ENVIRONMENTAL AND CORPORATE SOCIAL ACCOUNTING: ANOTHER DIMENSION FOR ACCOUNTING INFORMATION


Content

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.

Order Complete Project