial for companies to acquire pollution prevention or clean technology than those of pollution clean-up. It is also observed that in environmental regulations, there is a shift from the ‘command and control’ approach to market-driven forms in which pollution prevention alternatives are replacing pollution cleaning approach. It follows therefore, that determining the appropriate pollution prevention approach may lead to additional decisions to be taken by management. Such decisions may include selecting capital expenditures, and in the opinion of Shield, Beloff and Heller (1996:5), expenditures such ‘as markets for emissions’ allowances development, may require companies to determine whether it is more cost beneficial to buy or sell these allowances, giving the cost of avoiding the covered emissions.

Environmental issues for purpose of economic and cost accounting have also been controversial even though the topic has been identified for discussions for the past four decades. This is because common criteria for value measurement of non-marketed, non-monetized resources and impact on externalities have not been agreed.

Previously, corporate organizations have ranked business considerations based on profitability. Companies have also recognized all indirect expenditures 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.

Besides, conventional accounting has not provided for such practice and particularly for accounting for impact on externalities. According to B. Field and M. Field (2002), little was recognized of the environmental depletion and degradation to the environment 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 the 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.  Field andField,(2002) conclude that, ‘what once were localized environmental impacts, easily rectified, have now become widespread effects that may very well turn out to be irreversible.’