costs into daily business activities and then communicating this information to the ...... available resources to enhance stakeholders' value (Horngren, Datar ...
ENVIRONMENTAL ACCOUNTING AND STAKEHOLDERS’ VALUE OF LISTED MANUFACTURING COMPANIES IN NIGERIA
ODEWOLE, OLABISI BOLARINWA
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ENVIRONMENTAL ACCOUNTING AND STAKEHOLDERS’ VALUE OF LISTED MANUFACTURING COMPANIES IN NIGERIA
ODEWOLE, OLABISI BOLARINWA PG/14/0032 B.Sc, M.Sc (Unilag)
BEING A THESIS SUBMITTED IN THE DEPARTMENT OF ACCOUNTING SCHOOL OF MANAGEMENT SCIENCES IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF DOCTOR OF PHILOSOPHY BABCOCK UNIVERSITY ILISHAN REMO OGUN STATE NIGERIA
2018
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CERTIFICATION This Thesis titled, ENVIRONMENTAL ACCOUNTING AND STAKEHOLDER
S’ VALUE OF LISTED MANUFACTURING COMPANIES IN NIGERIA prepared and submitted by ODEWOLE, OLABISI BOLARINWA in partial fulfilment of the requirements for the degree of DOCTOR OF PHILOSOPHY (Accounting) is hereby accepted
Prof. R. I. Akintoye Supervisor
Prof. R. O. Salawu Co- supervisor
Dr. F. F. Adegbie Co- supervisor
Accepted as partial fulfilment of the requirements for the degree of DOCTOR OF PHILOSOPHY (Accounting)
Prof. Yacob Haliso Provost, College of Postgraduate Studies
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DEDICATION This Thesis is dedicated to the Almighty God
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ACKNOWLEDGEMENTS My gratitude goes to the Almighty God for his guidance and protection over my life up till this moment and for the mercies he bestowed upon me in the course of my pursuit of this degree. My deepest gratitude goes to my supervisors, Professor Rufus Ishola Akintoye, the Head of Department of Accounting who guided me through this work despite his busy schedule, Professor R. O. Salawu for his understanding and guidance and Dr. Folajimi Adegbie the PGCoordinator of Accounting department despite his busy schedule he found time to supervise this work. I thank Prof. Enyi P. Enyi, the Dean of School of Management Sciences for his guidance throughout the period of this programme. I appreciate also Prof. Sunday Ajao Owolabi, the Deputy Vice Chancellor (Management Sciences) Babcock University for his mentorship and leadership. I appreciate them all for their wealth of experience, sincere advice, unlimited support and encouragement in supervising this work. Their input improved this study greatly. I appreciate all my lecturers; Prof (Mrs.) Teju Somorin, Dr. A. Onakoya, Dr. S. O. Olaoye, Dr. S. O. Dada, Dr. A. N. Nwaobia who taught me during the course of this program. To the members of the various monitoring panel that were put together by the department in the course of this program. I am sincerely grateful to Prof. T. O. Asaolu, Prof. P. O. Oladele, Prof. U. Uwuigbe, Dr. G. Yinusa, Dr. B. Lawal, Dr. O. B. Aworinde, Dr. S. O. Kajola, and Dr. O. Jaiyeoba whose corrective critiques have continuously help to improve the knowledge in accounting. I thank Prof. G. K. Afolabi, Prof. O. Oduyoye in the Department of Business Administration. My appreciation goes to the Provost College of Postgraduate Studies, Prof. Yacob. Haliso, the Deputy Provost, Prof. M. Akpa, the Secretary College of Postgraduate, Dr. (Mrs). T. J. Owolabi whose words of knowledge at the chapel seminars have always being to guide the successful completion of the program. I thank Dr. (Mrs.) M. Alegbeleye, Babcock University Editor, Dr. Isaiah, Abolarin the University Methodologist for their selfless services and corrective critique. The staff of Postgraduate College, Messrs. A. Oyedijo, O. A. Soyege, E. Onwulata, Dr. (Mrs.) K. C. Ibe-Moses, Mrs. O. Barretto, F. Adeleye, and O. Olaleye, staff of Accounting department, M. Ifayemi, A. Igbaroola, T. Ajibade, secretaries of Accounting department, Miss A. Soneye, Mrs. O. Ogunjimi and Mrs. B. G. Kuranga. Photocopy operator at BUSA, F. Lawal. I thank them all.
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I would like to express my thanks to all the respondents to my questionnaire in general, and to individuals who agreed to be interviewed in particular. Mr. O. Ayeola, President of Lagos State Cooperative Federation, O. S. Akinwumi, Mrs. M. Olaoye for their assistance in connecting me with officers of selected organisations. I thank the executive officers of the Community Development Association, (CDA) around the various organisations. My appreciation goes to the Provost, College of Medicine, University of Lagos, Prof. F. E. A. Lesi, Mr. Lekan. Lawal, the Bursar University of Lagos, Akoka, the Acting Director of Finance, Mr. S. A. Akinade, the College Secretary, Mr. O. Azeez Esq, The Dean Basic Medical Sciences, Prof. (Mrs.) O. A. Magbagbeola, Prof. O.A.T. Ebuehi, and the H.O.D Biochemistry Department,
Prof. A.
Osuntoki. I thank my colleagues in the office Messrs. A. Adegoke, C. Odiakaose, B. Bamidele, K. Oladeinde, F. Alagbada, F. Izunobi, B. Olubumuyi, E. Okoh, O. Akintunde, O. Osifolu, O. Olarinmoye, O. Onifade, A. Doherty, R. Nwaiwu my senior colleagues J. O. Akinyele, A. Solabi, F. Akinrodoye, A. Sogeke, S. O. Ojomu, S. O. Adenekan, O. S. Apata, A. A. Adeniyi, Dr. (Mrs) N. Imaga, O. Olusola, Dr. O. H. Olasore and G. O. Oyedapo (Late). I appreciate my husband, Mr. Adedayo Odewole for the full support and encouragement throughout the duration of this programme. I am grateful to my children Ayobami, Omobolade, Oluwadarasimi and Oluwasemilore Odewole for the love and understanding they showed me during the course of this study. I owe my parent Mr. & Mrs. J.O. Akinwumi the warmest gratitude for their love, prayers and unlimited support till now, my sister and brothers Mrs. Abiodun Afolayan, Mr. Olumide Akinwumi and Mr. Adebayo Akinwumi for their encouragement and support, my Uncle Dr. R. A. Mustapha, for his continuous encouragement. I thank them all. My warm regards to my colleagues in the Department and College who in one way or the other contributed to this study. My PhD colleagues at Babcock University Messrs. A. T. Oyebamiji (Class Governor), G. Oyedokun, (Assistant Class Governor) A.R.A. Afolabi, S. Obida, T. Aguguom, P. Ajagun, T.T. Siyanbola, A. Ajibade, O.O. Fregene, R. Benjamin, I. Adekunle, M. Alatise, M. M. Hassan, B. Bolukale, A.M.A. Tonade, A. Adegbite, G. Ogundajo, J. Oguniyi, J. Ogunwede, O. Oyebolu, O. Olotu, A. J. Akinwunmi, A. Awotumilusi, F. Akande, A. Adekola, J.A. Akindejoye, J. Oguntodu, T. A. Hassan, O.R. Olusanjo, F. Oladejo, O. Ojutawo, I thank them for the support and friendship. 6
ABSTRACT Over the years, decisions of Nigerian corporate stakeholders have been based on the financial reporting system of manufacturing companies. This has not addressed the value maximisation objective of stakeholders’ proxied on the relevance of accounting numbers. However, it is observed that the conventional financial reporting system has not adequately satisfied the information need of different stakeholders as some important non-financial environmental issues were usually not reflected, thereby leading to sub-optimality in decision making. The study evaluated the effect of environmental accounting variables on stakeholders’ value of listed manufacturing companies in Nigeria. This study adopted survey research design. Population of the study comprised 226,996 stakeholders of the 40 companies listed on the Nigerian Stock Exchange (NSE) as at 31 st December, 2017, chosen purposively using the event criterion of 10 years existence. A sample size of 400 was determined using Taro Yamane formula and the sample was selected using stratified sampling technique. A validated questionnaire with Cronbach’s Alpha reliability values ranging from 0.700 to 0.723 was used to collect data with a response rate of 81.5%. Descriptive and inferential (multiple regression) statistics were used for data analysis. The findings revealed that environmental accounting variables had a combined significant effect on stakeholders’ value (F(6, 319) = 89.804; Adj. R2 = 0.621, p 0.05). The controlling influence of corporate performance revealed a significant positive effect (β = 0.087, t(319) = 5.061, p < 0.05). The study concluded that environmental accounting information improved the value of stakeholders’ decisions of listed manufacturing companies in Nigeria. The study recommended that manufacturing companies should include environmental accounts as part of the conventional financial reporting system that would detail their environmental activities to reduce stakeholders’ agitation and increase their value. Also, policymakers should put in place stringent environmental monitoring mechanisms to ensure compliance. Keywords. Environment, Environmental accounting, Stakeholder, Value, Stakeholders’ value Word Count. 385
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TABLE OF CONTENTS Content
Page
Title Page
i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
vi
Table of Contents
vii
List of Tables
xiii
List of Figures
xvi
Abbreviations
xvii
Appendices
xviii
CHAPTER ONE: INTRODUCTION 1.1
Background to the Study
1
Statement of the Problem
7
1.3
Objective of the Study
10
1.4
Research Questions
10
Hypotheses
11
1.6
Justification for the Study
11
1.7
Significance of the Study
13
1.8
Scope of the Study
14
1.9
Operationalisation of Variables
14
Operational Definition of Terms
16
1.2
1.5
1.10.
CHAPTER TWO: REVIEW OF LITERATURE 2.1.
Conceptual Review
17
2.1.1.
Definition of Stakeholder
17
2.1.2.
Stakeholder’s Value
22
2.1.3.
Measuring Stakeholders’ value
25 8
2.1.3.1.
Management and Employee Value
27
2.1.3.2.
Shareholder Value
28
Content
Page
2.1.3.3.
Local Residents’ Value
30
2.1.3.4.
Government and Regulatory Agencies’ Value
31
2.1.4.
Environmental Accounting Concept
32
2.1.4.1.
Environmental Justice
32
2.1.4.2.
Environmental Conservation
34
2.1.4.3.
Environmental Preservation
35
2.1.4.4.
Environmental Restoration Strategy
36
2.1.4.5.
Environmental Sustainability
37
2.1.4.6.
Corporate Performance
38
2.1.5.
Environmental Accounting
39
2.1.6.
Accounting and its Relationship with the Environment
40
2.1.7.
Scope and Objectives of Environmental Accounting
41
2.1.8.
Responsibility and Accountability of Organisation towards the Environment
2.1.9.
43
Environmental Accounting and it Relationship with Conventional Accounting
44
2.1.10.
Corporate Environmental Reporting
45
2.1.11.
Environmental Costs
46
2.1.12.
Environmental Accounts (Environmental Profit or Loss Account)
46
2.1.13.
Environmental Activities in Nigeria. The Experience
47
2.1.14.
Environmental Challenges
48
2.1.14.1. Deforestation
49
2.1.14.2. Drought and Desertification
49
2.1.14.3. Soil and Coastal Erosion
49
2.1.14.4. Pollution
49
2.1.14.5. Water Hyacinth Invasion
50
2.1.14.6. Land Degradation
50
2.1.14.7. Health Hazard
50 9
2.1.15.
Environmental Regulations and Standards (Nigeria Scenario)
50
2.1.16.
Accounting Standards
52
Content
Page
2.1.17.
Environmental Taxes
55
2.1.18.
Appraisal of Environmental Restoration Strategy in Nigeria
58
2.2.
Theoretical Review
59
2.2.1.
Legitimacy Theory
59
2.2.2.
Voluntary Disclosure Theory
61
2.2.3.
Signaling Theory
62
2.2.4.
Stakeholder theory
62
2.2.5.
Accountability Theory
64
2.2.6.
Systems Theory
66
2.2.7.
Summary of the Reviewed Theories
68
2.2.8.
Theoretical Framework
70
2.3.
Empirical Review
71
2.3.1.
Environmental Justice and Stakeholder value
71
2.3.2.
Environmental Conservation and Stakeholder value
73
2.3.3.
Environmental Preservation and Stakeholder value
74
2.3.4.
Environmental Restoration Strategy and Stakeholder value
75
2.3.5.
Environmental Sustainability and Stakeholder value
77
2.3.6.
Environmental Accounting and Stakeholder value
78
2.3.7.
Environmental Accounting, Corporate Performance and Stakeholder value
81
2.4.
Gap in Literature
90
2.5.
Researcher’s Conceptual Model
93
CHAPTER THREE: METHODOLOGY 3.1.
Research Design
96
3.2.
Population
96
3.3.
Sample size and sampling Technique
97
3.4.
Method of Data Collection
99
10
3.4.1.
Instrument for Data Collection
99
Content
Page
3.5.
Validity of Research Instrument
100
3.6.
Reliability of Research Instrument
100
3.7.
Method of Data analysis
101
3.8.
Functional Relationship
102
3.9.
Model Specification
102
3.10.
Model Evaluation
106
3.11.
A Priori Expectation
106
3.12.
Ethical Consideration
107
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION OF FINDINGS 4.1.
Response Rate
108
4.2.
Characteristics of the Sample
109
4.2.1.
Age of Respondents
109
4.2.2.
Educational Qualification
110
4.2.3.
Department of Respondents
111
4.2.4.
Relationship with the Organisation
112
4.2.5.
Length of Relationship
113
4.3.
Descriptive Analysis
114
4.3.1.
Environmental Justice
114
4.3.2
Environmental Conservation
116
4.3.3.
Environmental Preservation
118
4.3.4.
Environmental Restoration Strategy
120
4.3.5.
Environmental Sustainability
122
4.3.6.
Corporate Performance
124
4.3.7.
Management and Employees’ Value
125
4.3.8
Shareholders’ Value
127
4.3.9
Local Residents’ Value
129
4.3.10.
Government/Regulatory Agencies’ Value
131
11
4.4.
Descriptive Statistic of the Variables in the Study
132
4.5.
Multiple Regression
133
Content
Page
4.5.1.
Test of Hypothesis
133
4.5.2.
Summary of Hypotheses Results
142
4.6.
Regression Model Analysis
144
4.7.
Overall Regression Analysis
152
4.7.1.
Summary of the Model Results
154
4.8.
Discussion of Findings
155
4.8.1.
Main Objective: Effect of Environmental Justice on Stakeholder value
155
4.8.2.
Objective 1: Effect of Environmental Conservation on Stakeholder value
156
4.8.3.
Objective 2: Effect of Environmental Preservation on Stakeholder value
158
4.8.4.
Objective 3: Effect of Environmental Restoration Strategy on Stakeholder value
160
4.8.5
Objective 4: Effect of Environmental Sustainability on Stakeholder value
161
4.8.6.
Objective 5: Effect of Environmental Accounting on Stakeholder value
165
4.9.
Implications of the Study
166
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 5.1.
Summary
169
5.1.1
Summary of Findings
170
5.2.
Conclusion
172
5.3.
Recommendations
173
5.4.
Contribution to Knowledge
174
5.5.
Limitation of the Study
175
5.6.
Suggestion for Further Studies
176
References
177
Appendices
210
12
LIST OF TABLES Table
Page
2.1.
Table of Empirical Review
84
3.1.
Sample Size Determination
98
3.2.
Reliability Statistics for Environmental Accounting
101
3.3.
Reliability Statistics for Stakeholder value
101
4.1.
Sample Size and Percentage of Response Rate
108
4.2.
Age of Respondents
109
4.3.
Educational Qualification
110
4.4.
Department of Respondents
111
4.5.
Relationship with the organisation
112
4.6.
Length of Relationship with the organisation
113
4.7.
Responses to questions on environmental justice
114
4.8.
Responses to questions on environmental conservation
116
4.9.
Responses to questions on environmental preservation
118
4.10.
Responses to questions on environmental restoration strategy
120
4.11.
Responses to questions on environmental sustainability
122
4.12.
Responses to questions on corporate performance
124
4.13.
Responses to questions on management & employees’ value
125
4.14.
Responses to questions on shareholders’ value
127
4.15.
Responses to questions on local Residents’ value
129
4.16.
Responses to government/regulatory agencies’ value
131
4.17.
Descriptive Statistic of the Variables in the Study
132
4.18.
Regression Analysis of Environmental Justice and Stakeholder value
4.19
133
Regression Analysis of Environmental Conservation and Stakeholder value
4.20.
135
Regression Analysis of Environmental Preservation and Stakeholder value
137 13
4.21.
Regression Analysis of Environmental Restoration Strategy and Stakeholder value
139
Table 4.22.
Page Regression Analysis of Environmental Sustainability and Stakeholder’ Value
141
4.23.
Multiple Regression Result
143
4.24.
Regression Analysis for Environmental Accounting and Management & Employees’ Value
4.25.
144
Regression Analysis for Environmental Accounting and Shareholders’ Value
4.26.
146
Regression Analysis for Environmental Accounting and Local Residents’ Value
4.27. 4.28.
148
Regression Analysis for Environmental Accounting and Government /Regulatory Agencies’ Value
149
Regression Analysis for Environmental Accounting and Stakeholder value
151
14
LIST OF FIGURES Figure
Page
2.1.
Stakeholder and Organisations. The Relationship
18
2.2.
Stakeholder Classification and Identification
20
2.3.
Modified Balance Stakeholder Performance Report
26
2.4.
Researchers’ Theoretical Framework. Systems Theory Cycle
69
2.5.
Researchers’ Conceptual Model. Environmental Accounting and Stakeholder value
94
4.1.
Age of respondents
109
4.3.
Educational Qualification
110
4.4.
Department of Respondents
111
4.4.
Relationship with the organisation
112
4.5.
Length of relationship with the organisation
113
15
ABBREVIATIONS ANOVA
Analysis of Variance
CO2
Carbon Dioxide
CDA
Community Development Association
CP
Corporate Performance
CSR
Corporate Social Responsibility
DPR
Department of Petroleum Resources
EAI
Environmental Accounting Information
EC
Environmental Conservation
EGASPIN
Environmental Guidelines and Standards for Petroleum Industries in Nigeria
EIA
Environmental Impact Assessment
EJ
Environmental Justice
EP
Environmental Preservation
EPA
Environmental Protection Agency
ER
Environmental Restoration Strategy
ES
Environmental Sustainability
ESI
Environmental Sensitive Industry
EVA
Environmental Accounting
FEPA
Federal Environmental Protection Agency
GHG
Greenhouse Gas
GRI
Global Reporting Index
GRVA
Government/Regulatory Agencies’ Value
IAS
International Accounting Standard
IASB
International Accounting Standard Board 16
IEA
International Energy Agency
ABBREVIATIONS IFAC
International Federation of Accountants
IFRS
International Financial Reporting Standards
IMF
International Monetary Fund
IYC
Ijaw Youth Council
LRV
Local Residents’ Value
MEV
Management and Employees’ Value
NEEDS
Nikkei Economic Electronic Databank System
NESRA
Nigerian Environmental Standards and Regulations Enforcement Agency
NGO
Non-Governmental Organisation
NOSDRA
National Oil Spill Detection and Response Agency
NPE
National Policy on Environment
NSE
Nigerian Stock Exchange
OECD
Organisation for Economic Co-operation and Development
OLS
Ordinary Least Square
SCM
Standard Cubic Metre
SEC
Securities and Exchange Commission
SHV
Shareholders’ Value
SPSS
Statistical Package for Social Sciences
SV
Stakeholder’s Value
UN
United Nations
UNEP
United Nations Environmental Programme
USA
United States of America
USD
United States Dollar 17
VIF
Variance Inflator Factor
APPENDICES Appendix
Page
I
Re. Academic Research Project
177
II
Questionnaire
210
III
Study Population
215
IV
Selected Sample Size
216
18
CHAPTER ONE INTRODUCTION 1.1.
Background to the Study The environmental condition experienced across the globe has led to increased stakeholders' interest in organisations' operations especially in the demand that companies address the impact of their activities on the environment and provide stakeholders with information that would help their decision- making. Global warming and environmental management have taken the central stage in global debates on issues concerning the environment particularly from pressures resulting from ecological degradation, as it has been identified that industrialization which led to economic growth and development does not come without its environmental challenges: global warming (greenhouse effect), ozone depletion, acid rain, deforestation and pollution (land, water and noise), radioactive and chemical wastes dumped into the seas and oceans and health challenges (Seetharaman, Mohammed & Saravanan, 2007). Studies have pointed out that establishing industries usually result in a diversified economy that encourages achievement of stable and sustainable societies (Boakye, 2010; Endashaw, 2009; Ofori-Cudjoe, 2009; Shraddha & Nehal, 2014), industrialization is also seen as indispensable tool of structural economic developments, which is associated with more productivity, growth and per capital incomes (O'Brien, 2001; Szirmai, 2012; Timmer & Szirmai, 2000), however, Akinbami and Adegbulugbe (1998) pointed out that the consumption of naturally endowed resources as strategies for development is not achievable without experiencing its negative consequence that is environmental pollution. According to the report on the level of carbon dioxide emission rate put the global CO2 emission rate at 407.35ppm as at December 2017, the daily statistic report made available by the CO2- Earth (2017) showed that fossil fuel emission from human activities accounted for 91% of the total CO2 emissions while the remaining 9% was due to changes in land use, 41% of the fossil fuels emitted in 2015 came from coal, 34% from oil, 19% from gas, 5.6% from cement and the remaining 0.7% from flaring. The report 19
made it known that not all these emissions are contained in the atmosphere as plants take up 31%, oceans take up 26% and the atmosphere takes up 44%. The United States Environmental Protection Agency listed the global emissions by economic sector in 2016, it reported that the global emission from fossil fuels have been constant from 2014 to 2016 that does not mean that it decreased greatly because the highest emission generating countries like China and the U.S experienced minimal reduction while India experienced increase and this was attached to the growth in the use of renewable energy and the reduction in the use of coal from the statistics on producers of energy related carbon dioxide China was set at the highest with 28.21% of the total emission, followed by the United States with 15.99%, India is the third with 6.24%, Russia with 4.53%, Japan with 3.67%, Germany 2.23%, Korea 1.75%, Iran 1.72%, Canada 1.71% and Saudi Arabia 1.56% (Knoema, 2017). Africa generated about 929.69 million metric tons of CO 2 in 2010 of which electricity and heat production generated 423.37, transport 219.72, manufacturing industries and construction 140.89. Nigeria in particular contributed highly to this as the 43rd emission generating country in the world after Belgium and Oman and 4th in Africa with countries like South Africa, Egypt and Algeria occupying the first, second and third positions respectively. Nigeria CO2 emission per capital stood at 0.44metric tons in 2016 which was a 2% reduction from what was experienced in 2015 (Knoema, 2017) with the manufacturing sector playing a major role to this rate, efforts put into place to control this have not been easy particularly, with the type of disclosure practices adopted by organisations across the globe which could have been a quick measure to controlling environmental condition experienced in recent times. In Nigeria currently, there is said to be no definite accounting standard that has been put in place to monitor the uniformity of environmental information reporting (Bassey, Effiok, & Eton, 2013; Musa, Peter & Bukar, 2014). Most companies are comfortable with the present system of reporting as environmental information is disclosed at their discretion which made them misrepresent environmental accounting information for corporate social responsibility information (Ayoola, 2017; Musa et al., 2014). It is therefore critically important to find solace in action that would restore environmental 20
stability since the stakeholders: employees, shareholders, researchers, government, regulatory agencies, local and international policymakers, academia, investors, NGOs, local community residents, environmentalists and the media pointed at the activities of organisations to be the cause of global environmental problems (Baker & Schaltegger, 2015; Buhr & Freedman, 1996; Callen & Thomas, 2000; Darabaris, 2008; Owolabi, 2008; Robbins, 2001). Stakeholders are constantly demanding for more relevant environmental information from organisations having impact on the environment as the realisation that all economic issues directly or indirectly associated with the environment increases (Adekanmi, Adedoyin & Adewole, 2015; Onyali, Okafor & Egolum, 2014; Uwuigbe & Jimoh, 2012). According to the study of Salvioni & Bosetti (2014) the last quarter of the twentieth century, has made organisations identify the value of interacting with all relevant stakeholders since environmental degradation has highly damaged the ecosystem generally. Accounting has a major role to play in correcting this situation particularly the role it had to play in detailing the environmental responsibilities of every economic segment, as a result, accounting added to its ‘cap’ the activity of measuring and examining possible and visible environmental impacts of organisations’ activities (Asuquo, 2012). Environmental accounting according to Stanko, Brogan, Alexander and Chay (2006) is defined as identifying, measuring, allocating and subsequent integrating environmental costs into daily business activities and then communicating this information to the organisation stakeholders. According to the Ministry of Environment, Japan (2002; 2005) environmental accounting is directed at accomplishing sustainable development, ensuring the continuity of an advantageous relationship with the local community and following up on effective and efficient environmental conservation processes. The guideline stated further that the identified accounting procedures permit an organisation to detect the cost accruable from environmental conservation in the normal business activities, determine benefits resulting from such activities, make provision for the best available means of measuring them quantitatively in both monetary and physical terms and encourage the communication of results to the stakeholders (researchers' emphasis).
21
The stakeholders are interested in obtaining environmental justice, by knowing that organisations are highly committed to environmental conservation, environmental preservation,
environmental
restoration
and
environmental
sustainability
since
environmental issues such as spillage, pollution and greenhouse gas emissions have destroyed the ecosystem and have continuously led many social and economic agents to believe that business operations are the cause of this situation. As a result of this, stakeholders
(management,
employees,
shareholders,
community
residents,
government/regulatory agencies) are requesting that these companies be held accountable for the damages their business activities have done to the environment. Stakeholders are requesting for an environmental reporting system that is of standard, with the ability to connect the environment and financial performance of organisations and by so doing support quality decision making of stakeholders such as the directors, shareholders, management, employees, community residents, government/regulatory agencies, financial analysts among others (Ranagnathan & Ditz, 1996). Aside the fact that it assists in proffering solutions to the rising environmental and management information needs, it also encourage good management in financial and economic terms when it comes to environmental issues, move improvement, performance as well as assist in visualising the organisation as having moral right to render account of its activities to its stakeholders (Ahmad, Salah & Lutz, 1989). Studies made it known that organisations' objectives can be met when stakeholders are included in the sustainable development process (Blackburn, 2007; Carroll & Buchholtz, 2014; Eweje & Perry, 2011). Corporate environmental disclosure, however, dated back to 1960s, when organisations took up the duty of accounting for their impact on the environment especially to the shareholders, the years between 1971 and 1980, acknowledged the commencement of environmental accounting while from 1981 to 1990, interest grew more for environmental accounting; literature started paying more attention to environmental accounting analytical approach to issues and researchers began the debate on the relevant information for disclosure (Roberts, 1992). The first country to prepare environmental account was Norway, with the purpose of correcting the anomalies experienced as a result of the sensitivity of their economy to the environment, a tracking device in the 22
form of environmental accounts was put in place to see to this (Meadows, Meadows, Randers, & Behrens, 1972). The Netherlands was the second and their interest was as a result of the works of Roefie Hueting, which led to the development of national income accounts that is National Accounts Matrix Environmental Accounting (NAMEA) by including physical data on pollutant emission. Interest in accounting for the environment moved to its maturation level in the nineties, managers and accountants became more interested in it and it became a part of organisational rules and policies (Deegan, 2002; Gray, 2001; Mathews, 1997, 2000). Despite this, including social issues or employee related issues in the annual report was not a good idea at that time (Adams, 2004; Eugénio, Lourenco & Morais, 2010). Today, demand is constantly made that organisations fit environmental accounting into its' day to day activities, since it cannot be handled independently of the conventional accounting but to serve the role of integrating financial effects of environmental matters in the present system of accounting (Schaltegger & Burritt, 2010). Research showed that Nigeria enjoyed secured environment before independence particularly before the amalgamation which made the then government pay little attention to regulations on environmental impact, but by 1916, many environmental activities became criminalized with the promulgation of the Criminal Code Act of 1916 (AbdulRafiu, 2017; Ladan, 2009) but with the discovery of oil in large commercial volume after independence and the Koko experience, stringent attention grew for environmental related matters which led to the birth of environmental protection agencies such as Federal Environmental Protection Agency (FEPA, 1992, 1998), National Policy on Environment (NPE, 1989), Environmental Impact Assessment (EIA, 1992), Environmental Guidelines and Standards for Petroleum Industries in Nigeria (EGASPIN), Department of Petroleum Resources (DPR 1991), National Oil Spill Detection and Response Agency (NOSDRA, 2005) (Ladan, 2009). Despite all these enactments, environmental challenges still persist, a problem scholars attached to the inability of the country to enforce compliance with current regulations (Ahunwan, 2002; Okike, 2007). For example, Shell Plc., a major oil producing company in Nigeria since 1958, contributed majorly to the country's environmental situation 23
particularly the situation of the Niger Delta region through leakages of oil into the host community farm lands and rivers. The exploration, production, and refinement of oil together with illegal oil bunkering and illegal refineries established in various part of Nigeria brought about different environmental and ecological challenges ranging from oil spills, destruction of habitat, pollution of air, land and water, gas flares, and land degradation. The chemical constituents of these spills affect soil properties, water bodies and human health (Christian-Aid, 2006; Lauwo, 2011). Water pollution is another major environmental pollution issue affecting the country, as the waste products from petroleum, mining, iron and steel, pharmaceuticals, and textiles activities go directly into water bodies, it negatively affects the colour, odour as well the sulfates and nitrates constituent of water (AbdulRafiu, 2017). Environmental degradation such as early death; respiratory diseases, air-borne diseases, water pollution, acid rain, poor vegetation, land degradation, are results of organisations' industrial activity in their quest for profit maximisation. For example, Salama, Al-Rumaih, and Al-Dosary (2011) pointed out that cement factory's activity has seriously affected the air such that plant and animal life is threatened. The solid fuel smoke emitted by the manufacturing and oil companies are said to result in 1.6 million deaths in a year in the poorest economies of the world (United Nations Environmental Programme UNEP, 2006). AbdulRafiu (2017) from his study identified the results of environmental deterioration in Nigeria to include: conflict and mayhem resulting in the destruction of lives and property or displacement of people this is seen in the case of Niger Delta Ogoni and other communities where oil explorations have been described by continued disagreement among the community residents, the oil industries, and government. Senewo (2015) pointed out that Nigeria has greatly benefited from the Niger Delta economically as more than $30 billion USD was attributed to having been gained from the region in the period before agitations but this has left the people with nothing. He stated further that this discovery encouraged a self-determination movement like the Kaiama Declaration of Ijaw Youth Council (IYC) (Fentiman & Zabbey, 2015; Senewo, 2015). Some decided environmental cases in Nigeria include Tebite Vs. Nigeria Marina and Trading Co. Ltd (1971), where, a Plaintiff who is a legal practitioner, achieved success in 24
suing the defendant as the dirty particles coming from his resident caused nuisance to him. In similarity with the above case is the case of Karagulamus vs. Kolawole Oyesile (1973) 3 U.I.L.R, where the fumes escaping from the defendants' equipment affected the Plaintiff who sued successfully, another case was Umudje vs. Shell B. P Petroleum Development Company of Nigeria Ltd., (1975) 8.II. SC. 156, where the waste of crude oil in a pit linked the property of the Plaintiff and destroyed his lakes and ponds killing all his fishes the defendants were held liable (Ademola, n.d). Also, the case between Isaiah Ogar V. Chevron where the plaintiff asked for a relief of #100 million an out of court settlement of an insignificant sum of #20 million was given after almost a decade of litigation. Ekeremor Zion V. Shell held in the lower court where compensation of about #30 million (US$200,000) was granted in settlement for oil spills that destroyed farmlands. The following combination of suits and their compensations: (i) Suit Number. W/17/83 - #13,278,306.00 (ii) Suit Number. W/16/83 - #4,095,085.00 (iii) Suit Number W/80/83 - #5,522,701.00 (iv) Suit Number W/72/83 - #7,392,589.00 put up for the Plaintiffs (Sokebolo, Ofogbene, Obotobo and Ekeremor Zion) people all asking for compensation from Shell Nigeria for oil spillage. The defendant was held liable (Ojo & Tokunbor, 2016). Adams (2004), Okoye and Ngakwe (2004) stated that there is a growing demand by the stakeholders for environmental accounting on the part of the organisations to assess, and put together accounting reports that would take care of raw materials consumed, energy and natural resources that have continuously contributed to environmental degradation that is demanding for ethical and environmental reports. This request came up due to increased effect organisations' activities have on the society. It is therefore important that developing economy should borrow a leaf from countries where environmental accounting is duly identified and practiced rather than waiting for international regulatory organisations to design the standard or framework for reporting environmental issues, they should put into place framework that would guide the companies in recognising detailed environmental accounting information to eliminate the information gap between the organisations and their stakeholders. As identified by Schaltegger, Burritt and Peterson, (2003) that organisations that promptly take decisions on issues affecting the environment and incorporate these factors into their general business plans, can achieve 25
many benefits apart from winning stakeholders' favour. It is with this, that this research work is put together to evaluate the effect of environmental accounting on stakeholders' value focusing specifically on listed manufacturing companies in Nigeria. 1.2.
Statement of the Problem The impact of pollution and other environmental related issues on the environment has been a major contributor to climate change. Various studies pointed at the activities of organisations as they work towards fulfilling the financial needs of their investors as the main element responsible for these environmental impacts. According to Holt (2012), organisations and government should carry out appropriate accounting to meet the responsibilities owed to the environment; they have to ensure they stick to keeping the environment safe for all. This made for the need for environmental accounting. Bassey et al., (2013) pointed out that with environmental accounting, organisations can be encouraged to be environmentally friendly so as to enjoy the benefits inherent in such acts. Government and regulatory agencies together with professional accounting bodies in the developing countries are affected by weaknesses in the structural system as their approach to default in environmental matters are treated with levity (Ali, Ahmed & Henry, 2004) the improper application of International Accounting Standards, lack of transparency in corporate financial statements are the factors that contribute to local and international investors' drawbacks (Lawal, 2016). So also Leyira, Uwaoma and Olagunju (2011) pointed out that in the developed countries, conformity with environmental standards is achievable when government regulators enforce the law, the legal system in operation gives room for concerned parties' opinion to be heard in administrative settings and in litigation. But in developing nations particularly in Nigeria, the available means of approach for the stakeholders to take part in the judicial, political and administrative decision-making process in regard to environmentally sensitive facilities is really very small. Therefore, to assist the stakeholders enjoy better environmental accounting information and get environmental justice, government and regulatory bodies would expect the organisation to work with them in their environmental conservation, restoration, prevention and sustainability strategies this can be achievable with tighter regulation and better enforcement of existing environmental laws (Leyira et al., 2011). 26
Studies have shown that the financial information made available by companies in Nigeria have been incomplete as environmental information components are absent or inadequate and this has been a problem for the stakeholders, it has greatly hampered their decision making and subjected the true financial position of the organisation's activities to question (Adekanmi et al., 2015; Eze, Nweze, & Enekwe, 2016; Lorenc, 2016; Onyali et al., 2014; Oraka & Egbunike, 2016; Orsioll & Farley, 2016) that is, due to the voluntary nature of reporting, the volume of environmental information made available is at the discretion of the managers and unfortunately what is referred to as environmental information is corporate social responsibility (CSR) performed by organisations which showed the level of understanding of what environmental accounting truly entails (Musa et al., 2014). According to Gray and Bebbington (2000) in as much as environmental reporting remains a voluntary engagement, it would only fulfill the legitimate needs and not serve as an accountability mechanism. Patten (2014) followed up on this and suggested the establishment of a guiding framework, a financial reporting system which encourages organisations to make available information that has to do with environmental performance and other relevant issues with defined and measurable data; this would also be needed to change corporate environmental reporting and make it a tool of accountability and transparency. The demand made by the stakeholders across the globe for organisations to report the social responsibility made for the drive for environmental accounting to be more visible in both developed and developing countries (Elkington, 1997; Gray, Bebbington & Walters, 1993). The stakeholders are constantly agitating for environmental justice that organisations should be made to account for damages caused to the environment; they believe that since the organisations can benefit from them as stakeholders in the ecosystem, their interest should be captured in the financial statements and reports of the organisations. They want to be included in the organisations' plans on environmental preservation, conservation, restoration and how the organisation intends to achieve environmental sustainability as they see it as a means of getting environmental justice for the role they play in supporting the existence of the organisations.
27
Iyoha (2010) argued that the society requires environmental accounting reports just as the capital market needs information that is financial in nature such that users of such information would have better knowledge about the organisation financial and environmental responsibility. Rappoport (1986) pointed out in his study that stakeholders are interested in the organisation disclosing information which would help their decisionmaking abilities. Stakeholders believed that their value would be protected and corporate performance improved if they get environmental justice by being better informed on environmental conservation, preservation, restoration as the organisation work towards environmental sustainability. In spite of the fact that researchers in developed countries covered a wide ground in studies concerning environmental disclosure (Belal, 2001; Deegan, Rankin & Voght, 2000; DeVilliers, 2000; Frost & Wilmhurst, 1996; Tsang, 1998; Williams, 1999), the developing countries have been lagging behind, Nigeria, in particular, a country where many of the industries generate toxic chemicals which are emitted directly into the environment (AbdulRafiu, 2017; Abu-baker & Naser, 2000; Lawal, 2016; Okeagu, Adegoke, Ademiluyi, Onuoha & Chinwe, 2008; Uwuigbe, 2011) have been lagging behind. Despite the fact that there has been vast research on environmental accounting with shareholders' interest as the center of attention, there is fewness of studies carried out in the area of stakeholders' value particularly from the developing countries' perspective. It is with this that this study is put together to extend the frontier of knowledge by evaluating the effect of environmental accounting on stakeholders' value of listed manufacturing companies in Nigeria. 1.3.
Objective of the Study This main objective of this study is to evaluate the effect of environmental accounting on stakeholders’ value of listed manufacturing companies in Nigeria. The specific objectives are to: i.
assess the effect of environmental justice on stakeholders’ value of listed manufacturing companies in Nigeria;
ii.
analyse the effect of environmental conservation on stakeholders’ value of listed manufacturing companies in Nigeria; 28
iii.
determine the effect of environmental preservation on stakeholders’ value of listed manufacturing companies in Nigeria;
iv.
appraise the effect of environmental restoration strategy on stakeholders’ value of listed manufacturing companies in Nigeria and
v.
investigate the effect of environmental sustainability on stakeholders’ value of listed manufacturing companies in Nigeria.
1.4.
Research Questions This study evaluated and proffered solution to the following questions: i.
What effect does environmental justice have on stakeholders’ value of listed manufacturing companies in Nigeria?
ii.
What effect does environmental conservation have on stakeholders’ value of listed manufacturing companies in Nigeria?
iii.
What effect does environmental preservation have on stakeholders’ value of listed manufacturing companies in Nigeria?
iv.
What effect does the appraisal of environmental restoration strategy have stakeholders’ value of listed manufacturing companies in Nigeria?
v.
What effect does environmental sustainability have on stakeholders’ value of listed manufacturing companies in Nigeria?
1.5.
Hypotheses The hypotheses of this study are: H01:
Environmental justice has no significant effect on stakeholders’ value of listed manufacturing companies in Nigeria,
H02:
Environmental conservation has no significant effect on stakeholders’ value in listed manufacturing companies of Nigeria,
H03:
Environmental preservation has no significant effect on stakeholders’ value of listed manufacturing companies in Nigeria,
H04:
Environmental restoration strategy has no significant effect on stakeholders’ value of listed manufacturing companies in Nigeria,
29
H05:
Environmental sustainability has no significant effect on stakeholders’ value of listed manufacturing companies in Nigeria.
1.6.
Justification for the Study Many research works have been carried out on environmental accounting reporting and disclosures by scholars like Eltaib (2012) where it was discovered that the disclosed environmental information is non-financial in nature; Enahoro (2009) where it was recommended that plans and guidelines that should center on reducing corporate impact on the environment; Eze et al., (2016) found out that environmentally friendly organisations who voluntarily make available information concerning their environmental activities enjoy high level of competitiveness; Hamid & Behrad (2014) identified that a clear incorporation of environmental conservation into business activities would transform the economic society; Makori & Jagongo (2013) recommended that tax credit be given to organisations that comply with environmental laws and there is the need to make environmental reporting compulsory; Oraka & Egbunike (2016) found out that there is the need for guidelines or principles to serve to improve the disclosure of environmental information by companies. Scholars such as Figge and Schalteger (2000) concluded that an organisation that want to improve its enterprise value must manage its resources efficiently; Garcia-Castro and Aguilera (2015) identified that the value stakeholders’ value is not only the value accrued to capital providers but the total value accrued to all the stakeholders of the organisation; Tantalo and Priem (2014) found out that with regard to the stakeholder trade-off and shareholder value maximisation idea, there is need for a change to a broader stakeholder value creation. The gaps identified by the study includes: incomplete environmental accounting information in the financial statement that is the absence of environmental conservation, environmental preservation, environmental restoration strategy and environmental sustainability information in the financial statements which signified that stakeholders are not receiving environmental justice for their contributions to the organisation; ineffectiveness of the voluntary reporting system as the organisations hide 30
under this to make available information they think would be adequate for the need of the users; absence or ineffectiveness of the regulatory framework for disclosure; ineffectiveness of the current environmental regulations; ineffectiveness of the conventional accounting and reporting system; inability of the financial statements and reports to show uniformity; the dearth of research in environmental accounting and stakeholders' value in Nigeria, particularly those undertaken to identify the effect of environmental
justice,
environmental
conservation,
environmental
preservation,
environmental restoration strategy and environmental sustainability on stakeholders' value; and the need to prepare environmental accounts as a part of the conventional financial reporting system. 1.7.
Significance of the Study The study attempted at contributing to the field of accounting, with the current effort at ensuring accountability, which makes accounting for natural resources enjoyed by organisation and the influence such activities have on the environment important, voluntarily disclosing environmental information have been found inadequate in communicating and reporting environmental activities. This study is of importance in meeting stakeholders' agitations for mandatorily disclosing environmental accounting information in corporate financial statements and reports which then leads to environmental improvement and corporate performance. Awareness would continuously be created concerning adding environmental information to the existing corporate financial accounts and the move towards sustainable development, this research would assist organisation management in the framework that would guide the realisation of this, it would be of relevance to government and regulatory authorities, to put up legislative rules in Nigeria to guide companies' inclusion of environmental accounts as a part of their financial reporting systems. Recognition of hidden environmental information that has been presented to management in the traditional financial reporting system under other heads such as overhead would be identified and with this, management would identify avenues of saving cost, making available insights to organisation on ways of meeting with stakeholders' agitations for mandatory inclusion of environmental accounting information in corporate financial 31
details and reports which then leads to environmental improvement and corporate performance. This study would help enlighten policymakers on modalities of putting together corporate environmental performance data or index that would assist them to monitor the organisations' activities as it relates to the environment. This study served to enlighten the shareholders in making investment decisions and understand their investment performance in detail as environmental information aspect would be part of the information made available by the organisations and the actual value of their returns after all environmental issues are adequately taken care of would be easily determined. The study would also help to educate residents of the host communities and other stakeholders on the need to ensure that organisations are accountable for their impacts on the environment and their roles in ensuring pollution free environment. The professional accountancy bodies would be able to improve the quality of programmes put together as this is one of the contemporary issues in accounting development, students, researchers and academics would have better understanding of the effect of environmental accounting on stakeholders' values, This study would serve as body of knowledge to researchers and contributions would be made towards development in environmental accounting and stakeholders' value. 1.8.
Scope of the Study The study concerned ascertaining the level of effect environmental accounting has on stakeholders' value of listed manufacturing organisations in Nigeria. This study concentrated on listed manufacturing companies to achieve the stated objective. Manufacturing companies were chosen due to the type of activities they are involved in and the direct effect they have on the environment as they contribute highly to environmental degradation (Oyesola, 2008; Uwuigbe, 2011). This study considered 75 listed manufacturing companies on the Nigerian Stock Exchange as at 31st December 2017 from which a sample size of 40 listed manufacturing companies which cut across agriculture, conglomerates, construction/real estate, consumer goods, healthcare, industrial goods and natural resources sector of the economy were selected based on event criteria of 10 years of continuous existence and minimum of 32
100 staff in its workforce. Attention was therefore paid particularly to listed manufacturing companies due to the level of their daily activities, the variability of their stakeholders, their contribution to the national economy and the impact they have on the host communities.
1.9.
Operationalisation of Variables Y = f (X) Y = Dependent variable = Stakeholders’ value (SV) X = Independent variable = Environmental Accounting (EVA) SV = f (EVA) Where: Y = SV= y1, y2, y3, y4 y1 = Management & employees’ value (MEV) (Fair compensation and benefits) y2 = Shareholders’ value (SHV) (Return on investment) y3 = Local residents’ value (LRV) (Corporate Social Responsibility) y4 = Government/regulatory agencies’ value (GRAV) (Taxes and Penalties) X = EVA= x1, x2, x3, x4, x5 x1 = Environmental Justice (EJ) x2 = Environmental Preservation (EP) x3 = Environmental Conservation (EC) x4 = Environmental Restoration Strategy (ER) x5 = Environmental Sustainability (ES) Z = Corporate performance (CP) (Control variable) f = functional dependency of the relationship µ = error term. This is to represent other possible factors of concern that are not captured in the model. Functional Relationship ME = f (EJ, EP, EC, ER, ES, CP)
`
SH = f (EJ, EP, EC, ER, ES, CP) LC = f (EJ, EP, EC, ER, ES, CP) 33
GRA = f (EJ, EP, EC, ER, ES, CP) SV = f (EJ, EP, EC, ER, ES, CP)
Variable Description Explanatory variables like environmental: justice, conservation, preservation, restoration strategy and sustainability were used to capture the independent variables (environmental accounting) while the proxies for dependent variables are management & employees’ value (fair compensations and benefits), shareholders’ value (return on investment), local residents’ value (corporate social responsibility), government/regulatory agencies’ value (taxes and penalties) as stakeholders’ value and the control variable is corporate performance. 1.10.
Operational Definition of Terms The meaning of some concepts adopted in this study is as explained below: Community Resident: is a multitude of coinciding, competing, conflicting interest groups, which goes beyond the project lifecycle and who is affected by their interest in such projects. Environmental Conservation: the efficiency and effectiveness in the use of natural resources or the environment such that stakeholders’ value is adequately protected. Environmental Justice: applying fair treatment, equal access without discrimination to stakeholders in organisations’ environmental decision making. Environmental Policy: the plans of the organisation with regard to their activities and interactions with the environment on which actions are carried out that would result to the realisation of the organisational goals. Environmental Preservation: the reduction in the effect of activities on the environment so as to maintain its continuous existence Environmental Restoration: taking polluted environment back to the former position it was before the impact. Environmental Sustainability: meeting the needs of present generation while at the same time paying attention to the need of the future generation.
34
Government/regulatory agencies: a body responsible for putting together a regulatory framework to guide the existence of all organisations. Stakeholders’ value: is the total value of equity of a firm or its market capitalisation.
CHAPTER TWO REVIEW OF LITERATURE 2.1.
Conceptual Review The conceptual review serves to identify in-depth analysis of the concepts under study, the theoretical review serves to guide the identification and analysis of all relevant theories on which the study is based and better clarify the perspective of the study, the empirical review discusses the various relevant studies that have been conducted on the variables under study, while the researchers' conceptual framework attempts to explain the relationship between variables under study.
2.1.1. Definition of Stakeholder According to Clarkson (1995), a stake is said to be an important object which can take up any form and is subject to risk. It is the issue to which the stakeholders have interest (Miller & William, 1991). Drawing from this, it could be concluded that stakeholders are groups of people who are influenced by or have effect on the success of organisational policies and plans (Freeman, 1984; Sterling et al., 2017). They are individual or groups with a particular interest in the decisions of an organisation and are particularly interested in influencing it whether directly or by passing information (Savage, Nix, Whitehead, & Blair, 1991). Stakeholder according to Kochan and Rubenstein (2000) is anyone who risks something addressed as value which could take the form of capital, health, welfare or happiness in having a relationship with an organisation. Miller and William (1991)
35
pointed out that they could take the form of organisation or people who can help or harm the company that is employees, customers, creditors, shareholders or suppliers, while some may be opponent such as competitors, environmentalist, union, government and regulatory agencies with direct or indirect relationship with the organisation. The study of Freeman 1984 is the most referenced work on stakeholder (Frooman 1999; Mitchell, Agle, & Wood, 1997; Preble 2005). Freeman implores organisations to have a wider view of stakeholder not minding their impact or the role they played in organisations' businesses. His model looked at the organisation playing a central role while surrounded by all its stakeholders (Figure 2.1).
Owner Financial community
Activists Group Suppliers Organisation
Customer
Employees
Figure 2.1: Stakeholders and Organisations: The Relationship Source: (Adapted from Freeman (1984). Strategic management: A stakeholder approach. Boston: Pitman).
36
To Kaler (2002) identifying and classifying stakeholders have not really been an easy task for researchers. Classifying stakeholders according to (Buysse & Verbeke, 2003) has to do with grouping them in relation to their similarities or influence on the organisation. Kumar, Rahman and Kazmi (2016) in their study identified that there are two broad classification schemes of stakeholders: generic and relative. Generic classification is motivated by studies from the past and premise on the principle that the actual stakeholder classification is generally accepted while the classification of stakeholder based on the study area is referred to as relative classification. Freeman (1984) looked at stakeholders from two categories: internal and external. He viewed internal stakeholders to be responsible for the internal changes affecting the organisation while external stakeholders are responsible for the external changes. Some other classifications includes Goodpaster (1991) fiduciary and non-fiduciary, Clarkson's primary and secondary grouping, he said that primary group have more powerful influence on the organisation as the organisation cannot exist without them while the secondary stakeholder group is either influenced by the organisation's activities of the organisation or influenced it themselves they don't participate in the organisation's transactions and are not important to its survival (Clarkson, 1995). Kumar et al., (2016), however, proposed classifying stakeholders into four dimensions: economic, social, environmental and regulatory. According to them, economic stakeholders are those who have impact or are impacted by the success of economic and financial plans of the company; when it has to do with achieving natural environmental related objectives, then we consider the environmental stakeholders; social stakeholders take care of societal responsibility-related objectives and finally, regulatory stakeholders in charge or regulation monitoring the organisation's activities. They stated further that, this classification is needed to take care of various conceptual and empirical models for the reason that there has been lack of clarity and agreement among researchers with regard to stakeholder classification (Kumar et al., 2016).
37
Economic Stakeholders
Social Stakeholders Stakeholder Identification
Stakeholder Classification
Environmental Stakeholders
Regulatory Stakeholders
Figure 2.2: Stakeholders Classification and Identification Source: (Adopted from Kumar, V., Rahman, Z., & Kazmi, A.A. (2016). Stakeholder identification and classification: A sustainability marketing perspective. Management Research Review, 39(1), 35 – 61.
Henriques and Sadorsky (1999) on their own pointed out that literature on environment divided them into four distinct groups: a) organizational stakeholders, b) regulatory stakeholders, (c) community stakeholders, (d) media ; while some other literature view the concept from the angle of the individuals having direct dealings with the organisations (e.g., suppliers, creditors, institutional investors, authorities, customers, 38
media group, local inhabitants, consumers, employees, the public, NGOs and shareholders) (Lankoski, Smith & Wassenhove, 2011). Regulatory stakeholders as pointed out by (Henriques & Sadorsky 1999) to include trade union who made it their duty to gather information with regard to pressing and pending legislation, governments who should take responsibility for environmental regulations, (Allen, 1984; Kelly, 1991; Kirby, 1988; Porter & Van der Linde, 1995; Schrader, 1991) environmental rivals, with the intention of making a headway in the field through technology (Barrett, 1992). Organisational stakeholders with a direct link with the organisation are employees, suppliers, customers and shareholders (Greeno & Robinson 1992; Henriques & Sadorsky, 1999). Customers whose interest includes patronising the organisation products and pass on their comments favourably or otherwise to the organisations' representatives either through full support for the products or refusal to deal with the company or taking the company to court (Greeno & Robinson 1992). Suppliers protect their value by discontinuing delivery of a product if they discover that the patronising organisation is not complying with basic rules or when the organisations refuse to accept more environmentally friendly products, while the organisations include employees that would assist in accomplishing success and problem solving environmental policies (Buzzelli, 1991). With the shareholders, their intentions are known when their shares are disposed at the shareholders' meetings (Greeno & Robinson, 1992). Then we have the community stakeholder group which includes the community members, the environmental organisation and the potential investors they, however, have the power to influence public reactions for or against the organisations and finally the mass media stakeholder group (Clair, Milliman, & Mitroff, 1995). Urgency, power and legitimacy can be adopted in recognising different groups of stakeholders the presence or absence of these characteristics, would assist in determining who and what matters in stakeholder analysis (Mitchell et al., 1997). Power as to do with the ability of the stakeholder to affect the organisation; this ability could be utilitarian that is controlling the organisation through using material means and normative as a result of respect, recognition and admiration gotten from their existence in the community (Etzioni, 1964; Mitchell et al., 1997). Legitimacy, on the other hand, is a general view that one's behavior is within the socially accepted norms (Suchman, 1995). It can be 39
looked at from three perspectives of regulative, normative and cognitive. Regulatory legitimacy comes from rules and regulations put into place by governments, professional bodies, and other key organizations, normative legitimacy comes from the informal guidelines of what the society considered as normal, while cognitive legitimacy has to do with belief that guides everyday activities (Zimmerman & Zeitz, 2002). Regulative legitimacy means legally sanctioned, normative legitimacy is morally guided and cognitive legitimacy is culturally relevant. By urgency, the demand of the stakeholder is guided by time as managers' have to apply wisdom when stakeholders' agitation goes out of hand as such stakeholders' interest demand urgent concentration (Mitchell et al., 1997). Kochan and Rubenstein (2000) classified stakeholders into two broad group economic stakeholder and societal stakeholder. According to them, economic stakeholders add economic value to the organisations' final product and services since they are involved directly in the value pyramid while societal stakeholders are outside this pyramid but their influence is significant to an organisations' value added. Lazlo et al., (2004) identified that in the earlier twentieth century, stakeholders consider value destruction as externality as holding organisations accountable for economic, social and environmental damages was not easily achievable but with development in information and communication technology, this has now been a thing of the past as identifying and internalizing negative stakeholder impact can be achieved easily. The society demand for corporations to be responsible have resulted in a fresh class of responsible customers, employees, investors, it has led to a better awareness on issues pertaining to human health and risks associated with the ecology. Donna and Alexis (2014) in their study identified stakeholders from two perspectives following up on Clarkson (1995). Primary stakeholders are (employees, shareholders, suppliers and customers) while the secondary stakeholder includes (community, competitors and government). Nevertheless, the present study adopted the classification of stakeholder as pointed out in the studies of Clarkson (1995), Donna and Alexis (2014) that primary stakeholders are employees, shareholders, suppliers, customers while secondary stakeholders are the community, competitors and government. This is because in accounting for stakeholders' 40
value, what is valued is the transaction; adopting this grouping would assist in covering the interest of every other stakeholder who falls within the group and this would ultimately make for fuller study. 2.1.2. Stakeholder's Value Value according to the Cambridge dictionary (2017) is considering something important, the belief system of people on issues of right and wrong and the important thing in life that can direct human behavior. It is as an important belief shared among people of the same background about what is good or bad, it is also seen as the worth, or importance of something. Attaching values to stakeholders according to Gregory and Keeney (1994) is a difficult task to perform. They discovered from their study that there is similarity in the kind of value stakeholders are interested in, as seen in the objectives these stakeholders set to accomplish. They further stated that differences arise in the hierarchy of such values especially when viewed from the level to which identified alternatives measure up in relation to the objectives. However, these misunderstanding can be handled in a systematic way while the stakeholders are meant to understand that the desire of a particular interest group is actually the desire of everyone, it is the level of importance of such values that differ (Keeney, Von Winterfeldt & Eppel, 1990 as cited in Gregory & Keeney, 1994). Organisations in the quest of carrying out their business activities, create and destroy stakeholders' value and this arouse stakeholder's judgment and reactions that can be very difficult to comprehend unless and until the organisation is able to measure perfectly the effect of its activities on stakeholders (Lankoski et al., 2011). When an organisation understands its stakeholder it assists in designing and recognising the importance of social responsibilities, since it is the organisations' responsibility to ensure its long-term economic, social, and environmental survival (Du, Bhattacharya & Sen, 2011). Garcia-Castro and Aguilera (2015) identified that there is a great difference between value from the shareholder point of view and what total value created means. Value creation for shareholders is the accumulated value available to owners of the business 41
while the addition of all value created means accumulated economic value available to all stakeholders of the organisation. For instance, Coca-Cola Company in its annual reports and accounts made a claim that "Coca-Cola provides value to everyone who touches it". That is, every one of its stakeholders who comes in contact with the products has something to gain. Whether as employees who work in an encouraging and rewarding environment, customers who get satisfaction from the brand, shareholders who benefit because of the organisation's strong financial performance, local communities who benefit from taxes and its conservation programmes, the organisation maintains that everyone is better off because of its existence (Epstein & Young, 1998). Cloninger (1997) claimed that firm value is the addition of the value accredited to its respective stakeholders. This idea was buttressed by Freeman, Harrison, and Wicks (2007) that maximising shareholders' value would indirectly lead to creating value for stakeholders. They stated further that there is no clarity as to what constitutes stakeholders' value and recommended further research on stakeholder theory. Plottu & Plottu, (2007) identified that value can be intrinsic, altruism or bequest. Stakeholders' value particularly is seen as multi-faceted as its components are not easily visible and quantifiable in monetary terms as individual stakeholders' understanding of value matter since they are individually and collectively at liberty to decide on when and how to react to the organisation (Espeland & Stevens, 1998; Rowley, 1997). Brandenburger and Stuart (1996) viewed all organisations' value as difference between interest in paying an opportunity cost, they analysed that more value is created for customers where the price paid for commodity reduces, suppliers enjoy more value when their purchasing costs to the organisation increases or when their opportunity costs reduces while organisations enjoy more value when there is increase in the product prices or when cost of production reduces. This strategy identified above is not without its challenges as it is not easy to determine what constitutes an interest in making payment and opportunity cost to stakeholders but what is needed to be done is to adopt incremental figures in place of real figures (Bowman & Ambrosini, 2000; Brandenburger & Stuart, 1996). Studies such as those carried out by Donaldson and Preston (1995), Freeman (1984), Harrison, Bosse and Phillips (2010), Jones (1995) and Wood (1991) 42
argued that allowing stakeholders access to fair treatment contributes to corporate performance. This assumption is however criticised by some social psychologists and behavioural economists such as (De Cremer &Van Lange, 2001; Fehr & Fischbacher, 2004) they do not believe that all stakeholders' interests are the same since the motives to cooperate are unrelated across individual stakeholders. The problem with this critique is that it does not believe stakeholders have hierarchy of interest. Stakeholder's interests are arranged according to its importance to the particular stakeholders according to Keeney et al., (1990) as cited in Gregory & Keeney (1994). This study, therefore, supports the opinion of Keeney et al., (1990) and argued that all stakeholders' value is the same but differences come in the arrangement of such interest. The idea of conducting a systems approach towards looking at environmental accounting through the stakeholders' perspective is a beneficial way of comprehending the interconnections in the environmental actions of any system. 2.1.3. Measuring Stakeholders' value The Shareholders' value is said to encourage an unfair preference towards the organisations' shareholders while neglecting others who participated one way or the other in the company's success or failure or/and depend on the company's success, this is the reason for the identification of stakeholders as the concept has to do with pointing out that there are other groups who are interested and important to the company's success (Earl & Clift, 1998; Figge & Schaltegger, 2000). A balanced approach to all major constituents and elements that have direct effect according to (Curtice, 2006) on the performance of the organisation that is the stakeholders is needed. Freeman (1984) said that when people have material and immaterial interest in an organisation, they are said to have a stake in the company and known as stakeholders. Figge and Schaltegger, (2000) pointed out that the stakes individuals have in the organisation comes from the fact that resources are made available for the organisation by them. They identified the resources made available to the organisations as: (a) capital resources which take the form of financial assets, tangible assets, human resources or natural resources (b) goodwill resources and (c) resources in the form of information and know-how.
43
Earl and Clift (1998) made it known that businesses have always incorporated various factors with the exception of the environmental factor in their decision-making process, the environmental factor is relatively new and complex as it has impacted directly on every aspects of the organisation. They further stated that stakeholders also may promote environmental issues which the organisation is not used to since their motive is not purely financial. The relationship between the organisation and the stakeholders are usually profitable ones as stakeholders expect to benefit from what they give to the organisation and what they get from it (Alexander, Sharpe & Bailey, 1993). In order to safeguard their stakes, they behave as interest groups towards the company and other stakeholders, with the kind of interest they possess which could be both compatible that is working towards increasing the distributable value added of the organisation or conflicting which have to do with making a bigger part of the organisations' distributable value belong to them (Mintzberg 1983; Pfeffer, 1992), as a result of this, the organisations' management and other stakeholders are faced with measuring the conflicting interests while giving enough room for maneuvering. According to Curtice (2006) stakeholder is an individual or group whose support the organisation needs and in return have expectations from the organisation, a proper assessment of the level of this satisfaction would provide valuable indicator for current and future performance, he stated further that there is the need to clearly define the stakeholders. This study, therefore, adapts the Curtice model in the identification of the stakeholder for this study. Stakeholder
Expectation
As measured by
2008
metric Management & Employees Shareholders Employees
Local residents
Fair compensation and benefit Career development Pleasant work environment Safe work conditions Return on investment Attention Stability Liquidity of investment Corporate Social Responsibility Charitable Donation Stable Employment Increase Local Investment 44
2009
2010
2011
Target
Government/ regulatory Agencies
Taxes and Penalties Fines Minimal impact on the Environment
Figure 2.3: Modified Balance Stakeholder Performance Report Source: (Adopted from Curtice (2006). Stakeholder analysis: The key to balanced performance measures. Process Portfolio Management, BPTrend, 1-7.
Management must, therefore, identify the contributions of all the stakeholders and bring out those whose contributions are critical so as to guard their role in the success of the companies (Schaltegger & Sturn, 1992 as cited in Figge & Schaltegger, 2000). They stated further that critical stakeholders are said to possess the characteristics of making available resources that cannot be easily replaced or too expensive to replace and replacing those who currently supply resources to the organisation is either too expensive or impossible. Harrison & Wicks (2013) made it known that making measures of stakeholder issues dependent variable and organisational actions independent variables would lead to better understanding of how the action is influencing the total value created by the organisation. 2.1.3.1. Management and Employee's Value Organisations have a strong influence on the administration of social rights of their employees including areas such as fair wages, health and safety. The realisation that employees mean more than just human resources in the process of production has given rise to the claim that employees should also have access to certain level of influence on the activities, their job environments and the corporate goals (Claydon, 2000; Cludts, 1999). Employee is defined as a person who works for another person in return for financial or other compensation (Muhl, 2002) while according to Black (1991), employee is seen as a person in the employment of another person under the contract of hire, express or implied, written or oral, where the person who employs have the capacity to control and direct the employee in the material details of how the business activities are carried out.
45
Buzzelli (1991) identified employees as the source of organisation's success and successful environmental policy planning needs their participation. They usually have their sources of livelihood at stake and possess special skills requesting for security, wages and salaries, benefits, and meaningful work environment in exchange for their loyalty while the management is expecting that they work in line with the rules and regulations of the organisation, be a good ambassador of the organisation by speaking in its favour and act responsibly in the local communities where the company situates (Onyali, Okafor & Onodi, 2015). They further stated that the role of management is peculiar as they also possess a stake in the organisation, the difference between theirs and that of the employees is that they are responsible for safeguarding the interest of the organisation which results into finding a level ground for the regular claims made by other stakeholders. Information generated on environmental accounting activities is required, managing the environment is necessary for effective control of environmental impacts which make management and employees important tools to achieving a successful environmental accounting implementation programme (Uwuigbe, 2011). The result of which would lead to the provision and inclusion of quantitative data that would be communicated to the stakeholders on progress made and by so doing, giving the management and employees' satisfaction over their achievements while motivating them to do more (Boyce, 2000; Zeghal & Ahmed, 1990). According to Huang and Kung (2010) with increasing awareness of environmental issues, employees and management are having interest in their company's environmental performance, there is clarity that unreactive attitude towards environmental strategy would result in negative performance, which destroys reputation, weakens the rights and value of employees, and leads to the payment of fines, these values which is closely linked to the organisation's prospects, call for particular interest in the attitude of the organisations as it regards environmental strategies and this makes them demand more transparency and accountability. An employee is therefore defined in this study as a person who works for another person in return for financial or other compensation. 2.1.3.2. Shareholders' value 46
Shareholders are in a more powerful position to hold the organisation accountable for many issues (Crane, Matten & Moon, 2004). According to Copeland (1994), shareholders' value approach value of the organisation from the shareholders' point of view. It is defined as the difference between the corporate value and debt (Black, Wright & Bachman, 1998; Rappaport, 1986). Serven (1999) saw it as the market value of a common stock while Scott (1998) defined it as the total value of equity of a firm or its market capitalisation. Copeland, Koller and Murrin (2000) stated that value is created by earning a return on the investment higher than the opportunity cost of capital. While Dalborg (1999) argued that shareholders' value is created when the returns in the form of dividend and shares prices increases and are higher than the risk-adjusted rate of return gotten in the stock market. Greeno and Robinson (1992) pointed out that shareholders make their interest known by talking about them at shareholders' meeting and outright sale of their interest in the organisations' shares. When an organisation is referred to as "unlevered", it means that it uses only equity capital to achieve its objectives meanwhile an organisation is "levered", when it combines both equity and debt, it is a condition needed to achieve optimal capital structure which has influence on the firm value and shareholder's wealth (Kumar, 2007). He further stated that funds can be generated by the organisation from external sources and internal sources alike; internally that is, plowing back funds which ordinarily could have been paid out as dividend to the shareholder into the system and externally through an issue of debt or equity. When shares are issued, it is the expectation of shareholders to receive dividend but with a borrowed fund, the organisation has to regularly pay back interest on the facility from which the shareholders benefit while in another situation they experience loss due to the fact that debt increases shareholders' returns in a good times and reduces them when time is bad and thereby causing financial leverage. Shareholders' stakes in the organisation are financial in nature as their expectation is that financial return would come from these stakes (Onyali et al., 2015). Keim (1978) recommended a more diffused ownership structure, which would broaden stakeholders' demand for accountability; transparency of organisation activities, but this would require stringent monitoring that would make organisations disclose environmental information 47
(Eng & Mak, 2003). Nyiramahoro and Shooshina (2001) however stated that there have been various ways identified in the measurement of shareholders' value, minimal effort has been made to measure it as a majority of them are still making use of the traditional accounting measures. The shareholder's value definition adopted for this study is that given by Scott (1998) that is the total value of equity of a firm or its market capitalisation. 2.1.3.3. Local Residents' Value The community is defined as a group of people with commonly shared value. Parsons (2008) defined community as a fluid group of people who have at least one common characteristic like interest, experience or value while Pacione (2001) defined it as a group of people who have a common interest in the same geographic area, culture, race social class or values. According to Teo and Loosemore (2011) community is seen as a multitude of coinciding, competing, conflicting interest groups, which extend beyond the project lifecycle and who are affected by their interest in such project. Boyles (1996) identified that community is faced with challenges resulting from development in global technology. Raza (2011) pointed out that value is appreciated at an individual level by every member of a community; every community should be centered on value creation for the host community and for the organisations, the head of the community should be able to identify the objectives of the community and communicate same to other residents. He, however, concluded that organisations that understand the powers of the community where it operates and makes meaningful deductions from it would be more successful. Atkinson and Cope (1997) pointed out that the local community cannot be handled as a single homogeneous, easily identifiable group, according to Skerratt and Steiner (2013) it should be noted that the community residents have their own point of view. Dunham, Freeman and Liedtka (2006) argued that they were made to know that community is a stakeholder without true recourse to what they actually are. They suggested four subcategories of community to include; community of place which they said are those community stakeholders that live very close to where the organisation conduct its business operations; community of interests have the same interest or purpose and may or may not be living close to the organisations; virtual advocacy groups are referred to as 48
those with short-term disruption plans while community of practice come together by a sense of shared interests, purpose and values. Local residents particularly those situated in environmentally affected communities are expecting the organisation to convince them that in their day to day activities, they would incorporate the views of the local community members, it would be carefully considered and properly addressed as they are the custodian of the best knowledge of the local environment, which is very beneficial to the organisation's decision making strategy (Aloni, Daminabo, Alexander & Bakpo 2015). The local resident give the organisation all the support needed to put facilities on ground and from which they are expecting benefit from the social contributions and the taxes made by the organisation while expecting the organisation to keep to their promises by being good citizens and not exposing the community to irrational danger or cause havoc to the environment (Onyali et al., 2015). The community stakeholders' definition adopted for this study is that given by Teo and Loosemore (2011) that is, the community is a multitude of coinciding, competing, conflicting interest groups, which goes beyond the project lifecycle and who are affected by their interest in such projects. 2.1.3.4. Government and Regulatory Agencies' Value The government has a great effect on organisations. They may sanction companies that violate environmental regulations or order the shutdown of such companies. The study of Deegan and Rankin (1996) discovered organisations charged with violating environmental regulations make available more positive environmental information in their annual reports. Regulatory stakeholders according to (Roome, 1992) are responsible for putting together a regulatory framework to guide the existence of all organisations, as they are the custodian of this. Presently, the role of creating guidelines to enable the organisations to operate in the environment through regulations belongs to the governments (Hewapathirana, 2014). Aloni et al., (2015) opined that government and regulatory agencies would want to see their policies and regulations address environmental issues while encouraging organisations put up programmes that would
49
involve other stakeholders in relation with the environment so that their policies would be seen to cause less argument as time goes on. Based on systems theory managers should systematically engage in communicating stakeholders so as to prove and be seen as accountable. Among all stakeholders, the influence of government on the organisation is very critical as they possess the power of subjecting any organisation or individual who violates environmental regulations to fine or shut such businesses down (Huang & Kung, 2010). Deegan and Rankin (1996) study showed that organisations that do not violate environmental regulations report more positive news in their reporting instruments. Government/regulatory agencies for the purpose of this study is seen as a body responsible for putting together a regulatory framework to guide the existence of all organisations (Roome, 1992). 2.1.4. Environmental Accounting Concept Md. Abdul, Saifuddin and Mohammad (2016) noted that environmental accounting and reporting give rise to accountability in relation to issues on how well organisations are including the environment and their stakeholders in their corporate decision making. Environmental Accounting also assists in determining monetarily the negative value of the impact these organisations have on the environment, while also valuing what the organisations give back to the environment monetarily. In the course of accounting and reporting on issues concerning the environment, the stakeholders want to see organisations
account
for
environmental
justice,
environmental
preservation,
environmental conservation and environmental restoration and also their plans for environmental sustainability. 2.1.4.1. Environmental Justice Environmental justice according to EPA, United States Environmental Protection Agency (2017) is a means of treating people fairly; making them involved meaningfully without paying attention to their colour, race, nationality, or level of income especially, when it has to do with putting together, implementing and enforcing environmental regulations, laws and policies. It further stated that its goals would be achieved when everyone is adequately protected from environmental hazards and any hazard that can threaten health, 50
in the same degree and can access decision-making processes that affect a healthy environment equally. The studies of Rawls identifies justice principles to be; circumstances in which every individual have rights equal to vast liberties coherent with other people enjoying the same liberties; and also that inequalities should be evenly arranged so that they would be to everyone's advantage and organised so that no one person would be stopped from occupying any position (Akintoye, 2014). Environmental justice according to Miller (2011) required that those who would be affected by the impact of environmental decisions have a right and should take part in such decisions and have their opinions and interests genuinely put into consideration; environmental regulations and laws be fairly and duly applied and enforced and the risk associated with the environment be fairly distributed across the society. The definition of environmental justice as it relates to this study, therefore, is treating people fairly, making them involved in organisations decision making as it affects the environment without discriminating any stakeholder. Environmental justice can be viewed from two angles that is the distribution of environmental risk and the stakeholders' opportunities of taking part in environmental decisions, environmental justice is important as a clean and healthy environment contribute to the wellbeing of the society (Arcioni & Glenn, 2005). Stakeholders are taking environmental issues serious (Bringer & Benforado, 1994; Makower, 1993). Looking at it from the investors' perspective, shareholders' value suffers in situations where organisations spend millions on cleanup, court costs and fines to keep officers out of prisons (Minow & Deal, 1991 as cited in Illinitch, Soderstrom & Thomas, 1998), there is also an increase in the number of customers exhibiting favoritism towards greener corporations and products (Vandermerwe & Oliff, 1990), it is getting extremely difficult for chief executive officers and other key employees to occupy environmentally risky positions in organisations (Clark, 1993) while a survey conducted showed that the general public views pollution as threat to the environment and their health and claimed that organisations should be held responsible for cleanups (Smith, 1990). Environmental regulations, policies and decisions concerning development affect the quality of health, natural environments and access to natural resources (Miller, 2011). Due to lack of 51
environmental justice, affected individuals and communities endure environmental risk and the impacts of human activity, there is, therefore, the need to ensure environmental justice by ensuring that those who are affected seriously by these impacts are allowed to participate in development and enforcement of environmental laws (Miller, 2011). To satisfy the constant demand for environmental justice, entrepreneurs, media, regulatory bodies and corporations have in place measures to address environmental performance. It is however noted that as environmental information is becoming more available from different sources, methodological inconsistencies inherent in the measures and ratings adopted may interfere with the ability of the stakeholders to comprehend and bring out meaningful information (Illinitch & Schaltegger, 1995; Lober, 1996). While experts say that it is likely the complications inherent in it result in greater confusion on its importance (Hammond & Miles, 2004). To, therefore, meet this increase in the quest for environmental justice, interest groups are requesting that standard format that would aid comparison to be put into place (Fried, 1993). Freedman and Stangliano (1991) pointed out in their study that organisations that have the history of good environmental disclosure enjoy better market valuation even when severe environmental legislation is introduced than the organisation that practices poor disclosure practices. They further stated that detailed environmental accounting reflects better financial performance and encourages quality decision making from the users of organisations' financial reports. 2.1.4.2. Environmental Conservation Liberati, Rittenhouse and Vokoun (2016) stated that the 20th century experienced an exceptional level of environmental activism and policy implementation that brought about a previously unrivaled emphasis on conservation. Hassan (2011) pointed out that reporting environmental accounting information as one of the major elements in an environmental report empower the users of the information to understand the company's position on environmental conservation and how it handles environmental issues. Joppa and Pfaff (2009) stated that efforts made previously concerning conservation, while very useful, often involved taking advantage of protection opportunities that concentrated on 52
areas of high elevation and low productivity. The current conservation planning is focusing more on identifying conservation opportunity areas that is areas which are yet to be protected, so as to minimize the spatial extent that needs to be protected and maximize conservation objectives. The absolute goal of current conservation planning is to increase the protected land estate across ecosystem and biodiversity intense areas (Liberati et al., 2016). Studies showed that environmental conservations are critical in environmental accounting research. Prior research has proxy environmental conservation costs for the degree of firms' voluntary environmental protection efforts (Wang, Lu, & Wang, 2014) it has also been used to show governmental environmental regulation (Sueyoshi & Goto 2009). From the works of Clarkson, Li, and Richardson (2011) evidence showed that at least some aspects of environmental conservation costs are perceived positively in the stock market. Study also showed that with the importance attached to adopting sustainability strategy by top management, the magnitude of firms' environmental conservation costs has been increasing worldwide (Chan-Fishel 2002). Keun-Hyo, Song, and Patten (2017) said that managing environmental conservation costs effectively is important such that organisations producing eco-friendly products can effectively compete in product pricing and expand their market share. Park and Kokubu (2010) conducted a study to show that environmental and economic performance of companies that manage environmental costs as part of target costs is consistently high. It, therefore, showed that costs linked with environmental conservation are of importance to environmental research and practice. This study defined environmental conservation as the efficiency and effectiveness in the use of natural resources or the environment such that stakeholders' value is adequately protected. 2.1.4.3. Environmental Preservation Concern for environment according to Martensson and Westerberg (2016) has increased across the globe, the society is particularly interested in knowing that organisations are highly committed to environmental preservation, since environmental issues such as spillage, pollution, growth in energy consumption and greenhouse gas emissions have continuously led many social and economic agents to believing that business operations 53
are the cause of these situations and this has created awareness for the organisation to prove their environmental accountability by working harder on their environmental performance (Larrinaga, Moneva, Llena, Carrasco & Correa, 2002; Llena, Moneva & Hernandez, 2007). One method organisations adapted to handle this situation and create a favourable image is to make available information relating to social and environmental impacts to their stakeholders (Gray, Owen & Adams 1996). While Rezaee and Elam (2000) argued that there is the need for environmental laws and regulations, to be put into place in order for organisations to be accountable for their environmental activities. Environmental accountability became important as there is a growing concern by the stakeholders clamoring for it. Recent studies in the field of stakeholder theory identified that stakeholders possess the power to influence the corporate decisions and strategies. This study, therefore, defined environmental preservation as the reduction in the effect of activities on the environment so as to maintain its existence. 2.1.4.4. Environmental Restoration Strategy Restoration according to Merriam-Webster (2017) is an act of restoring; taking something back to the former position it was before the impact which could take the form of regeneration that is bringing the natural forest strands back to life. Derak, Taiquib, Aledoc and Cortina, (2016) identified that conducting restoration has to do with handling stakeholders conflicting interests. The independent study of Bullock, Aronson, Newton, Pywell, and Rey-Benayas, (2011) and also De Groot, Alkemade, Braat, Hein and Williams (2010) made it known that the input of stakeholder has become very critical in an ecological restorative decision. Martín-Lopez et al., (2012) said that notwithstanding the fact that stakeholders are increasingly involved in programmes that concern restoring ecosystem services, little effort has been directed at addressing their opinion on ecosystem services from the point of their attitude, values, interest and beliefs. In addition, their view is scarcely considered throughout the stages in the programme (Khater, Raevel, Sallantin, Thompson, Hamze, & Martin, 2012). Wortley, Hero and Howes (2013) stated that ecological restoration has the tendency of reversing land degradation, increase the speedy recovery of biodiversity, and make 54
available important ecosystem services. Some scholars identified that focusing totally on ecological results of restoration is however insufficient for assessing the success of restoration projects (Sachs et al., 2012) while on the other hand other scholars talked about the need to attach economic values to ecosystem services regain through restoration (Bullock et al., 2011; Rey-Benayas, Newton & Bullock, 2009; Palmer & Filoso, 2009) in contrast with the studies of (Geist & Galatowitsch 1999; Miller & Hobbs 2007; and Le, Smith, Herbohn & Harrison, 2012) where the significant function of social influences in accomplishing restoration success was identified. This study adopts the definition given by the Merriam-Webster (2017) and defined environmental restoration as taking polluted environmental back to the previous position it was before the impact. 2.1.4.5. Environmental Sustainability A business unit that considers its long-term health in addition to proper management of every aspect of its' business activities at the same time is said to be a sustainable company (Przychodzen & Przychodzen, 2013). Foy (1990) defined sustainability as when current economic activity does not go out of proportion by affecting future generations. According to Morelli (2011), the economist would apportion environmental assets as only an aspect of the value of manmade and natural capital while their preservation is a function of an overall financial analysis in contrast with the ecologists who strive to preserve minimum levels of environmental assets in physical terms. Social sustainability has been defined according to McKenzie (2004) as a condition within the communities that is positive and the process carried out or put into place within the community to achieve this positive condition. Woods (2000) defined sustainable development as the maintenance of important ecological processes and systems that support life generally, from the Brundtland Report; it is seen as meant to fulfil the requirements of present demand without neglecting the needs of future generations (Bossel, 1987; Gower, 1992; Howarth, 1992; United Nations World Commission on Environment and Development UNWED 1987). This definition has been criticised on the basis that when not clearly defined, in order to meet the demand of stakeholders, organisations hide behind it and continue its activities without minding the environment. Barbier (1987) defined it as the maintenance of important 55
ecological processes and life support systems, preservation of genetic differences, sustainable use of resources with the general aim of achieving sustainable development by conserving living resources. Figge and Hahn (2004) pointed out that assessing the contribution of organisations to sustainability comprises of the economic, the environmental and the social aspects. They stated further that triple bottom line approach is one of the methods adopted in measuring corporate sustainability as it incorporates these three objectives. Akintoye (2014), Ezeh and Onodugo (2004) pointed out that the request and anticipations of various stakeholders from organisations have changed greatly, customers now want sophisticated goods and services which are in line with development in technology, employees seek and demand high remuneration and good working conditions while stakeholders generally require increased returns on investment and business stability and growth. They stated further that growth does not come easy but with some challenges: i.
The need to develop the required expertise, remain focused in the period of chaos, have not been easy for management and employees
ii.
The organisation looks at modalities for survival and then introduces new products and devise new ways of delivering them, the achievement of which results in expending funds on research and developmental activities.
iii.
Organisations are also faced with the challenge of ensuring unity among its employees as growth comes with an increase in complexity and control problems.
iv.
Growth also comes with an increased demand for capacities.
v.
When organisations are just coming up, attention of government and the communities are centered on them so also are the demand made on them for instance, demand is made for more tax revenue on the part of the government, community ask for social responsibility, better salaries and working environment on the part of the employees and management and better dividend on the part of the shareholders (Alabar, Mtswenem, & Lim, 2016).
56
Despite the criticism of the Brundtland definition of sustainability, this study, therefore, defined environmental sustainability meeting the needs of present generation while paying attention to the need of the future generation. 2.1.4.6. Corporate Performance Corporate performance according to Rouse (2015) is a complex evaluation of the ability of an organisation on the execution of its most important parameters that is, shareholder performance, and financial market information. Deegan and Rankin (1997) pointed out that users of financial statements believed that environmental reports are needed in making decisions. lIlinitch et al., (1998) suggested that environmental performance evaluation must be seen beyond just financial statement disclosures of environmental liabilities to non-financial aspects of performance. The study of Thisthethwaite (2011), pointed out that there has been failure on the part of financial accountants in assessing corporate financial performance, this failure was accredited to the fact that the pricing of environmental damages essential to any company's production process has been left out. Beaver (1989) identified that there has been a shift away from the economic view of corporate performance measurement to a more informational view with the identification of social effects of organisation's activities, so also is a shift in viewing financial Figures as the basis of corporate performance measurement as they are now treated as an aspect of a broader measures. McDonald and Puxty (1979) defended the argument that organisations are no longer reportable only to the shareholders but exist within a system and have a responsibility towards that system. With this, Rappaport (1986) stated that there have been weaknesses in accounting, as it has been unable to incorporate risk and investment policies but concentrated more on shareholders' value. This was further buttressed in the study of Barnett and Salomon, (2012) where they argued that the better an organisation handles its relationship with its stakeholders, the more achievement it would accomplish over time. 2.1.5. Environmental Accounting Environmental accounting concerns itself with information that has to do with all aspects of the environment, that is, monetary and non-monetary information and expenditure, it 57
has to do with the grouping, recognition, monitoring, collection and analysis of business activities and then incorporating same in the business financial statement to aid decision making (Schaltegger, 1997). Cormier and Gordon (2001) saw environmental accounting as one of the communicating tools which organisations made use of to disclose information on their remedial activities to stakeholders. It has to do with ensuring that corporate accounting systems and reports are in line with the environmental related cost that the organisation is involved in (Lawal, 2016). International Federation of Accountants, IFAC (2005) stated that environmental accounting can be viewed from various perspectives: such as the analysis of environmental-related financial information disclosure to assist accounting and reporting activities, the identification of both environmental monetary and physical information, accounting for total costs among others. Yakhou and Doweiler (2004) stated that environmental accounting makes available reports that can be used internally and externally and also enable organisation pin down environmental data. Howes (2002) opined that environmental accounting is making use of environmental data to achieve performance, bringing out the link between performance (economic and environmental). Institute of Management Accountants as cited in Ijeoma (2015) stated that organizations adopt environmental accounting so as to assist in variety of ways among which are: making environmental costs elimination or reduction decision, bringing to limelight hidden environmental information in overhead accounts; having a clearer view of costs and performance attached to the environment so as to incorporate an accurate costing and pricing system; improving the appraisal process and investment analysis by adding expected environmental impacts; and supporting the development of overall environmental management system while Stanko et al., (2006) saw it as recognition, determination, distribution and then the onward communication of the information to organisations' interest groups. However, from the above stated explanation, environmental accounting is seen as identifying, analysing, measuring, and allocating environmental-related physical and monetary information, including this information in business decisions so as to
58
experience improvement in corporations' economic and environmental performance and the subsequent transmission of this news to stakeholders for proper decision. 2.1.6. Accounting and its Relationship with the Environment The continuous degradation of the environment and the rate of increase in environmental disasters have caused experts to highly consider integrating environmental issues into organisational activities which requires a look from the economic, legal, accounting, financial and technical point of view (Jahamani, 2003). From the perspective of Tapang, Bassey and Bessong (2012), an attempt has been made in ensuring that accounts are rendered on the use of natural resources. The need for accounting in relation with the environment cannot be denied as accounting play a major part in creating awareness on the environmental responsibility that is the impact organisational activities have on the environment (Bassey et al., 2013). Accounting added to its conventional duties, the role of measuring, valuing and determining the impact of the environment on the organisations' activities, with this, information users can make informed decisions (Bala & Yusuf, 2003) particularly when the present organisational practices showed no traces in the financial statement nor was there any additional document prepared detailing environmental costs, a need, therefore, arises for proper identification and separation of environmental costs from any other costs for proper allocation and also to encourage putting together data that serve as environmental indicators (Ali, 2002). He went further to state that if accounting fail in its role of making financial data on organisations' environmental performance available, it would command the support and interest of environmentally unfriendly organisations and this would not give room for competitive advantage as some organisations are devoting their resources into becoming environmentally friendly while others are continually damaging the environment as there is no form of standard of reporting system to bring them together (Ali, 2002). When resources are properly managed in an environmentally friendly manner, it would give room to competitive advantage as many organisations now know that a way of reducing environmental cost is through offsetting it with revenues generated through 59
sales of waste by-products because measuring and valuing particularly, attaching monetary values to environmental issues may not be totally free from errors, but effort must be made by the professionals, the economists and accountants to ensure this (EPA, 1995; Hamid 2002). 2.1.7. Scope and Objectives of Environmental Accounting Assessing cost associated with ecological impacts is not easy to accomplish but it is possible since the determination of costs to serve as replacement costs can be done for both nature services and natural capital (Mohammad, Mohammad & Asaduzzaman, 2015). Determining the scope of environmental accounting has not been easy as it is very wide in nature, covering corporate level, national and international level (Hamid & Behrad, 2014). Mohammed et al., (2015) stated that looking at environmental accounting from the aspect that; investment corporations made to reduce detriments caused to the environment such as investing in environmental protection equipment as all types of damage done to the environment are indirectly due to organisation's activities and placing monetary value on this information is not an easy task in accounting. They further stated that it is not visible attaching measurement or value to damages done to the environment especially when calls are made to place such responsibility on the particular industry as this can only be done through identifying the quantity of non-renewable natural resources used (Mohammed et al., 2015). Pramanik, Shil and Das (2007) stated that environmental accounting is meant to show organisations'
commitment
to
sustainability,
determination
of
organisations'
accountability and transparency that would help boost ethical investment, it also encourages disclosure of environmental information to the society particularly the stakeholders and this polishes the image of the organisation. They stated further that the benefits enjoyed from adopting environmental accounting are that it creates knowledge of environmental related costs and thereby make available measures of reducing or avoiding them while improving environmental performance. It serves as an effective instrument for making management aware and taking proactive decisions on environmental issues and proving to stakeholders that organisations are environmentally conscious. Richardson
60
(1999) identified that environmental accounting works well when it is placed as a priority on management plans. The Environmental Protection Agency (EPA) added that lots of environmental problems can be reduced significantly when effective decisions are made since environmental cost may be hidden in overheads or unintentionally overlooked, to overcome this, cost associated with the environment may be counterbalanced when waste is sold as this becomes a source of revenue and the organisation can gain competitive advantages with customers where their products and services are environmentally friendly (Eze et al., 2016).
2.1.8. Responsibility and Accountability of Organisation towards the Environment According to Lucas (1993) being responsible is being answerable. He sees responsibility as an act that should go beyond merely fulfilling an obligation to rendering account to other stakeholders. Responsibility as regard organisations' environmental practice comes from the various obligation and effort made by organisations in the management and accounting for environmental impacts arising from their operations, which could take the form of formulation and implementation of policies or plans as it relates to the environment, that is organisations are said to be responsible when through the management of their environmental activities in the society, accounting for such actions is performed by them (Gray, Dey, Owen, Evans & Zadek, 1997: Gray et al., 1996). Morgera (2006) stated that corporate environmental responsibility involves organisations' conducting their business activities responsibly with special attention given to environmental issues, deforestation/desertification, pollution, greenhouse gasses/carbon dioxide [GHG/CO2] emissions, and land degradation. Deegan and Unerman (2011) pointed out that the natural resources organisation made use of does not only belong to them and since they take this resources from the community and return waste generated by them also into the environment, the society would expect that the benefits of environmental management should exceed the cost they bear. AbdulRafiu (2017) said it
61
is the responsibility of organisations to ensure that environmental effects due to their business activities are properly managed, controlled and duly reported. Adams (2004) posited that accountability means rendering account and the processes guiding the provision of such account to stakeholders. Accountability has to do with information pertaining to finance and those not related to funds, evaluating them so as to apportion praise or blame where necessary (Stewart, 1984).
This means that
accountability can be ensured when there is a mechanism put in place to commend or punish organizations that engage or does not engage in the practice of corporate environmental accountability. Research showed that organisations believed profitability reporting is the only means of accountability as it is visible practically that most organisations' environmental reports usually contain information on accounting for sustainable profits instead of environmental sustainability, it is, however, suggested that accountability should go beyond this and look at corporate ethics as well as social and environmental performances of the organization (Adams, 2004; Belal, Cooper & Khan, 2015; Belal, Cooper & Roberts, 2013; Brophy & Starkey, 1996). 2.1.9. Environmental Accounting and it Relationship with Conventional Accounting Financial accounting and management accounting involve making information pertaining to the organisation available to the external and internal users respectively, that is putting together information that would show how the organisation has effectively consumed available resources to enhance stakeholders' value (Horngren, Datar & Foster, 2005), but conventional accounting has not been able to separately recognise organisations' environmental-related impact, as it paid more attention to economic or financial performance of the organisation (Burritt & Saka, 2006; Frost & Wilmshurst 2000; Gray, & Bebbington, 2001; IFAC 2005). Environmental issues are however, increasingly becoming of great concern all over the world (IFAC 2005) as evidence from the study of Ditz, Ranganathan and Banks (1995) where they identified that it contributed a lot to the accumulated costs of which conventional accounting practices have not been able to adequately take care of (Ditz et al. 1995) the gap which environmental accounting is meant to fill.
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According to Epstein and IMA Foundation for Applied Research (1996), lack of adequate information or gap in information has been identified as a limitation to organisations performance as it regards the environment. There is, therefore, a need for innovations such that a well-designed measurement and control system to enable organisations have a better understanding of their environmental impacts. The main feature that separated conventional accounting from environmental accounting is that conventional accounting make available monetary and physical details of organisational activities that is management accounting makes available information that concerns revenues and costs, it generally makes available information on organisational financial position and financial performance to external stakeholders while other accounting systems serves to regulate organisational activities such as tax or bank regulatory accounting (Burritt, Hahn & Schaltegger, 2002). The physical information made available by conventional accounting systems are for the purpose of inventory and material management, proper production planning and quality control which does not in any way recognise separately and clearly organisational environmental impacts (Schaltegger & Burritt, 2000). They stated further that it concerns systems activities and methods of recording analysing and reporting environmental issues. IFAC (2005) stated that environmental accounting is a wide concept which can be used in many contexts among which are: evaluating and disclosing environmental information so as to render account and report, aggregating and reporting of accounting information at the organisational level, national level and considering environmental information in both monetary and physical terms in the form of sustainability accounting. 2.1.10. Corporate Environmental Reporting Corporate environmental reporting according to Lodhia (2006) is a process by which environmental information are disclosed to stakeholders by organisations. The concept has been used and accepted by society as a means by which organisation show their accountability to the environment (Bebbington, Larrinaga & Moneva, 2008; O'Dwyer, Owen & Unerman 2011). Organisations made use of some media to make the environmental information known to the stakeholders among which are annual reports, environment reports, newsletters (Lodhia. 2005; Zéghal & Ahmed, 1990). The 63
development of the Internet has also added to this means as corporate environmental reports can be found on organisations' websites. A major issue of concern in environmental reporting is the type of information that corporations must disclose to be accountable. Managers have argued that very few people make use of the environmental information in their reports (Adams, 2004), literature on the other hand has proven otherwise, it has been shown that a number of stakeholders used environmental accounting information to make informed decisions to serve their interest (Freedman & Jaggi, 2009; McBarnet, 2007). With this, corporate environmental reporting is an important tool that would enable stakeholders hold organisations responsible and accountable for their impact on the environment. Corporate environmental reporting can be viewed from three perspectives that is involuntary, voluntary and mandatory environmental disclosure (Uwuigbe, 2011). He stated further that involuntary is disclosure without permission or against the company's would, voluntary environmental reporting has to do with willingly disclosing organisations' environmental information. While mandatory environmental reporting is the requirement by law that organisation has to compulsorily make available information with regard to its' environmental activities. However, as a result of the continuous demand of the stakeholders for organisations who are responsible for environmental degradation to be accountable and disclose their environmental information, this study added to the voice of other researchers (Ionel-Alin, 2012; Musa et al., 2014; Uwuigbe & Jimoh, 2012) and recommended the adoption of both voluntary and mandatory disclosure of environmental information in the annual accounts. 2.1.11. Environmental Costs Hansen and Mowen, (2000) opined that it could also be said to be cost attached to generating, discovering, remediating and preventing environmental degradation (Hansen & Mowen, 2000). The U.S. Environmental Protection Agency EPA (1995) itemised costs associated with environmental activities to include: conventional costs identification (i.e environmental raw materials and energy costs) potentially hidden costs (costs recognised by the accounting system but are limp up with overheads) contingent cost (costs expected 64
to be incurred in the future) and image and relationship cost. To Enahoro (2009) a better understanding of environmental cost cannot be achieved without reference to some terms which have assisted in giving better meaning to the concept among these terms are total costs, full costs, true costs, life cycle costs and this helps to further emphasise the deficiencies associated with the conventional accounting as it has not been able to properly capture environmental costs. 2.1.12. Environmental Accounts (Environmental Profit or Loss Accounts) This reporting instrument of an organisation's performance according to Sabeti (2011) is based on the need to complement the conventional account to include revenues and costs in figurative terms relating to different environmental impacts. Gray and Bebbington (2001) pointed out that there is the need to include cost relating to organisations' effect on the environment, Bebbington, Brown and Frame, (2007), suggested putting this idea into practice and defining the boundaries and limits. Arena, Conte and Melacini (2015) identified BSO Origin as the first organisation to publish environmental profit or loss accounts in 1990 and also Puma in 2011 published its own environmental profit or loss account (Gray & Bebbington, 2001; Huizing & Dekker, 1992; Puma, 2011; Sabeti, 2011). According to Arena et al., (2015) environmental profit or loss accounts were used for external
accountability
and
therefore
serves
to
complement
real
figurative
communications, converting environmental outcomes into monetary terms (Gray & Bebbington, 2001; Huizing & Dekker, 1992; Sabeti, 2011). Environmental profit or loss can be used to motivate managers to adopt environmentally friendly attitude, assist in visualising from the information gotten the economic and environmental impacts associated with decision that have to do with the environment (Jones, 2010; Maunders & Burritt, 1991), the effects from the extra costs and potential savings occurring beyond a fiscal year (Saravanamathu, 2004). 2.1.13. Environmental Activities in Nigeria: The Experience Nigeria as one of the developing nations with access to abundant natural resources is experiencing its own problems in the quest for development; the activities of government 65
such as gas flaring, industrial pollution, oil spillage, deforestation, irregularity in the distribution of oil proceeds and other related issues may have significant influence on quality of life of its citizenry (Donwa, 2011). Eze et al., (2016) with the huge sum of money in the coffers of government from the proceeds from sale of crude oil and other natural resources on a daily basis, an ordinary man would have thought that the citizens would be comfortable through provisions of needed resources, but it is, however, a sorry state as it could be observed that most of the states where these resources are gotten are in abject poverty, and the multinationals benefiting from these communities have also not been of tangible assistance either, the detrimental effect these spills from oil exploration and other industrial waste generated by these companies have continually left terrible landmark on the host communities. Going with the stakeholder theory, it is imperative to ask if the multi-national companies are socially accountable in enhancing the quality of life of the host communities and ensuring proper environmental control measures in accordance with the dictate of the international regulatory laws (Eze et al., 2016). The inability of the leaders in Nigeria and the oil companies to identify with the cry of these exploited communities and the citizens in totality leads to agitations, which have continuously destroyed lives and property. From the study of Donwa (2011), the agitations of the host community has centered on the fact that the promises made to the communities have only been on paper and have not been acted out since the discovery of oil in the region, government has abandoned them, the farm land and waters are polluted, there is high level of deforestation, and erosion, the air is polluted, water polluted, land polluted, there is no source of livelihood for the members of the communities, the health status of the people is continuously affected, they are threatened with leukemia, birth defects, dizziness, slow reflexes, loss of consciousness, heart failure, strokes and untimely death, while the money separated for development of this part of the country is being used to develop other parts of the country (Mabogunje, 2007).The quest for profit maximisation by these ‘parasites' that is the companies have made them strikingly rich to the detriment of the environment and effective management of the environment has been an issue (Eze et al., 2016). 2.1.14. Environmental Challenges 66
Regardless of all efforts put into place in Nigeria, particularly, after the Rio conference to address issues affecting the environment, environmental degradation is still persisting, the problem of water, air and noise pollution is still persisting and effort to minimize these have continually proven abortive (Sada & Odemerho, 1998; Uwuigbe, 2011). Oil spills and waste from industries, heavily pollute shorelines, destroying plants and animals, endangering fish hatcheries, contaminating the skin of commercially valuable fish, interfering with the oxygen levels and reducing the lifespan of water animals (Worgu, 2000). Uwuigbe (2011) stated that conducting clean up in order to restore the environment with the application of dispersants causes further damages to aquatic animals while the consumption of these animals by man and other animals results in food poisoning which leads to loss of lives generally. Unfortunately, any oil spilled is not easily recoverable as the oil quickly spreads into thin films, dissolves in water, dispersed with the help of tides, wind and ocean current and results in loss of economic resources to the government (Nwankwo & Ifeadi, 1988). The Niger Delta area has continually been under siege from pollution, therefore, to encourage environmental survival, manufacturing companies and oil companies involved in waste disposal and oil exploration need to properly record, analyse and report environmentally induced ecological and financial impact (Uwuigbe, 2011). Studies identified that the major environmental problems affecting Nigeria includes deforestation, drought and desertification, soil and coastal erosion, pollution of air, land and water, water hyacinth invasion, land degradation and health hazard (Adediran and Alade, 2013; Akintoye, 2014). 2.1.14.1. Deforestation This results from continuous, unchecked felling of trees which causes loss of soil fertility (Adediran & Alade, 2013). 2.1.14.2. Drought and Desertification Drought results in lack of water for plants and animals to survive. Desertification involves the loss of biological or economic productivity and complicity in croplands and pasture (Adediran & Alade, 2013). 67
2.1.14.3. Soil and Coastal Erosion Water and sea waves are the catalysts of erosion in the southern part and movement of the wind in the Northern part of the country (Adediran & Alade, 2013). 2.1.14.4. Pollution Pollution generally, whether air, water affects the environment. It could take the form of illegal release of industrial liquid waste to streams, rivers and open drains, oil transportation and exploration carried out in oil-producing regions, In Nigeria, some industries do not dispose their solid waste properly and industrial liquid waste is still discharged in some cases into places that are harmful to the communities (Akintoye, 2014). 2.1.14.5. Water Hyacinth Invasion This is a free floating plant which grows up to three feet in height. Its growth has a negative economic impact which includes the dogging of irrigation channels, loss of fishing areas and increases in breeding habitat available to disease-transmitting mosquitoes and others and this is making it increasingly costly to generate clean water (Adediran & Alade, 2013). 2.1.14.6. Land Degradation Conacher and Conacher (1995) saw land degradation as a human influence on the natural process which negatively affects the ability of the land to effectively function within an ecosystem as a result of its acceptance, storing and recycling water, energy and nutrients. The causes of land degradation are identified as anthropogenic and mainly agricultural related. They include land clearing and deforestation, agricultural depletion of soil nutrient, urban conversion, irrigation and pollution. Land degradation significantly affects the nation. It nullifies the expected gains from improved crop yields and reduced population growth (Conacher & Conacher, 1995). 2.1.14.7. Health Hazard
68
The health of citizens has been highly threatened by environmental pollution as they are continuously affected with leukemia, birth defects, dizziness, slow reflexes, loss of consciousness, heart failure, strokes and untimely death (Mabogunje, 2007). 2.1.15. Environmental Regulations and Standards (Nigeria Scenario) The fundamental purpose of laws is to achieve sustainable living which can be accomplished through ensuring the integration of environmental mindfulness into unfair treatment of natural resources it is with this that local and international regulatory institutions were directed towards achieving equilibrium between the unfair treatment and protection of the natural resources from potential dangers (Uwuigbe, 2011). The Nigerian 1979 constitution guarantees the right of an individual to life and this include right of access to unpolluted water, land and air. Some of the important legislation and regulations that deal with environmental degradation in Nigeria include: Criminal Code Act. (CAP 77. L.F.N. 1990) The Act Cap 77 LFN 1990 Section 234 makes it a punishable offense for anyone in the course of exercising his/her own right, obstruct or cause any damage to the environment or public. Anyone found guilty would be imprisoned for 2 years; it is also an offense for anyone who fouls water body, tank, reservoir, spring, stream, well and makes it unfit for the reasons for which it is usually used, anyone found liable would be jailed for 6 months. Federal Environmental Protection Agency (FEPA). ACT. 1988. (CAP 131 LFN 1990) Nigeria environmental regulation existed only on paper before 1988 but with a foreign company attempt at dumping dangerous chemical in the Niger Delta part of the country, the lapses in the country's environmental regulation became obvious. This led to the enactment of Decree No.42 of 1988. This also brought about agencies to monitor and protect the environment. The FEPA Act forbids any contamination of the environment and anyone one found violating would pay fine of #100,000 or 10 years jail term or may be both an organisation would pay #500,000. The Harmful Waste Act 1988 (CAP. 165. LFN 1990) 69
Prohibit a person or corporate body from carrying, transporting, selling, buying, importing, depositing, dumping or carried, transported, sold, dumped in any part of the country. Any person or corporate body found wanting under the Act would be liable for life imprisonment. National Environmental Protection S.I.8. (Effluent Limitation Regulation 1991). The Law provided that anyone who violates the provisions of this Act and if found guilty would pay a fine of #100,000 he may also have to be imprisoned for 10 years or may experience the both for an organisation it would pay a sum of #500,000, in addition, a fine of #1,000 would be paid for the days the offence continues. Any person(s) who act for or on behalf of such body corporate shall be personally liable and punished accordingly. Regulations on Environmental Impact Assessment (EIA) that of importance in Nigeria include: (EGASPIN) Environmental Guideline and Standard for Petroleum Industries in Nigeria, Environmental Impact Assessment Act (EIA) 1992, 2002, Department of Petroleum Resources (DPR). Environmental Impact Assessment Act, (1992) EIA is made mandatory for projects which are private and public-oriented in Nigeria. Guidelines were put into place to ensure this and they include: the consideration of the degree these impacts may have on the environment before embarking on such projects, this makes for the need for proper communication when there is the knowledge that the proposed project would negatively affect the environment, encourage implementations of relevant policies. Federal Ministry of Environment is thereby empowered by this Act to see to the execution of the EIA projects. Oyeshola (2008) observed that Nigeria has lots of regulations together with provisions and penalties in place to monitor environmental problems but the problem comes from its implementation or enforcement of the laws. They stated further that stakeholders, therefore, need to follow up on all these laws and ensure an effective enforcement. 2.1.16. Accounting Standards
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International Accounting Standard on Environmental issues, a professional body like International Accounting Standard Board (IASB) has in place standards guiding accounting practices and of relevance to environmental issues. Although, technically, some aspect of the standards is not really spelled out to take care of environmental issues, there are examples contained in some other parts which made it relevant and making it possible to give meaning to core areas of environmental liabilities and provisions. Disclosure of Accounting Policy (IAS 1) This standard identified that every significant accounting policies be made known in all the notes contained in the financial reports. With the continuous reference made to environmental issues affecting the organisations, the possibility remains that the treatment placed on environmental liabilities and impaired assets would be referred to particularly as regard environmental sensitive organisations whose activities affect the environment a lack of stated policy may be a cause for disapproval. IAS 1 does not ask that environmental costs and liabilities be separately disclosed, but the stakeholders are expecting to see the disclosure of such information as well as its' appropriate explanation. It is however suggested that in a situation where environmental costs are disclosed, the manner of identification of such costs should be explained in order to ensure that there is no conflict in the comparison between organisations. IAS 1 should, therefore, demand that environmental costs and liabilities be separately disclosed where these are material to the organisation, where the information would greatly affect decisions of the users, the accounting policies should support this disclosure by stating what they represent, its accounting treatment and in the case of environmental capitalised costs whether the amount concerned is delivered from an allocation of total costs, or is restricted to those costs that relate totally to environmental factors. It is expected that the IFRS would take this decision. Property, Plant and Equipment (IAS 16) The standard talks about recognising and measuring property but some plant and equipment may be gotten solely or partially to meet environmental demand. The standard gives room for expenditure relating to an item of property, plant and equipment to be 71
subsequently capitalised only when there is the probability of future economic benefits that exceed the initial assessed standards of performance of the existing assets that would result from it and go to the organisation. The issue of environmental expenditure, the mitigating effect of environmental damage and avoiding any future closure, for instance, where new laws would have made an organisation limit its activities and regard this as a way of generating future benefits, but there has been no direct increase in the future economic advantage of any identified presently in use property, plant and equipment. Acquisition of these assets may be needed to assist the organisation derives future advantages from other property its own. The standard also recommended the identification of the situation where the amount recovered from property, plant and equipment reduce below its carrying amount as a result of the impairment, the carrying amount should be so written down and the difference is recognised as an expense. Assets gotten are only identified to the extent that the resulting carrying amount involved does not go beyond the total amount recoverable from the asset and any other related assets. It is expected that IAS 16 make available a guide on how to treat environmental expenditures relating to property, plant and equipment and make clearer the criteria for capitalisation that is whether there is a need for an increase in expected economic benefits instead of continued economic benefits. This should also be taken care of by IFRS. Impairment of Asset (IAS 36) IAS 36 detailed variety of indications for likely occurrence of impairment and attached little significance to the importance of management interest in understanding the appropriate accounting treatment. Measuring environmentally impaired assets may be affected by: a) Delay in disposal of an asset as a result of dealing with contamination, coming from clean-up costs and increased interest charges. b) Uncertainties experienced as a result of the possibility for improvement with related technological advancement or changes in legislation.
72
c) Risks coming from the stigma effect, restraining potential purchasers and resulting in a more limited market. IAS 36 talks about the amount recoverable from a cash-generating unit that is, it is sometimes subject to the recognition of assets which are not part of the cash generating unit. The standard, however, does not extend this method to the impact of contaminated land. The standard also addressed problems identified with measuring impairment of assets which are as a result of environmental factors, the problem of determining the recoverable amount as well as the timing involved. The standard should make further reference to the stigma effects of environmental impairment on potential purchasers.
Provision, Contingent Assets and Liabilities (IAS 37) The standards recommend the identification of provisions when an organisation has a current law related duties due to past event which has the capacity of being reliably estimated and likely that resources outflow would generate the required economic advantages that would be needed to offset clean-up costs and penalties for unlawful damages caused to the environment. When a law is changed, an obligation that was formerly not present would become more visible at a later time, but the impact of any new legislation put into consideration when measuring an existing obligation becomes visible only when there is enough objective evidence that there is every certainty that the legislation would be enacted. The standard, however, identified that there may not be sufficient evidence until new legislation is brought to life in many cases. Uncertainty, there prevent the amount of the obligation that is being measured to be reliable. With this, IAS 37 requires the disclosure of contingent liabilities. Intangible Assets (IAS 38) The continuous usage of intangible assets in the environmental window such as pollution permits and emission rights appears to fulfill the criteria for identification as intangible assets, in that they are likely to lead to future economic benefits to the enterprises. There is a need for clarification as to whether items such as emission rights and pollution 73
permits which are of increasing usage in the environmental window would meet the standard and be recognised as intangible assets. 2.1.17. Environmental Taxes Environmental taxes take different forms, but generally, it is measures taken by imposing taxes on environmentally damaging activities or credit products or activities that are beneficial to the environment (Milne, n.d). She stated further that all form of tax systems, income tax, excise tax, property tax can incorporate environmental tax measures at all level of government, local state and federal.
According to Somorin (2012), an
environmental tax is a tax that is imposed for the purpose of the environment that is the tax that is meant to provide incentives for the reduction of particular emissions or taxes on environmentally harmful products. She stated further that the main reasons for environmental taxes are to reduce the burden of environmental problems and preserve the environment. Williams (2016) pointed out that the idea of using taxation as a corrective measure for negative externalities is linked to Pigou in 1920. This concept he further stated is based on the notion that negative externality is created when the production or consumption of some goods cause damage to someone other than the seller or buyer of such goods or substances and this is seen as an element of market failure because their action failed to incorporate external cost into their decision making and enforcing a tax on such externality generating product is a measure of correcting the externality. Somorin (2012) stated that environmental taxes take three different forms that is, it serves as fees or taxes used to generate revenues for environmental cleanup; leads to changes in behaviour, as a result, leads to pollution prevention and serve as measures to reduce consumption. The practical aspect of enforcing a theoretical ideal tax is not easy as it is rather very difficult to estimate marginal damages, especially in situation where the danger is expected to occur in the future as seen in the issue of greenhouse gas emissions or with variability in the damage experience across space and time as seen in the local air pollutants. In many situations, measuring emissions and imposing the actual taxes is a difficult task to perform by the taxing authorities which then necessitated the imposition of tax on some proxy for emissions like the amount of fuel burned. The taxing
74
authority resolved to choose a proxy that is very close to what matters for marginal damage particularly when it is impracticable to tax emission directly (Williams, 2016). There are alternative policies that are used to reduce environmental pollution apart from taxes. This includes tradable permits, technology or emission standards and subsidies for adopting less polluting alternatives. According to Williams (2016), the best policy to function without waste makes available modalities for reducing emissions and at the same time gives the market flexibility across various methods of reduction in emissions for a particular emitter and across different emission generators. Somorin (2012) made it known that several environmental taxes are in existence all over the world among which are taxes and charges for forest or logging concessions, gas flaring, environmental impact assessment, environmental pollution and levies for environmental improvement while in Nigeria, environmental taxes are in the form of petroleum tax, cattle tax, penalties for gas flaring, road tax and agricultural tax. The Organisation for Economic Co-operation and Development OECD (2011) structured a design for environmental taxes to take the form: a) the scope should be as broad as the scope of the damage; b) environmental bases should be enforced on the pollutant or polluting behaviour with few exceptions if any; c) the rate should be in equal proportion to the damage; d) it must be credible and its rate predictable so as to motivate environmental improvements e) the distributional impact should be addressed through other policy instruments; f) the revenues from environmental taxes can help fiscal consolidation or reduction of other taxes. g) it must be clearly communicated to the public; h) its combination with other policy instruments may be needed to forestall certain issues i) there is the need to assess competitiveness, coordination and transitional relief.
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There is a current trend on the introduction of carbon tax, which is the tax meant to handle carbon dioxide emitted majorly through burning of fossil fuels (Akinwande, 2014; Odinkonigbo, n.d). The advocates for this type of tax see it as the relevant tax to create a stable price for emissions which is important and needed by organisations involved in long-term decisions concerning investment and innovation in low emission technologies. Akinwande (2014) made it known that Nigeria has peculiarities concerning its tax system implementation as it operates a "slow ramp-up" system whereby tax is gradually introduced over time from low initial rate and then increasing it at a pre-announced schedule so as to get to the desired system. The country is also faced with weak enforcement. It was stated in one of the reports of the Nigerian Extractive Industries Transparency Initiative that the volume of gas produced was not made available before flaring, as the Figures made available were computed by the companies and forwarded to the Department of Petroleum Resources (DPR) after flaring of the gas. This showed serious lapses in the control and monitoring mechanisms put into place by the DPR whose duty is to see to it that these companies make available accurate and reliable information. He further identified that there have been deficiencies in the legislative framework for greenhouse gas reporting in Nigeria. This, therefore, pointed to the urgent need for a legislative framework for mandatorily reporting emissions for the effective accomplishment of the carbon tax system as it must be backed by robust enforcement for effectiveness and transparency (Akinwande, 2014). 2.1.18. Appraisal of Environmental Restoration Strategy in Nigeria Despite the beautiful legislative plans the country has in place, environmental problems are still persisting. Scholars pointed out that putting laws in place is not a major problem but the implementation of such enacted laws, as well as an effective judicial system strong enough to enforce formal rights are what is missing in Nigeria (Okike, 2007; Ahunwan, 2002). The study of Adeoti (2001) discovered that the environmental policies of the manufacturing companies are very weak and this is evidenced in the poor state of technology adopted in controlling their emission a situation that is assisted by the weak emission reduction policies in Nigeria as there has not been any culprit organisation or individual arrested for emitting dangerous substances into the environment. Ladan (2009) 76
critically analysed the Nigerian environmental laws and the activities of the environmental agencies in place and discovered some challenges faced by these agencies which affects their performance. He found out that Nigeria laws are structured to react to situations after events rather than having in place a stated strategy or plan, or being in an advantageous position when detrimental events arise. Furthermore, with the level of corruption in the country and among the staffs of the regulatory agencies, setbacks are also experienced as the materials worked with are outdated (Ladan, 2009). Legislations to control environmental pollution were further modified, while new ones were promulgated in Nigeria, but despite these efforts, the level of the pollution experienced in the country has brought out the ineffectiveness of these laws as they have not been backed up with actions. For instance, Section 3 of the Associated Gas Reinjection Act ban gas flaring but still gives permission to polluters to continue this act on the payment of a fine. Looking deeply at the section, the minister for petroleum is empowered to decide who to permit and the fines to be paid for every 28.317 standard cubic meter (SCM) of gas flared. The penalty for gas flared was US$3.50 for every 1000 SCF gas flared in 2008. According to Akinwande (2014), the 2012 report of the Nigerian National Petroleum Corporation (NNPC) showed that gas flare is only reduced by 15 percent, this in order words erupted the question of the effectiveness of the tax laws as it has not been effective in discouraging environmental pollution, he concluded that there is the need for a legislative framework for compulsorily reporting information on emissions in the country (Offiong, 2011). In order to address the fourth objective of this study, the researcher conducted a one-on-one interview with some of the stakeholders on their perspective of the environmental restoration strategy in place in the organisation and the country as a whole. This was detailed in the discussion of findings in chapter four of this study. 2.2.
Theoretical Review The theoretical perspective provided a mirror to understand better the issue under investigation in this research. Theories were reviewed and a theoretical framework was designed for the study. The theories reviewed in this study, therefore, include:
77
Legitimacy theory, Voluntary disclosure, Signaling, Systems, Stakeholder and Accountability theories 2.2.1. Legitimacy Theory Parsons (1960) defined legitimacy as appraising actions as it has to do with common values in the context of the involvement of the actions in the society, it is a process by which organisations prove in a superordinate system its right to exist. The theory was propounded by Dowling and Pfeffer in 1975. It is based on the assumption that organisations' policies are in agreement with the policies of the larger society (Dowling & Pfeffer, 1975; Guthrie, Cuganesan & Ward, 2007; O'Donovan, 2000). According to the works of Dowling and Pfeffer (1975), it is important when considering the relationship between the organisations and the external environment, with legitimacy, a link is established that states what is acceptable as the normal way of behaviour in the society together with social values connected to or implied from their activities. That is, organisations should make sure that they work within the acceptable standards of the society. Legitimacy theory according to Nordahl and Chiem (2014) is system-oriented as it regards the opinion of organisations as part of a broader system. It is based on the premise that organisation should conduct activities within what is acceptable to the society by making sure that their activities are seen as legitimate by the society that is organisations would adopt strategies to see to it that the society is confident that they are operating within its values and norms (Gray, Kouhy & Lavers, 1995; Hearit, 1995; Nwachukwu, Ogundiwin & Nwaobia, 2015; O'Donovan, 2000; O'Donovan, 1999; Suchman, 1995; Tilt, 1999). Nwachukwu et al., (2015) emphasised that in addition to the organisations' profit maximisation motive, they also owe the society moral right to be socially responsible and participate in environmental issues (Hawken, 1993; Kuruppu & Milne, 2010; Shocker & Sethi, 1973; Solomon & Solomon, 2004) by ensuring that environmental information disclosed in organisations' financial reports and accounts elicit their reactions to societal demands (Magness, 2006). The theory posited that the greater the probability of a move away from the social perception of how a company should act, the more the intention of the organisation to 78
work towards maintaining the relationship or managing these shift in social perception (Ashforth & Gibbs, 1990; O'Donovan, 1999). The theory further postulated that disclosures at the corporate level are carried out to respond to environmental pressures in order to achieve environmental performance and to support the organisation's existence and business activities (Cho & Patten, 2007; Guthrie & Parker, 1989). Organisations, therefore, respond to giving up greater volume of information so as to maintain their value of being portrayed legitimate (DeVilliers & VanStaden, 2006). Ghazali, (2007) argued that the theory also support the idea that where an organisation is negatively affecting the environment, the members of the society may tag the company as not environmentally friendly and decide to avoid patronising its products or requesting that government should intervene in such situation with this, organisation take various measures including communicating with the affected stakeholders to resolve such issue (Ashforth & Gibbs, 1990). Some other researchers have different view about this, stating that organisations have some other reasons for making available information that are not financial in their financial statements and reports, one of which was to make them perform better and continue to remain in business (O'Dwyer et al., 2011). However, a limitation of the legitimacy theory is that it pays more attention to reasons behind disclosure of corporate information while paying little attention to how they do it, reason for doing it, why there is difference in organisations' environmental practices. Despite the fact that the theory is adopted in environmental reporting as an effective tools in explaining the reasons for organisations environmental reporting (Brown & Deegan, 1998; Deegan & Gordon, 1996; Deegan & Rankin, 1996; Guthrie & Parker, 1990; Islam & Deegan, 2008; O'Donavan, 2002), it is however not effective for this study as it is inadequate in detailing comprehensively the true position of environmental accounting in Nigeria. 2.2.2. Voluntary Disclosure Theory This theory was credited to Verrecchia in 1983. According to Jensen and Meckling (1976) in the attempt of managers who are seen as the agent of the organisation to reduce their costs and maximize their own personal wealth, get involve in information asymmetry because they possess more information about the organisations that the 79
owners and thereby information is made available to stakeholders as they deem fit (Healy, Hutton & Palepu, 2001; Jensen & Meckling, 1976). The theory is based according to Jensen and Meckling on the consideration found in the agency theory, which asserted that agency costs are borne mainly by agents. Grossman (1981) in his study pointed out that theoretical studies on disclosure attached total disclosure to the opinion that organisations who don't disclose are with more terrible information which cannot be shared with the stakeholders or they are not ready to be influenced particularly by their competitors. This theory's relevance to this study is such that accounting studies that have to do with disclosure mostly talk about the type of disclosure in existence and the actual disclosures made by the organisations. However, the theory has not been able to help incorporate environmental accounting information into organisations' financial reports as doing this is with the discretion of the managers and they are free to include whatever information they feel are relevant and exclude those they feel are not important to them. 2.2.3. Signaling Theory This theory was propounded by Spence 1973 to clarify information asymmetry in the labour market. Signaling occur when there is information asymmetry that is a situation where managers who are the custodian of organisations' information have access to more information than stakeholders (Aburaya, 2012). Signaling theory indicated that to reduce the gap between users of information, the person in the possession of the higher volume of information should release it (Morris, 1987). This theory has been used to clarify the reason behind voluntary disclosure decisions in annual reports (Schleicher, 2007). Signaling theory is premised on the assumption that more information is only disclosed when organisations are performing (Ross, 1979). There is therefore the need for managers to signal successfully and ensure credible signals (Eccles, Herz, Keegan & Philips, 2001). The theory though have been used in relation to disclosures, it is not relevant to this study as making information available only when organisations are performing is not adequate for decision making. With this, organisation should ensure that adequate and relevant information are made available so as to enable the users make informed decisions. 2.2.4. Stakeholder Theory 80
This theory was propounded by Freeman in 1984. He defined stakeholder as any person(s) that has influence or can be influenced by the business of the organisation in the quest of achieving its purpose (Freeman, 1984). The survival of any organisation depends on the support and the approval given by them. In Freeman (1984), the theory talked about identifying the link between organisation's behaviour and the stakeholders that is its concern is more than the traditional understanding between management and shareholders, it involves all interested persons in the organisations' affairs (Ansoff, 1965; Freeman, 1984; Nwachukwu et al., 2015). Bassey et al., (2013) highlighted that stakeholders are groups or individuals who are influenced or can influence corporate activities. They emphasised that the long-run survival of the organisation depends on its stakeholders' support and approval. They stated further that the more power stakeholders possess, the better the organisations' ability to meet their demand. The theory according to Phillips (2003) provides a means of connecting ethics and strategy which can help organisations who have the intention of serving the interests of all the stakeholders create value over time (Campbell, 1997; Freeman, 1984; Freeman et al., 2007). The theory is said to be divided into two branches according to (Deegan, 2009; Deegan, 2000; Eltaib 2012); which are managerial branch and ethical branch. The managerial branch talked about stakeholder power, viewing the organisation as a part of the society. It should be noted that stakeholders would not receive the same treatment from organisations as it would treat the more powerful stakeholders importantly (Deegan, 2000). In contrast to this statement, Deegan (2009), Donald and Preston, (1995), as well as Hasnas (1998), said that ethical perspective views all stakeholders as equally important. Ullmann (1985) made it known that the power stakeholder possesses in influencing the organisational decision is affected by the amount of control over organisations' resources. Watts and Zimmerman (1978) pointed out that the pressures stakeholders placed on the organisation make them disclose environmental information. Organisations must seek permission and approval of stakeholders before proceeding with its business activities this means the stakeholders possess some power over the organisations, this theory is directly holding organisations responsible to render 81
stewardship accounts for the resources kept in their care by the stakeholders (Deegan, 2002; Jamali, 2008; Unerman & Bennett, 2004). Bridoux and Stoelhorst (2013) in their study on managing stakeholders with heterogeneous motives talked about how organisations can create value by managing the relationships with their stakeholders. While Umulkher and Muganda (2017) concluded that accounting for the environment assist organisation to accurately assess cost and benefits of environmental preservation measures. Gray et al., (1996), organisations have responsibility towards all its stakeholders, therefore the theory is particularly tailored towards creating value for all stakeholders as a major aim of its existence within that environment (Nwachukwu et al., 2015), organisations with ability to satisfy stakeholders' demand, improve on their reputation and have a positive financial impact while organisation who does otherwise have a negative impact (Mushka, 2015; Wood, 1991). Stakeholder theory has been widely used solely or in agreement with other theories (Deegan & Blomquist, 2009; Islam & Deegan, 2008; Jamali, 2008; Zaman & Shiraz, 2011). Scholars see it as a sign for the organisation to take up their responsibility of being accountable for their activities to the stakeholders (Islam & Deegan, 2008; O'Dwyer, 2005; Unerman & Bennett, 2004). Some researchers argued that the theory concentrated on clarifying the connection between the organisation and stakeholders (Bebbington et al., 2008; Clarkson, 1995; Deegan & Blomquist, 2009; Jamali, 2008; O'Donovan, 2000) while others pointed out that despite the history and the time of its existence, stakeholder theory still needed further development (Agle, Donaldson, Freeman, Jensen, Mitchelll, & Wood, 2008; Freeman et al., 2007, Freeman, Harrison, Wicks, Parmar, & De Colle, 2010). Another limitation identified with stakeholder theory is that it has not been able to address modalities adopted by organisations in managing their relationship with stakeholders especially the more powerful ones. 2.2.5. Accountability Theory This theory is accredited to Tetlock in 1983. Borrero and Borrero, (1979), defined accountability as a statement eliciting clearly the intention of parties on a different part of 82
the coin, the service provider and the recipient of such services and evaluation of the effectiveness and/or efficiency as the case may be of the purpose to both parties. Bovens (2007) saw it as a connection between two parties to which one is the performer and the other is the congress, whereby the performer has the duty to justify and account for his or her behaviour while the Congress has all the right and power to apportion praise or blame on the performer. Accountability theory is concerned with the responsibility of making available detail list of action, to which an individual can be held accountable (Gray, Owen & Maunders, 1991). Cooper and Owen (2007) defined it as the obligation of accounting entities to detail and justify activities and events. This study hereby used the definition of Bovens (2007) since it identified the stakeholders as the party to whom accountability should be made. Accountability bring together the impression of corporate social responsibility that organisations have to take responsibility for their action as it has to do with environmental and social effects, while rendering stewardship to the stakeholders for decisions taken (Adams 2002; Cormier & Gordon 2001; Gray et al., 1995, Gray, Owen & Maunders, 1987, 1988). The relationship between organisations and those they are to account to (the stakeholder) is defined as reflected in their relative powers and the extent of which is based on the ability of the people involved to request for it (Gray et al., 1997). Staffan (2013) in his study on accountability pointed out that accountability possesses four characteristics which include: An individual/ agent or organisation who is to give account; an area/responsibilities/ activity/ domain subject to accountability; an individual/ agent/organisation to whom account is to be given; the right of the person/organisation to require
accountability,
explanation
or
justify
decisions
taken
from
another
person/organisation with regard to his activity/responsibility or the use of the resources in this case environmental activities and then the right of the person/organisation receiving the account to sanction the person rendering account if he fails to inform and/or explain/justify decisions with regard to his activities. Shearer (2002) argued that accountability has to do with responsibility towards others rather than self-interest while some other researchers had a different opinion about this (Carpenter & Feroz, 1992) by pointing out that in reality, accounting supports social and 83
political structure instead of being a tool for solving ethical problems or for creating accountability by reacting to stakeholders' interest. This might contribute to the attitude of the organisations towards the environment since this markedly changes the underlying idea behind the principles of accounting and accountability. This study considers the opinion of Hines (1988) who created the expression that when preparers of financial information are communicating reality they concurrently create reality. Frink and Ferris (1996) identified that Baring Bank failure, Hubble telescope flaw can be explained rationally as a failure in accountability. So also are the cases of Enron, the involvement of Arthur Anderson accounting firm, and the World Com disaster can be attributed to a failure in accountability (Frink & Klimoski 2004). The law in existence in the society is an issue that serves as a key factor in making organisations accountable to the society (Stone, 1975) since low regulation allows maneuvering to increase. Therefore, the right individual or stakeholders have to information which could be both legal and moral rights must be put together to enable them to hold the position of being accountable to (Odhiambo, 2015). Hines' (1988) view could therefore greatly affect the environmental accounting information that is being made and their presentation. Relating this to the study that is environmental accounting and stakeholders' value, organisations hold it a responsibility to the stakeholder to account, they should tell them how they have handled issues that concern the business and the environment we, therefore, argue that the financial statement and reports which is a major instrument through which the stakeholders understand what is happening in the organisation should contain the environmental accounting aspect to detail environmental information of the organisation. 2.2.6. Systems Theory Systems theory according to Anderson, Carter and Lowe (1999) can be defined as a way of thoroughly detailing increasingly complex systems across a continuum which encircled the person-in-environment. According to Capra (1997), it is a theory relevant to all discipline concerning how a system works in nature, society and in many scientific territories together with an underlying idea with which a critical inquiry can be carried in totality by considering all factors under study. It deals with the movement of ideas from 84
studying the part of a phenomenon to the whole (Checkland, 1997; Jackson, 2003; Weinberg, 2001). Systems theory is the idea of Von Bertalanffy in 1968 and it is based on the premise that it is not possible to understand the object under study by dividing it into smaller units and then reorganising it but that we should approach such through global view to emphasise how it works that is identification and analysis of the object from the rudiment so as to completely understand the phenomenon in totality we have to apply a holistic approach (Mele, Pels & Polese, 2010; Von Bertalanffy, 1968). Speaking clearly, it can be viewed from the perspective of logical consistency of organisations such that limits separating internal and external elements are seen to exist around it (Ng, Maull & Yip, 2009). It is a theoretical approach that assesses a concept together as a whole rather than as the sum of its individual elements. A system according to Von Bertalanffy (1968) grows through swapping of energy between the system and its environment, a relationship that is possible only when the boundary has permeability. He further stated that the energy under consideration could be both tangible (food, shelter) and intangible (information) and the more permeable the boundary, the more the level of interaction with the environment. The theory pays particular attention to the collaboration and connections between the independent parts so as to fully understand the structure, function and results of the organisation (Mele et al., 2010). They further pointed out that the beautiful thing about this theory is that it cut across all discipline as researchers can make use of information in other disciplines to have a coherent idea about a phenomenon (Clark, 1993; Hannan & Freeman, 1977). The general systems theory pays particular attention to collaborations or in other words interactions, saying that the attitude of an individual element is distinct from the way it reacts when it is put together with other elements. However, systems theory is criticised for not having the capacity to stand on its own, it is said to be based on the idea of technocrats and lack utility (Hoos, 1972; Hughes & Hughes, 2000). Despite this, shortcomings, this study is hinged on systems theory, looking at it from Swanson (2015) perspective where he noted that while positive development is being made in environmental accounting, disclosure of information and financial reporting, it is however unfortunate that most organizations still do not 85
adequately recognise and account for environmental issues, in the body of their annual financial statements. The accounting system is not complete without the environmental aspect. Swanson (2015) further stated that systems theory supports the view that organisations' environmental activities and sustainability be disclosed in the public financial statement. This study is hinged on the system theory as the disclosure system that refuses to pay attention to natural process in its financial statement is said not to provide information that would be needed for quality environmental disclosure. Systems theory incorporates all the views of other theories identified previously in explaining the relationship between environmental accounting and stakeholders' value. It identified the fact that legitimacy exist between the organisations and the external environment, voluntary disclosure, that is there is a need for the organisation to make available information to the stakeholders that are relevant for decision making, the need to let out more relevant information for the use of the stakeholders (signaling theory), the identification of the group of people that need this information (stakeholders theory) and the need to be seen as responsible and accountable to these stakeholders (accountability theory). By utilising this theory, the researcher intends to create a systems conceptual framework to holistically investigate the effect of environmental accounting on stakeholders' value particularly encouraging the preparation of environmental accounts as a part of the annual conventional financial report and accounts to continuously meet stakeholders' values. 2.2.7. Summary of the Reviewed Theories Legitimacy theory has to do with the agreement between an organisation and the society in such a way that the society is demanding that, for you to continue to survive in this environment, you must act within the norms of the law and the organisation is saying that my business activities are legal and I'm ensuring that I don't go outside the law in the course of my daily business activities (Kuruppu & Milne, 2010; Solomon & Solomon, 2004), Voluntary disclosure theory concerned itself strictly with the act that we are not under compulsion to disclose any information so make do with whatever information we disclose as this is what is best relevant and needed by various users, while signaling theory is a follow up on voluntary disclosure theory saying that stakeholders should be in 86
the know of the fact that we know you do not have all the detail information, we think we should be on the same page so these are some other information that we think you may also need. Stakeholder theory is about creating awareness that there are individuals who are affected and can affect organisations' business activities apart from the ones that are popular, accountability theory says there is always something to render account for and someone to be accountable to while systems theory says it is not possible for solutions to be proffered without understanding the rudiments of the problem that is a holistic view of situation of things is needed.
2.2.8. Theoretical Framework Environmental Justice
Management & Employees
Organisation
Shareholder s
Government &Regulatory Agencies
Management & Employees Government/Regulatory Agencies
Shareholders
Local Residents
Local Residents
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Figure 2.4: Systems Theory Cycle Source: Researcher’s Theoretical Framework 2018 Despite the noticeable contributions from these theories, this study sees systems theory as the most appropriate theory in explaining environmental accounting and stakeholders’ value for the following reasons: Systems theory is an all-encompassing theory as seen in Figure.2.4, it takes up the qualities of stakeholder theory, legitimacy theory and accountability theory in this study, it has been seen as a way of solving problem by seeing problems as a part of overall systems, instead of reacting to specific part, of outcome and events. It placed attention to cyclical rather than linear cause and effect that is examining the linkages and interactions between the elements that make up the entire system (Checkland, 1997; Jackson, 2003; Weinberg, 2001). With this, a system is therefore seen as a complicated whole, working together as a coherent unit; as the flow of energy, material and information among different structure that make up the systems; as a community existing within the environment; as made up of entities looking forward to equilibrium but can exhibit a rapidly growing predictive chaotic changes in behaviour. Stakeholders are seen as those whose account should be rendered to, whose expectations steer the organisations and government who are to render account to engage in environmental friendly activities whereas environmental accounting is used to report these actions back to the stakeholders. The interests of these stakeholders are subject to interpretation by the organisations and government, who uses environmental accounting information to systematically create accountability towards stakeholders. This study views the relationship between the stakeholder and the organisation through systems theory. Therefore, by focusing on stakeholder issues and what they want to see the organisation account for in its environmental accounting practices, the systems theory is considered more relevant to develop testable hypotheses. Much attention have been placed on stakeholder lately, most previous researches have concentrated majorly on managerial and shareholder view point of environmental accounting issues while few studies have actually dealt with examining environmental accounting from other stakeholders’ 88
perspective especially in the developing economies. This research therefore, attempt at contributing to the existing literature in developing economies and exploring the stakeholder view of what value is from the environmental accounting information. This would be done by identifying stakeholders’ value (dependent variable), environmental accounting (independent variable). It is with this that this study adopts systems theory in making all relevant environmental business information available to all stakeholders to meet their request and enable them make informed decisions. Systems theory is preferred as it provides the framework to expose the motives behind stakeholders’ agitations and the actual environmental information that capture their interests.
2.3.
Empirical Review The aim of this section is to review studies that have been investigated in environmental accounting in both developed and developing economies in order to identify existing coverage and to bring out the contribution of this study.
2.3.1. Environmental Justice and Stakeholders’ value The management of any organisation plays unique roles in ensuring good relations with the stakeholder (Hewapathirana, 2014). According to Buzzelli (1991) the importance of firms looking for an active participation from employees, suppliers and top managers particular with regard to environmental issues sees stakeholders as agents possessing more influence in regard to determination of success or failure of any organisational environmental plan. The study of Belkaoui (1976) looked at investors’ reaction to corporations; it paid attention to positive share market reaction of firms that provide accounts of their environmental pollution control procedures in comparison with those that could not disclose how they account for their environmental practices. The study found that there is increase interest in those organisations that make available environmental information in their financial statement as against those organisations that do not disclose. Freedman and Patten (2004) study on market reaction to negative environmental reporting found that 89
share price reaction was low for those organisations that account for their factory emissions in their annual reports as against those organisations that do not. This is however contrary to this proposition of this study that stakeholders needed environmental accounting information in their financial statement and reports. Potoski and Prakash (2004) study was on how government regulatory enforcement influences corporate compliance with mandatory and voluntary regulations and concluded that there is a need for the introduction of flexible incentive regulations, with which organisation could be willing to police themselves. Shimshack and Ward (2005) looked at the impact of effort made on enforcing environmental compliance with particular attention paid to the role of regulator reputation spillover effects. It was discovered that imposing fines on offenders of environmental regulations would restrain future violations. Porter and Van der Linde (1995) discovered that legal regulation is one of the factors that create innovation among organisations The study carried out by Henriques and Sadorsky (1999) made use of survey approach to elicit responses from a sample of 750 large firms in Canada. Using the general categorization scheme developed in corporate social responsibility research that is reactive, defensive, accommodative and proactive (RDAP) scale, the study identified firms that see the importance of environmental management as a critical part of business function as the most probable to view organisations’ stakeholders as important and referred to them as proactive firms; this is followed by firms with accommodative visibility and then those with a defensive visibility or profile. Firms that do not see environmental management as important are said to be the least to perceive organizational stakeholders as important they are referred to as reactive firms. ANOVA was used in analysing the data and the findings was that concerning employees as stakeholder, proactive firms ranked them highest followed by accommodative firms and then the defensive firms while reactive firms ranked them lowest. Oraka and Egbunike (2016) in the quest of appraising environmental accounting analysed the contents of the annual reports of some consumer goods organisations with the aid of descriptive research design and significant difference was established. Their recommendation was the establishment of a more detailed and well defined 90
environmental disclosure theme, guidelines to aid improvement, government should encourage managers to make use of environmental friendly practices so as to restore and ensure an atmosphere that is free from conflict for maximum productivity. The study conducted by Díaz et al., (2017) using Q methodology on a case study of hydropower plant in Switzerland, with an objective of understanding whether stakeholders’ perspectives pose a risk to energy policy implementation. The study found out that many stakeholders support the idea of an inclusive and democratic decision process. It was discovered that there was a uniform agreement, as the decision making process was seen as fair, inclusive. The need for accounting for the relationship between human, the techno-economic determinants and the environment was also pointed out so as to enable comprehension of public acceptance issues. Enyi (2012) conducted a research advocating that there is a need to modify and expand the scope and usefulness of environmental accounting to incorporate compensation schemes and recommended the amendment of existing laws to improve the systems in the environment. In summary, existing studies pointed at the importance of sanctioning environmental defaulters as this would lead to curbing environmental pollution and this invariably leads to environmental justice to the stakeholders. 2.3.2. Environmental Conservation and Stakeholders’ value An organisations’ concerned about the environment is driven by many factors one of which is external factor. According to the study of Banerjee (2001) he identified that pressures such as legislation, market opportunities, public concern for the environment have made them incorporate environmental issues into their strategic management decision process. Torn, Siikamaki, Tolvanen, Kauppila and Ramet (2008) carried out a study to explore the opinion of local resident about nature conservation, using survey method, administered questionnaire on 929 local residents of two locality, found out that negative attitude towards nature conservation were as a result of not involving the local residents in the plans of protecting the areas, lack of identifying any benefits from the protected regions and lack or inadequate interactions between the conservation managers and the local community residents. 91
Hamid and Behrad (2014) stated that environmental accounting is very important; their study found out that incorporating environmental conservation cost in business activity is a force to achieve structural transformation of the society. Concluding that correct evaluation and incorporation of system that would support structural transformation of the society is important to the people, regions, and administrations involved. Liberati et al., (2016) in their study used a case study approach to conduct a study on expanding conservation opportunity. The study was divided into three phases and adopted the multi criteria decision making process. The finding was that there were distinct differences among the three conservation strategies that is developing strategies that integrate multiple approach to conservation give the organisation the opportunities to partake in the advancement of conservation goals. The study concluded that widening the definition of conservation to include areas such as connect, restore, inform, partner and manage would lead to better implementation of conservation efforts. Grand, Messer & Allen III (2017) conducted a study on understanding and overcoming cost effective conservation discovered that majority of the respondents showed that cost effectiveness is of good quality in conservation programs, but they see it not as important as other program design criteria. The researcher further discovered that the reasons for this response was as a result of the cry for fairness and transparency of the process, the respondent lack confidence in the organization's ability to understand, they see that there is no incentives to change from the present method to a more cost-effective approach. The study therefore recommended that stakeholders should put more pressure on conservation professionals to make them more responsive to concerns about cost effectiveness. Keun-Hyo et al., (2017) conducted a study to investigate how environmental accounting information disclosed voluntarily by Japanese organisations relates to the companies’ essential ecological-economic performance. Using environmental investments and environmental expenses to measure environmental conservative costs, eco-efficiency to represent environmental performance, the period of study was 2002 - 2012; data were collected from sample firms’ environmental reports and the Nikkei Economic Electronic
92
Databank System (NEEDS). The findings suggested that organisations with worse ecoefficiency, on average, disclose a greater amount of environmental conservation costs. In summary, few studies have been conducted on environmental conservation and stakeholders’ value and the few studies identified pointed at the need for stakeholders to actively participate in decisions such that they would able to hold officers responsible for their actions. 2.3.3. Environmental Preservation and Stakeholders’ value The study of Bani-Khalid, Kouhy and Hassan (2017) made use of 66 listed companies for the period 2010-2012, and discovered that audit type, firm size, financial performance and corporate social environmental disclosure have significant relationships, it was also discovered that age, industry type, firm profitability and ownership type doesn’t have any relationship with corporate social environmental disclosure practices. Md. Hafij, Md. Musharof and Yakub (2014) study examined Bangladesh level of environmental disclosure of listed textile industries. The study see most of the organisations as addressing no environmental issues in the reports and they therefore recommended that government and other regulatory agencies should enforce and motivate the textile organisations to take care of environmental issues and report them in the annual report. Bala and Yusuf (2003) study brought out that very few organisations disclose environmental information in the directors’ report or in the chairman’s statement or in some other places in the annual reports. The study further pointed out that only qualitative information were made available as the organisations do not follow specific standard reporting guidelines. The study of Lars and Henrik (2005) on the effect of environmental information on market value of listed companies in Sweden showed that environmental information made available by companies have value relevance and that organisations that contribute negatively to the environment may experience their future solvency and earnings eroded. Faboyede (2011) on environmental protection and sustainability reporting discovered that assurance about an organisation and the integrity of the information through XBRL contribute to efficiency and effective resource allocation, increase income and welfare and also resulting in sound environmental practices that reduces environmental impact and increase value added.
93
The identified studies have shown that most of the organisations do not have environmental information detailed in quantitative terms in their financial statements as the few organisations that made available environmental information disclose qualitative information. 2.3.4. Environmental Restoration Strategy and Stakeholders’ value Wilson and Cagalanan (2016) conducted a study governing restoration reported that the adoption of sustainable environmental restoration depends on how attractive it is to the stakeholders. Watts and Zimmerman (1978) contested that firm’s use social responsibility to divert government interference. They thereby, occupy the position of one of the powerful stakeholders whom the management must satisfy. Previous study established a positive relationship that environmental sensitive industries (ESIs) who disclose more environmental information are susceptible to experience reduced sanctions from government (Chan & Kent, 2003; Deegan & Gordon, 1996; Elijido-Ten, 2004; Jaffar, Iskandar & Muhamad, 2002). Similarly, Shimshack and Ward (2005) concentrated on the effect of government sanctions on non-compliance and discovered that imposing fines and fees on violators of environmental regulations would restrain future violations. Also, Gunningham (2007) paid particular attention to issues of corporate environmental responsibility and law using the mining, chemical and pulp and paper industrial sector of the economy. He argued that the relationship between corporate environmental accounting practices and the law are closely linked and complex but that a better understanding of the relationship has valuable normative implications. Johnson and Rock (2005) conducted a study to investigate whether organisations hide under the superfund scheme to manipulate their earnings in order to reduce their exposure to the Superfund clean-up and transaction costs. Clause and Richardson (2008) looked at the effect of environmental investment on investment decisions and discovered that environmental information disclosure has effect on investment allocation decisions. Wortley et al., (2013) conducted a qualitative review of literature published and discovered that North America was the most studied region and environmental restoration is a rapidly developing area of research and also that empirical literature in environmental restoration is very scanty. 94
But from the developing countries perspective, Nasango and Gabsa (2000) investigated the environmental policy and politics of ‘ecologism’ in both Cameroon and Kenya. The study discovered that the key problem these countries faces is lack of political commitment towards the implementation of environmental regulations which makes environmental concern still at the level of continuous empty and sweet talk in those countries this was further buttressed in the study of Clapp (2005) where he argued that, environmental regulations put into place in the developing countries have been devoid of monitoring and enforcement mechanisms. In summary, previous studies have identified the need for sanctions on erring organisations as a means of curbing environmental pollution. 2.3.5. Environmental Sustainability and Stakeholders’ value Engin and IIknur (2017) study investigated the financial structure of cement companies, which are faced with environmental regulations and impacts. The annual reports of quoted sixteen cement producing companies in Istanbul Stock Exchange for the period 2011-2013 were analysed. The study was based on the concept of investigating which of the debt ratios and financial structure are affected mainly by environmental data of the cement companies on an emerging market. The findings were that significant relationship exists with regard to emission level while no significant relationship is identified in relation to carbon dioxide levels and financial ratios. The study however, recommended that a replicated study with similar industries be conducted on environmental impact and its effect on financial structure. Agbiogwu, Ihendinihu and Okafor (2016) examined the impact of environmental costs and social costs on performance of Nigerian manufacturing organisations. The study made use of secondary information from 10 randomly selected organisations for the period 2014 and data analysis was done with t-test. It was discovered that environmental costs and social costs have significant effect on Net profit margin, returns on capital employed and earning per share. The study is premised on the stakeholder theory and recommendation was that government should ensure that manufacturing firms in Nigeria adhere strictly to environmental laws.
95
Jang, Zheng and Bosselman (2017) in their study use web-based survey to collect data from top-level restaurant managers in the United States. The sample was gotten from panels recruited by a market research company in the U.S. 218 were retained. Both descriptive and inferential statistical tools were used in the analysis. The study discovered the mechanisms underlying the links between managers’ values and restaurants’ environmental sustainability as managers’ environmental values were seen to indirectly influence environmental sustainability through leadership and stakeholder engagement. The study incorporated nonfinancial measures such as stakeholder (customer/employee) satisfaction which according to the authors are probably more important and longer-term indicators because previous studies have been limited to utilising financial variables for measuring performance outcomes from environmental sustainability. Correa-Ruiz and Moneva-Abadia (2011) found out that lack of humanity and values, institutional capture and misunderstanding, misuse of democracy and short term economic approach have been catalyst of sustainability crisis. The study of Murray (2010) found out that the financial markets have less interest in social and environmental issues except in areas of risk and governance and that there is a strong motivation to making available social and environmental information despite the fact that it does not have strong effect on performance. Collins (2009) identified that sustainable practices of organisations that are tagged responsible have significant relationship with firm performance while sustainable practices are inversely related with fines and penalties. The study concluded that sustainability has effect on corporate performance and it may also serve as an instrument for corporate conflict resolution. Adekanmi et al., (2015) study on environmental accounting-a tool for sustainable development, examined the level of environmental accounting practices of listed companies in Nigeria, using secondary data and purposive sampling technique discovered that the level of environmental accounting among the companies is not high and identified that it may be as a result of weak regulations, or the absence of pressure group, the study however, recommended that both organisations and government should ensure that corrective measures are taken where activities impact negatively on the environment and effort should be geared towards enhancing environmental sustainability. In summary the findings from previous study have identified that the level of environmental 96
accounting is low and there is a need for both government and the organisations to consolidate on effort to ensure that environmental sustainability is ensured. 2.3.6. Environmental Accounting and Stakeholders’ value The study conducted by Ijeoma (2015) to determine the role environmental cost accounting play in environmental sustainability in Nigeria. The findings showed that there in not enough knowledge of environmental policies on the part of the management and employees of the organisation. There is a need for organisations to adopt environmental cost techniques so as to enable them effectively manage negative effects of the waste discharge into the environment as they work towards environmental sustainability. Yusof, Zainul, Zailani, Govindan and Iranmanesh (2016) investigated environmental practice of organisations on practitioners’ behaviour during the implementation stage, administering questionnaire on 375 architects, engineers, companies, result was analysed with partial least squares technique. The findings was that a positive effect exist between efficiency of energy and waste management practices of organisations, the environmental behaviours of practitioners at the level of implementing projects. Diaz, Adler and Patt (2017) used Q methodology to elicit information from stakeholders on the energy policy and their manifestation of hydropower project in Switzerland. The finding were that environmental and techno-economic assessments are important elements in developing energy transitions, they are however not enough particularly when it has to do with personal values and interests of stakeholders as this must be represented for energy transition policies to be acceptable. Thoradeniya, Lee, Tan, and Ferreira (2013) study examined the factors that have influenced sustainability reporting in developing countries. The study was built around the theory of planned behaviour in examining how managers’ attitudes and other psychological factors have strongly affected sustainability reporting in Sri Lanka. The study however adopted Partial Least Square path model of quantitative approaches in hypotheses testing. It was discovered that the psychological variables contribute to managers’ intentions to participate in sustainability reporting and corporate behaviour.
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But the study however, did not consider the opinion of other stakeholder as well as other exogenous variables that can affect the study. O’Dwyer, Unerman, and Bradley (2005) study revealed that there was a great request for mandated and sustainability reporting that is externally verified either in the annual reports or as a separate stand-alone report. This study claimed that this request was primarily motivated by a need to gain knowledge of companies' commitments to responsible business practices, and at the same time being motivated by the ability of sustainability reporting to encourage increased NGO influence on companies. They found that an organisation’s main motives are centered on resolving the tensions between the conflict of economic pursuit and environmental desirability. Beredugo and Mefor (2012) carried out a study on environmental accounting and reporting and the impact it has on sustainable development in Nigeria using survey research design with data collected from both primary and secondary sources. A sample of 400 respondents was drawn from respondents in Lagos and Rivers state while the data was analysed with Pearson correlation coefficient and OLS. The study however, discovered a significant relationship in environmental accounting and reporting and sustainability development as environmental accounting encourages the tacking of GHG emissions
and
other
environmental
information
for
reduction
programs.
Recommendations were that acceptable standard and Graphical indicators be adopted to assist users in determining organisational performance such that corrective actions would be taken when the need arises. Deegan and Rankin (1997) built on previous studies conducted by (Deegan & Gordon, 1996; Deegan & Rankin, 1996) where it was discovered that environmental information made available by organisations are only to build their corporate image and conducted a survey on the importance of environmental information to users in Australia, they however found out that many of the users identified the importance of this information to their decision making capacity and demand the inclusion of environmental information in corporate annual report. Also the study of Owolabi (2008) looked into disclosure of environmental information in annual reports and discovered that there have been very minimal disclosure of environmental related information, the study however, concluded 98
that with the rate of globalisation and the effort made by the international communities, the level of environmental accounting information disclosed would also increase. It could be observed that very few studies are available which examines the interests of stakeholders apart from the managerial stakeholders. Studies such as (Freedman & Jaggi, 1986) looked at stakeholders interest from investors angle, (Deegan & Rankin, 1997; O’Dwyer et al 2005) study viewed the need for environmental disclosure with majority of their respondents from the investors group while the study of Tilt (1999), in the survey conducted found out that the current environmental reporting practices is inadequate and with low credibility as pointed out by the respondents. The study of Uwuigbe and Olusanmi (2013) using stakeholder framework to expose the perception of stakeholders and accounting teachers to corporate social environmental reporting discovered that all stakeholders agreed on the importance of environmental practices and differences were found in their information needs. It is however, observed that stakeholders are interested in having organisations conduct its activities with the environment in mind, but there have been differences in the hierarchy of the information needs as the immediate need of each stakeholders differs. 2.3.7. Environmental Accounting, Corporate Performance and Stakeholders’ value Elijido-Ten (2007) identified that the shareholders who are the main provider of funds to the organisation possesses power that is measured by going through the level of ownership concentration. Some identified studies pointed out that the more the shareholders’ dispersal the greater would be the probability that organisations disclose more environmental information (Craswell & Taylor, 1992; Frost, 1999; Malone, Fries & Jones, 1993; Mckinnon & Dalimunthe, 1993). Freedman and Patten (2004) from their investigation on market reactions to negative environmental reporting among some companies in the USA, discovered that firms who reported in their annual report emission generated by them received a low reaction to their share price as against those who do not report them, and this is contrary to the findings of Belkaoui (1976) with his discovery that the profit maximisation idea of investors is diluted as they now want to see an ethically responsible and accountable organisation who duly account for their environmental activities with this, these organisations enjoy a positive share of the market reaction while 99
investors’ interest grow towards organisations that publish in their annual reports detailed environmental practices as against those who don’t. Freedman and Jaggi (2009) conducted a study on examining the reaction of the market to CSR disclosure and found out that environmental information that is pollution and nonpollution is relevant to investors and the market positively react to disclosures in this aspect. Their findings is however consistent with that of Belkaoui (1976). Plumlee, Brown, Hayes and Marshall (2010) study was on voluntary environmental disclosure quality and firm value. Using a sample from US organisations which cut across five industries, this study measured firm value with cost of equity and future expected cash flows while voluntary environmental disclosure quality was measured using the Global Reporting Index (GRI) and a positive relationship was identified between the two variables which is in contrast with prior findings. Ahmad (2012) used both primary and secondary data in their study, questionnaire was administered to elicit information from forty chief accountants and senior accountants, while the selected companies annual reports for the period 2010 was made use of. The discoveries were that environmental accounting and the practices of reporting it have not satisfied the stakeholders and therefore can be considered lacking behind. Magara, Aming and Momanyi (2015) research on the impact of environmental accounting on financial performance revealed that employees comprehend financial performance of corporation to be good as revenue generation has been on the increase so also profitability has been on the increase that is environmental accounting is significantly related positively to financial performance
perceived in the corporate
organizations. The study is premised on the stakeholder theory and recommendation was that government should ensure that manufacturing firms in Nigeria adhere strictly to environmental laws. Jang et al., (2017) in their study use web-based survey to collect data from top-level restaurant managers in the United States. The sample was gotten from panels recruited by a market research company in the U.S. 218 were retained. Both descriptive and inferential statistical tools were used in the analysis. The study incorporated nonfinancial measures such as stakeholder (customer/employee) satisfaction which according to the 100
authors are probably more important and longer-term indicators because previous studies have been limited to utilising financial variables for measuring performance outcomes from environmental sustainability and discovered the mechanisms underlying the links between managers’ values and restaurants’ environmental sustainability as managers’ environmental values were seen to indirectly influence environmental sustainability through leadership and stakeholder engagement. From the review it could be seen that the relationship between environmental accounting, corporate performance and stakeholders’ value have been inconclusive, this study therefore posits that the more the environmental accounting information included in the annual reports and accounts the higher the corporate performance and the higher the stakeholders’ value and vice versa. In approaching environmental information and stakeholders’ value, scholars adopted different theoretical approach to this; majorly used theories in this aspect are stakeholder theory and legitimacy theory as they pointed out that corporate social responsibility is expected to result in increase in corporate performance. Besides there are some overlapping characteristics in these theories in the sense that according to (Deegan, 2002) an organisation is seen as a part of a wide social system on which it has influence, this makes for the relevance of systems theory since it usurp the characteristics of the stakeholder theory, legitimacy theory, accountability theory and many others in explaining this relationship. As a result, many studies would state that there is a positive relationship even though weak between environmental accounting and corporate performance. Many studies have been found to proxy environmental accounting with corporate social responsibilities, for instance the study conducted by Turban and Greening (1997) and Mittal, Sinha and Singh (2008) identified a positive relationship between management and employee as it has to do with employing CSR, as it could lead to organisation being rewarded with more employee loyalty while attracting new employees and also increasing productivity. Furthermore, a community may demand that organisation have a better proactive environmental practices and support services rendered locally, with this it is expected that market value of socially responsible corporations would be better than those companies that are not socially responsible.
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There have been studies reporting negative relationship (Aupperle, Carroll & Hartfield, 1985) between CSR and corporate performance, by means of which higher CSR would lower corporate financial performance also Preston and O’Bannon (1997) pointed out that with the managers private goal that is the view that with a strong financial performance, managers may make lots of money by reducing socially related expenditures in order to increase their short term gain, a negative relationship is possible. In summary, findings have pointed out that a low significant relationship exists between corporate performance and environmental performance.
Table 2.1: Table of Empirical Review Study
Methodology and Sample
Findings
Gaps
Henriques and Sadorsky (1999). The relationship between environmental commitment and managerial perceptions of shareholder importance. Academy of Management Journal, 42 (1), 87 – 99
Survey research design, questionnaire was administered on 750 firms together with content analysis of the annual reports and accounts. Multivariate analysis of Covariance (MANCOVA) and ANOVA (Analysis of covariance) were used.
Observed that firms that are proactive ranked employees and community stakeholders as highest, firms that are accommodative ranked employees, community as second highest, regulatory third highest while the defensive firms see employees as their highest, community lowest and regulatory highest while the firms that are reactive ranked employees as lowest and community as third highest.
The study was however limited to largest organisations in Canada, the result can thereby not be generalized on medium or small firms, the research design was also limited to crosssectional, and the measure adopted for environmental commitment was limited to
102
Oraka and Egbunike (2016). Appraisal of environmental accounting information in the financial statements of consumer goods manufacturing companies in Nigeria. NGJournal of Social Development, 5(5), 6-28.
Descriptive research design, secondary data, 22 company’s annual reports and accounts were analysed. Multiple regression techniques were adopted.
Shimshack J. P., & Ward, M. B. (2005). Regulator reputation, enforcement and environmental compliance. Journal of Environmental Economics and Management, 50(3), 519 -540. Potoski, M. & Prakash, A. (2004). Regulatory convergence in nongovernmental regimes? Cross-national adoption of ISO 14001 certifications. The Journal of Politics 66(3), 885905 Freedman, M. & Patten, D.M. (2004). Evidence on the pernicious effect of financial report environmental disclosure. Accounting Forum 28(1), 27-41
Secondary data of 217 emission plants. Multiple regression technique adopted
Diaz, Adler & Patt (2017). Do stakeholders’ perspectives on renewable energy infrastructure pose a risk to energy policy implementation? A case of hydropower plant in Switzerland. Energy Policy, 108, 21 – 38.
A mixed method was adopted, Q methodology, snow balling sampling method. 38 people were selected. Semi structured interview was carried out. While factor analysis was used in analysing the data.
Bani-Khalid, Kouhy & Hassan (2017). The impact of corporate
Using disclosure index to measure the amount of
Significant differences exist in the disclosure themes of these companies, a significant effect was also identified in environmental disclosure, total assets turnover and return on equity while between current ration, return on assets and cash flow ratio of manufacturing companies. It was however recommended that environmental disclosure should be well detailed among companies and that standard setting organisations should put into place guidelines or standards regulating environmental disclosures in Nigeria. It was discovered that the impact of fines on violation reduced the level of violation by two-third.
content analysis of annual reports. Limited to only secondary data.
Limited to secondary data
Secondary data from 59 countries.
The introduction of flexible enforcement regulations, organisations may be involved in self-policing.
Study restricted to the use of secondary data and limited sample size.
The study used a sample size of 112 firms
The finding was that organisations with worse pollution performance suffered more negative market reaction than organisations with more detailed disclosure. The study concluded that environmental disclosure is inadequate under a largely relevant regime It was discovered that there was a uniform agreement that the decision making process is seen as fair, inclusive and democratic and incorporating procedural outcome and distributive justice. Evidence was also gotten that a need arises for accounting for relationship between human, techno-economic determinants and environment in trying to make for understanding of public acceptance issues. The findings of the study are that type of audit, firm size and firm
Theoretical gap
103
The study was not based on any theory and it is limited to primary data.
The study limited
is to
characteristics on social and environmental disclosure (CSED): The case of Jordan. Journal of Accounting and Auditing Research & Practice, 1 – 28.
CSED for the years 2010, 2011, 2012. Regression analysis was then done.
Md. Hafij, Md. Musharof & Yakub (2014). Environmental disclosure practices in annual report of the listed textile industries in Bangladesh. Global Journal of Management and Business Research, Accounting and Auditing, 14(1), 97-108. Torn, Siikamaki, Tolvanen, Kauppila & Ramet (2008). Local people, nature conservation and tourism in North-eastern Finland. Ecology and Society, 13(1), 8 -25.
Purposive sampling technique was adopted, secondary source of data collection, 29 listed textile companies, content analysis was done and the year 2013 was chosen.
Hamid & Behrad (2014). Role of environmental accounting in enterprises. Ecology, Environmental and Conservation. 20(3), 1 – 13.
Literature review was done.
Liberati, Rittenhouse & Vokoun (2016). Beyond protection, expanding conservation opportunity to redefine conservation planning 21st century. Journal of Environmental Management, 1 -8. Grand, Messer & Allen III (2017). Understanding and overcoming the barriers for cost-effective conservation. Ecological Economics 138, 139 – 144.
Case study approach, secondary source of data and a multi stage method was adopted.
Keun-Hyo Yook Hakjoon Song Dennis M Patten II-Woon Kim,
Secondary source of data was used. The study made
Survey method was used, local resident within two selected communities. 929 copies of questionnaire were sent out. Factor analysis was used in analysing the data.
The study adopted a survey method using the Qualtrics software (Qualtrics Provo, UT). A sample of 246 respondents from those who attendant a seminar on CEC techniques presented by the study co-authors.
104
financial performance has significant relationship with the amount of corporate social environmental disclosure and that firm profitability, type of industry, age and ownership does not significantly affect corporate social environmental disclosure practices. Many of the companies do not address environmental issues in the reports and they therefore recommended that government and other regulatory agencies should enforce and motivate the textile organisations to take care of environmental issues and report them in the annual report. There was no significant relationship between land ownership and peoples’ opinion about nature conservation or tourism development. But it was observed that majority of the respondents that confirmed nature conservation had positive or neutral effect on their household economies had a positive attitude towards nature conservation. The study found out that incorporating environmental conservation costs in business activity is a force to achieve structural transformation of the society. The conservation goal should be approached in different ways would increase ability and creativity, conservation plans would meet its goals. There is also the need for transparency. Respondent demand for fairness and transparency of the process, they see that there is no incentive to change from the present method to a more cost effective approach. The study therefore recommended that stakeholders should put more pressure on conservation professional to make them more responsive to concerns about cost effectiveness. It was discovered that Japanese firms changed their disclosure
secondary data and the use of disclosure index.
The study was limited to secondary data and content analysis, data for 2013 accounting year was used. The study was limited to the use of quantitative methods and no theoretical underpinning was identified.
Only secondary data was used.
Limited to the use of one organisation to represent the position of environmental conservation of the locality The sample selected is not a representative of sample of all conservation professionals worldwide. The study also lack theoretical underpinnings.. Differences in the methologies
(2007). The disclosure of environmental conservation costs and its relation to ecoefficiency: evidence from Japan. Sustainability Accounting Management and Policy Journal, 8(1), 1 – 36. Wilson & Cagalana (2016). Governing restoration: strategies, adaptations and innovations for tomorrows’ forest landscape. World Development Perspectives, 4, 11-15.
use of a sample of 274 Japanese manufacturing firms with available data for 2002-2012. Spearman correlation was used in the data analysis.
strategies on ECC in relation to ecoefficiency performers increasing their disclosed ECC more than better performers during this time frame.
for measuring CO2 emissions across the firms. Limited to secondary data.
Case study approach. Secondary data collection.
The study enumerated that engaging stakeholders early at the local level in the project design process is critical as it allows people a degree of ownership and control over the projects, as well as allows projects to be tailored to local needs.
Limited to case study and literature review.
Shimshack & Ward, (2005). Regulator reputation enforcement and environmental compliance. Journal of Environmental Economics and Management, 50, 519-540.
Secondary source of data was used. The study consists of data generated by 23 regulatory jurisdictions. The PCS data is for the period 1988-1996 and 217 major pulp paper and paperboard mills. GLS regression was used in the analysis. Primary source of data collection with the aid of questionnaire. Questionnaire was administered to 200 respondents from organizations in Nigeria. Frequency distribution, Mean rank and KruskalWallis test were used to analyse.
Fines decrease the level of violation and sanctions that are not attached to money does not have any impact the level of compliance rate.
The study has no theoretical basis.
Ijeoma (2015). Evaluation of Companies environmental practices in Nigeria. Social and Basic Science Research, 3(7), 349 – 364.
Uwuigbe, U., & Olusanmi, O. (2013). An evaluation od stakeholders and accounting teachers’ perception of corporate social and environmental disclosure practice in Nigeria. An International Multidisciplinary Journal, Ethiopia, 7(1), 352 – 365. Adekanmi A. D, Adedoyin R. A. & Adewole J. A. (2015) Determinants of SocioEnvironmental Reporting of Quoted Companies in Nigeria Journal of Research in Business, Economics and Management, 4(4)
Questionnaire administration to 80 accountants and Analysis of Variance was used in the analysis.
Secondary source. Purposive sampling technique was used to select a sample of 50 firms listed on the main board of the Nigerian Stock Exchange annual reports from 2005 to 2013 was analysed with
105
The findings showed that there in not enough knowledge of environmental policies on the part of the management and employees of the organisation. There is a need for organisations to adopt environmental cost techniques so as to enable them effectively manage negative effects of the waste discharge into the environment as they work towards environmental sustainability. Findings showed all respondents to be interested in environmental reporting practices of corporation
The findings were that environmental variables of influence have significant impact on socio-environmental reporting This study concludes that most companies in Nigeria majorly disclose information related to socio-community development,
The study is limited to questionnaire administration.
The study was limited to secondary data.
descriptive statistics.
Yusof, Zainul Abidin, Zailani, Govindan & Iranmanesh (2016). Linking environmental practices of construction firms and environmental behavior of practitioners in construction, Journal of Cleaner Production, 1-8.
Questionnaire administration on 375 architects, engineers contractors in Malaysia, and analysis was done with the partial least squares technique.
Thoradeniya, Lee, Tan, & Ferreira (2015). Sustainability reporting and the theory of planned behaviour. Accounting, Auditing & Accountability Journal, 28(7).
Survey was done, questionnaire was administered on top and middle level managers of companies in Sri Lanka and Partial Least Squares was done.
O’Dwyer, Unerman & Bradley, (2005). Users’ needs in sustainability reporting: perspectives of stakeholders in Ireland. European Accounting Review, 14(4), 759 – 787. Beredugo & Mefor (2012). The impact of environmental accounting and reporting on sustainable development in Nigeria. Research Journal of Finance and Accounting, 3(7)
Survey was done; questionnaire was administered on the population Irish NGOs.
Owolabi A. (2008). Environmental disclosures in annual reports: the Nigerian perspective. Second Italian Conference on Social and
Primary and secondary data. Questionnaire was administered. The sample size of valid respondents is 387 preparers (accountants) are 97, auditors are 95 and accounting information users (stock brokers, financial analyst, bankers, educators, consumers, surrounding communities, business partners, employees, civil society organisations and regulators) are 195. Using Pearson correlation coefficient, student t-test and MANOVA for data analysis. Content analysis of the annual reports of 20 companies from 2001 – 2006.
106
products, consumers and employees. It was observed that the social and environmental reporting of these companies contains little quantifiable data. The findings was that a positive effect exist and including practitioners in plans bring out better attitude towards the environment
It was discovered that the psychological variables contribute to managers’ intentions to participate in sustainability reporting and corporate behaviour. But the study however, did not consider the opinion of other stakeholder as well as other exogenous variables that can affect the study. Finding was that organisation’s main motives are centered on resolving the tensions between the conflict of economic pursuit and environmental desirability.
Only survey method was used. Selfreported behaviour was used.
A significant relationship was identified between environmental accounting, reporting and sustainable development tracking of GHG emissions and other environmental data can be achieved it was recommended that acceptable standard be acknowledged and Graphical indicators be so that corrective actions can be taken as at when needed.
The study was not based on any theory.
Organisations disclosed minimum environmental information in their annual reports. With increase in globalisation and the effort of the international communities there is
Study limited to content analysis.
Study limited to the use of questionnaire.
Environmental Accounting Research, Rimini, 17 -19. Elijido-Ten (2007). Applying stakeholder theory to analyse corporate environmental performance. Asian Review of Accounting, 15(2), 164 – 184. Plumlee, Brown, Hayes & Marshall (2010). Voluntary environmental disclosure quality and firm value: Further evidence. Journal of Accountability and Public Policy, 34(4), 1 – 43. Ahmad (2012). Environmental accounting and reporting practices, significance and issues: A case from Bangladesh companies. Global Journal of Management and Business Research, 12(14), 118 – 127. Magara, Aming & Momanyi (2015). Effect of environmental accounting on company financial performance in Kisii county. British Journal of Economics Management & Trade, 10(1), 1 -11. Mukherjee, Sen & Patanayak, (2010). Firm characteristics and corporate environmental disclosure practices in India. The IUP Journal of Accounting Research and Audit Practices, IUP Publications, 0(4), 24 – 41. Engin & IIknur (2017). Relationship between Environmental Impact and Financial Structure of Cement Industry. International Journal of Energy Economics and Policy
Agbiogwu, Ihendinihu & Okafor (2016). Impact of environmental and social costs on performance of Nigeria manufacturing companies. International
bound to be improvement. Secondary data was used, Performance ranking of the Australian conservation foundation. OLS regression model was developed.
The study found out that economic performance has no significant relationship with environmental performance.
The study was limited to one year period.
A sample of five US industries for the period 2000-2005 was used. Multiple regression analysis was carried out.
The study found out that higher quality environmental disclosures are positively associated with expectations of future cash flows, even after controlling for environmental performance and this complement and extend those provided in previous studies. Environmental accounting and reporting have not been satisfactory.
The study is limited to five industries and a period of 6 years. The study is also limited to secondary data.
Many of the respondents had a positive opinion of the financial performance of Kenya organisations. The study concluded that a significant and positive relationship exist between the variables. The study discovered that tax rate, leverage and liquidity were the most effect variables used in explaining organisations’ variation in environmental disclosure
The study was unable to access the financial statement of most of the organisations.
16 cement firms that are listed in Istanbul stock exchange analyzed for the years 2011-2013. Analysis was done using (OLS) ordinary least square
It was found out that significant relation on total industrial process emission levels with financial structure.
10 randomly selected organisations’ annual report for the period 2014 were analysed with T- test of SPSS version 20.
It was discovered that environmental and social cost significantly affect Net profit margin, Earnings per share and Return on capital employed of manufacturing companies.
The study was limited to the use of only secondary data and analysis was restricted to listed firms on the Istanbul stock exchange, a period of two years was used. The study was carried out for only one year period and limited to secondary data.
The study used primary and secondary data gotten from administering questionnaire to 40 chief accountants and senior accountants while 2010 annual reports of the selected companies were used. Descriptive research design, questionnaire was administered on a population 144 respondents from 16 organisations, 4 Industries were selected and content analysis of the annual report for 2007 – 2008 accounting year
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Study limited to only one year.
The study was limited to two years, content analysis and small sample size.
Journal of Economics and Finance, 8(9), 173 – 180. Jang, Zheng & Bosselman (2017). Top managers’ environmental values, leadership and stakeholder engagement in promoting environmental sustainability in restaurant industry International Journal of Hospitality Management, 63, 101 -111. Bassey, Effiok & Eton (2013). The impact of environmental accounting and reporting on organisational performance selected oil and gas companies in Niger delta region in Nigeria. Research Journal of Finance and Accounting, 4(3), 57 – 73.
Survey research was used. Questionnaires were administered on 2500 panels recruited by a market research company in the U.S. from which responses from only 218 respondents were analysed with descriptive and inferential statistical tools. Survey research design was adopted and data analysed with Pearson product moment correlation.
Adediran & Alade (2013). The impact of environmental accounting on corporate performance in Nigeria. European Journal of Business and Management, 5(23).
Secondary data, 14 randomly selected organisations’ annual reports and accounts were analysed.
Eze , Nweze & Enekwe(2016). the effect of environmental accounting on developing nation: Nigeria experience. European Journal of Accounting, Auditing & Finance Research, 4(1), 17 -27.
survey design, primary and secondary sources of data
Onyali, Okafor & Onodi(2015). Effectiveness of triple bottomline disclosure practice in Nigeria –stakeholders’ perspective. European Journal of Accounting Auditing and Finance Research, 3(3), 45 -61
The descriptive method of research design
Mohamed & Faouzi (2014). Does corporate environmental disclosure affect the cost of capital? Evidence from Tunisian companies. Global
32 companies listed on the Tunisian Stock Exchange for a period of 2003-2011. Multiple regression examination by Ordinary
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The study discovered the mechanisms underlying the links between managers’ values and restaurants’ environmental sustainability as managers’ environmental values were seen to indirectly influence environmental sustainability through leadership and stakeholder engagement.
Mail survey was used.
The performance of the oil companies selected for the study were enhanced by environmental accounting and reporting and that organisations that are environmentally friendly and voluntarily make available their environmental activities benefit from high competitiveness. Lack of detailed reporting and disclosure standards significantly affects the reporting and disclosure. The finding showed ROCE, EPS & environmental accounting were negatively significant while that between NPM, DPS and environmental accounting were significant and positive.
Survey method was used and analysis was limited to the use of Pearson’s product correlation coefficient
Environmental friendly firms who voluntary disclose their environmental activities enjoy high level of competitiveness and Environmental accounting motivates organizations to track their GHG emissions and other elements against reduction or elimination point placing sustainability at the fore front of present day corporations; requires that organizations adapt their reporting systems to enable them provide triple bottom line information to corporate stakeholders The study found out that organisation having better environmental disclosure scores showed cheaper equity financing
Theoretical gap and methodology gap. The study was limited to only one period and no theory was found Methodology gap using just the survey approach
The study made use of Investors, Customers/Cons umers and Accountants ants of Nigeria the way they were accessed was not stated The study is limited to two years period.
Journal of Management and Business Research: D Accounting and Auditing, 14(1), 1 – 8.
2.4.
Least Squares longitudinal regression.
(OLS) panel
Gap in Literature This section talked about environmental accounting research with particular attention paid to its relationship with stakeholders' value. Prior studies in this area have made attempt at providing an understanding of the developments in environmental accounting. Inconsistencies in study results may be due to lack of standardised measures of environmental accounting. The study of Illinitch et al., (1998) made it known that as attention is continuously given to environmental issues; the measures adopted are becoming very critically important. In addition, the voluntary disclosure method adopted for making environmental information available has been as a result of corporation business practice and this has made researchers strongly query the reliability of environmental accounting measures (Patten, 2002; Rockness, 1985). Stakeholders may find it difficult to put together accurate information for decision making. Furtherance to this, studies also pointed at the possibility of misidentification of environmental accounting in research together with the need to have a broader view of stakeholder (Figge & Schaltegger, 2000; Harrison & Wicks, 2013; Wood & Jones, 1995). With this, it is not very clear if the adopted indicators in previous studies for measuring environmental accounting and stakeholders' value are appropriate because there has been no agreement on what and how it should be viewed. It can also be successfully argued that a single environmental accounting proxy measure has exposed clear limitations as it as to do with reliability and interpretation in the previous empirical research. For instance, most of the studies used single environmental accounting proxy in the literature (Beredugo & Mefor, 2012; Okoye & Asika, 2013). This issue is of concern because an assumption is made that a single proxy like environmental disclosure is able to handle environmental accounting information and at the same time make available enough information for stakeholders' decision making and value maximisation.
109
Lack of theory and conceptualization is also an obstruction to an objective and detailed environmental accounting research. According to Ullman (1985), most of the studies in this area have made minimal reference to theories, and have only handled short time and small sample size. The minimal attachment to theories may be due to the problem of combining non-financial and financial issues. The conclusion from the previous literature made it known that stakeholders are aware of environmental accounting information and the need to be part of it. However, conclusions cannot be made that the presence or absence of environmental accounting leads to increase or decrease in stakeholders' value because they have not really provoked the reaction that environmental accounting information
(environmental
justice,
environmental
conservation,
environmental
preservation, environmental restoration strategy and environmental sustainability) has any significant relationship with stakeholders' value (management & employees' value, shareholders' value, local residents' value and government/regulatory agencies' value). That is, it is still not clear whether stakeholders see corporate environmental accounting as a major factor in their decision-making process as they work towards creating values for themselves, together with the need to establish a robust systematic relationship, a solid conclusion needed to be identified. The present study is also compared with some other study to further buttress this; Adediran and Alade (2013) studied the relationship that exists between environmental accounting and corporate performance in Nigeria using secondary source of data from 14 randomly selected listed companies annual reports for the year 2010, with a multiple regression analysis methods, it was discovered that between environmental accounting and return on capital employed, earning per share, a significant relationship exists while between environmental accounting, dividend per share and net profit margin it is not so. They, however, recommended that tax credit is given to environmental compliance organisations by the government and environmental reporting be made compulsory at both organisational and national level. The study, however, is in contrast with the present study which evaluated the effect of environmental accounting on stakeholders' value of listed manufacturing companies in Nigeria and also dealt with environmental issues as it affects stakeholders' value, the use of primary source of data collection and the sample size are also areas of contrast. The study used a small number of fourteen as the sample 110
size while the present study made use of larger number of sample size to have a valid generalization of the conclusion. Bassey et al., (2013) study is in contrast with the present study; one area of difference is in the objective and methodology. The study made use of only Pearson's correlation in analysing while the present research used in both Pearson's correlation and multiple regression analysis in order to establish a relationship in the variables. Both random and stratified sampling techniques were used while the present study made use of stratified and purposive sampling technique. Beredugo and Mefor (2012) study with a sample size of 400 respondents, Pearson correlation coefficient, and OLS were adopted in the analysis. The findings established a significant relationship between environmental accounting and sustainability. Onyali et al., (2015) focused on the perspective of corporate stakeholders in their study with a population of 100 corporate investors, 67 accountants and 100 consumers, a primary and secondary source of data They discovered that most organisation do not have explicit reports, the transparency exercised in the preparation of the reports is sometimes called to question and recommendation was that organisations should disclose more quantifiable triple bottom line information while there is need for standards to guide the recognition of the variables to be disclosure. Donna and Alexis (2014) found that in order to reduce the uneasy feelings between stakeholders and the organisation, organisation should formally account for stakeholders' value in the reports rendered. However, the various identified studies failed to evaluate the effect environmental accounting may have on stakeholders' value of listed manufacturing companies in Nigeria. Majority of the studies in Nigeria have been centered on corporate social responsibility, corporate disclosure and the major economy focused on was the oil and gas sector, multinational corporation and the Niger Delta region, studies have also concentrated more on legitimacy theory and stakeholder theory while few studies have seen the need for systems theory. These are the research gaps this study wishes to fill. 2.5.
Researchers' Conceptual Model
111
The conceptual model as depicted in (Figure 2.5) showed the relevant dependent variable in the framework is stakeholders' value which is looked at from the perspective of management and employees (fair compensations and benefits), shareholder (returns on investment), local resident (corporate social responsibility), government and regulatory agencies (taxes and penalties). The independent variables in the framework are the environmental accounting concepts which are: environmental justice, environmental preservation, environmental conservation, environmental restoration and environmental sustainability the control variable is corporate performance. As the conceptual framework specifies, all the variables have interactions as well as direct relation to the part model.
Independent Variables Environmental Accounting
Dependent Variables Stakeholders’ value
Environmental Justice
(x1)
Environmental Preservation (x2)
112 MEV (Fair compensation and benefits) (y1)
Environmental Conservation(x3)
LRV (Corporate Social Responsibility) (y3) GRAV (Taxes and Penalties) (y4)
Environmental Restoration strategy(x4)
Environmental Sustainability (x5)
Corporate Performance (z)
Control Variable
Control Variable Figure 2.5.: Conceptual Model: Environmental Accounting and Stakeholders’ value. Source: Researcher, 2018
Implication Stakeholders have various reasons for asking organisation to be accountable. The model (Figure 2.5) identified some issues in environmental accounting which are of particular interest to the stakeholder and from which they derive value. That is, it examines the various ways that stakeholders' value inherent in environmental accounting can be determined. Report on environmental justice is required; information on how organisation address environmental preservation is needed, environmental conservation information is necessary, information on environmental restoration is also very well 113
needed and there is the need for the organisations to make known how they intend to achieve environmental sustainability. These identified values must be brought together and incorporated in the corporate reports rendered on its day-to-day activities concerning its impact on the environment to the stakeholders.
CHAPTER THREE METHODOLOGY This chapter dealt with the research methods and processes used in proffering solutions to the study research questions. It showed the research design, population of study, sample size and technique, method of collecting data, validity and reliability of measuring instrument, data analysis techniques and model specification, A priori expectation and ethical consideration. 3.1
Research Design 114
This study adopted survey research design using primary data obtained through questionnaire administered on respondents from the selected listed manufacturing companies in Nigeria. Survey research design was used because it enabled the respondents contribute to issues concerning the topic as a result of its ability to cover a wide range of information as well as representative samples. Previous researchers in the field of accounting have made use of this design (Agyei & Yeboah, 2011; Egbide, 2009; Ogundipe, Idowu & Ogundipe, 2012). 3.2.
Population The study considered listed manufacturing companies in Nigeria. As at 31st December 2017, there were seventy-five (75) manufacturing companies listed on the Nigerian Stock Exchange. The population for this study, therefore, as members of staff of the manufacturing companies, shareholders, residents of the host communities and staff of the Nigerian Environmental Standards and Regulations Enforcement Agency (NESRA). A population of 226,996 was considered for this study as demonstrated in appendix iii. The total number of staff of the organisation was 64.207, shareholders 11,589 (shareholders holding 50,001 shares and above), the number of staff of Nigerian Environmental Standards and Regulations Enforcement Agency (NESRA) was 1200 as at 2014 and the population of the resident within the host community was estimated as 3,000,000 from which the researcher purposively selected 5% as the respondents who are directly affected by the activities of these manufacturing organisations, with this; the total number of community residents was 150,000.
3.3.
Sample size and sampling Technique To achieve the sample size for this study, the researcher adopted stratified and purposive sampling technique. The study selected manufacturing companies that have been continuously listed for a period of 10 years (2008 -2017) and have minimum of 100 (one hundred) numbers of employees. A sample of 40 manufacturing companies which cut across agriculture, conglomerates, construction/real estate, consumer goods, healthcare, industrial goods, natural resources, were found to meet these criteria. Thus,
115
manufacturing firms that have less than 100 employees were not considered part of this study. Using the Taro Yamani formula popularly postulated by Guilford and Fruchter (1973), with 95% confidence level and 5% error rate, the sample size was expressed in the formula stated as: n = N/ (1 + N(e2)) Where n = Desired sample size to be determined N = Total Population e = accepted error limit (0.05 on the basis of 95% confidence level) where N = 226,996 Substituting from the above n = 226,996/ (1 + 226,996 (0.052) = 226,996/567.49 = 400 respondents A sample size of 400 respondents was used for the purpose of this study. Purposive sampling technique was adopted in distributing the questionnaire among the respondents, this was done so as to save time and achieve a high level of returns of the administered questionnaire. The management & employees group were divided into two strata of senior and junior level officers and the study purposively selected from the stratum of officers on the senior level cadre; shareholders were those with shareholding of 50,001shares and above, local residents were purposively represented by the principal officers
of
the
Community
Development
Association
(CDA)
while
the
government/regulatory agencies were grouped into strata of senior and junior level officers and the study purposively selected from the stratum of senior-level officers of National Environmental Standards Regulations Agency (NESRA). Table 3.1: Sample Size Determination Respondents (stakeholders) Management & Employee Local resident
Sample size from each manufacturing company 3 3 116
Total sample size from the 40 selected manufacturing companies 120 120
Shareholder NESRA Total population
3
120 40 400
Source: Researchers’ computation, 2018. Purposive Sampling Technique was adopted in selecting all the respondents to the questionnaire. The researcher selected three respondents from the finance, administrative and technical departments of each of the sample manufacturing companies who hold the position of senior officer, three shareholders from the list of each sample company’s shareholders with shareholding of 50,001shares and above, three executives each from the executives of the Community Development Association (CDA) in the community where the organisation is situated and forty employees were selected from the list of the senior officers of the Nigerian Environmental Standards Regulations and Enforcement Agency (NESRA). However, the researcher considered the situation where two or more organisations exist in the same location. Where this was the situation, the researcher multiplied the questionnaire administered by the number of companies in that location, where it was discovered also that two or more companies are located in the same environment but have plant in another area, the researcher distributed the questionnaire to respondents in the other plants so as to have a wider view from the respondents. 3.4.
Method of Data Collection The study adopted primary data to accomplish objective findings. Data were gotten from respondents in selected listed manufacturing companies and it’s environing using a selfadministered questionnaire of which copies were distributed to the respondents under a questionnaire-forwarding introductory letter from the university. Questionnaire was adopted as the major method because it helped the researcher harvest wider opinions in a logical manner. The researcher also conducted a one-on-one interview with a target group of eleven respondents who are also part of the sample. This target group was made up of four employees, two shareholders, two CDA members and three staff of the regulatory agencies so as to further support the achievement of the fourth objective that is to appraise the effect of environmental restoration strategy on stakeholders' value. Previous studies had successfully made use of this method. 117
To achieve maximum responses from the respondents, personal visits were made to the respondents' offices and locations. 3.4.1. Instruments for Data Collection A closed-ended questionnaire which is a primary source of data collection was administered to evaluate the effect of environmental accounting on stakeholders' values (Appendix i and ii). The questionnaire was structured in line with the Likert scale (5point) and divided into two sections and nine units. Section A: Social-economic characteristics of respondents Section B: Unit 1: Environmental Justice Unit 2: Environmental Conservation Unit 3: Environmental Preservation Unit 4: Environmental Restoration Unit 5: Environmental Sustainability Unit 6: Corporate Performance Unit 7: Management & employees' value Unit 8: Shareholders' value Unit 9: Local residents' value Unit 10: Government & Regulatory Agencies' value 3.5.
Validity of Research Instrument The researcher, in the quest of reducing the level of bias which could come up in the course of conducting the study, carefully put together close-ended questions. Content validity was achieved by discussing the questions with the supervisors, research experts and lecturers. The content of the questionnaire was modified by the supervisors before administering on the sample population.
118
3.6.
Reliability of Research Instrument In achieving reliability for this study, Cronbach's Alpha test was carried out. Cronbach's alpha (\) is an estimate of reliability which could be used specifically to test the internal consistency of scale. According to Cronbach (1951), the presence of internal consistency in a test means that test or instrument can be interpreted. Cronbach's alpha measures the closeness items are related one to another in measuring the same construct. Cronbach's alpha formula is as stated below: \ = (n / (n-1)) (1- (∑si2/ sT2))si2/ sT2)) Where; n = number of items si2 = variance of ith item sT2 = is total score variance Cronbach's alpha submission is that where items have close relationship with one another, the test would be closer to 1, and where items are not closely linked, it would be closer to 0. To achieve this, pilot study was conducted in which 40 copies of the questionnaire were administered to selected respondents. Pilot study was meant to find out if the questionnaire was put together in a way that would bring out information looked for, ensure the proper presentation of questions constructed to enhance responses. Cronbach's alpha of 0.716 was obtained and this being greater than 0.70 indicated that the reliability of the test instrument is strong. Reliability Tests for the constructs Table 3.2: Reliability Statistics for Environmental Accounting Cronbach's Alpha N of Items 0.723 20 Source: Researcher’s Computation, 2018 Table 3.3.: Reliability Statistics for Stakeholders’ value Cronbach's Alpha N of Items 0.700 17 Source: Researcher’s Computation, 2018 119
Cronbach' alpha test was conducted on the construct for environmental accounting and stakeholders' value and the result showed in Tables 3.2 and 3.3 indicate that the entire construct for environmental accounting had a coefficient of 0.723 while that of stakeholders' value had a coefficient of 0.7. 3.7. Method of Data Analysis The study made use of descriptive and inferential statistics in analysing and interpreting the data used in this research. The data collected through questionnaire was fine-tuned and made ready by editing, coding, sorting and then keying into the system using statistical computer software for analysis. Frequency distribution, percentages, mean and standard deviation determination, multiple regression analysis was used to regress the independent variables on the dependent variables and inferential results were obtained, multiple regressions highlight relationship (positive or negative), elasticity or sensitivity and the level of significance of the identified independent and dependent variables. To discover the power or extent of the relationship between stakeholders' value (management & employees, shareholders, local residents, government/regulatory agencies) and environmental justice, environmental conservation, environmental preservation, environmental restoration strategy and environmental sustainability (Environmental accounting), a model of multiple regression analysis was adopted. 3.8. Functional Relationship MEV = f (EJ, EC, EP, ER, ES, CP)
F1
SHV = f (EJ, EC, EP, ER, ES, CP)
F2
LRV = f (EJ, EC, EP, ER, ES, CP)
F3
GRAV = f (EJ, EC, EP, ER, ES, CP)
F4
SV = f (EJ, EC, EP, ER, ES, CP)
F5
where: Management & employees’ value (MEV) Shareholders’ value (SHV) Local residents’ value (LRV) 120
Government/regulatory agencies’ value (GRAV) Environmental Justice (EJ) Environmental Conservation (EC) Environmental Preservation (EP) Environmental Restoration (ER) Environmental Sustainability (ES) Corporate Performance (CP) f = functional dependency of the relationship 3.9. Model Specification Testing the relevance of the stated hypotheses environmental accounting and stakeholders' value, the regression model stated below examined the relationship between the variables; dependent, independent and control. As identified in the study hypothesis, stakeholders’ value was expected to react positively, in relation to positive response of environmental accounting variables of corporate organisations and negatively in relation to negative response of environmental accounting variables of corporate organisations. The study measured the nature of significance through the research instrument (questionnaire). With this, the first hypothesis which stated that environmental justice does not have significant effect on stakeholders’ value of listed manufacturing companies in Nigeria, we have: Hypothesis One MEVi = β0i+ β1EJi + β6CPi + µi SHVi = β0i + β1EJi + β6CPi + µi LRVi = β0i + β1EJi + β6CPi + µi GRVAi = β0i + β1EJi + β6CPi + µi That is: SVi = β0i + β1EJi + β6CPi + µi For the second hypothesis which stated that environmental conservation does not have significant effect on stakeholders’ value of listed manufacturing companies in Nigeria. 121
Hypothesis Two MEVi = β0i + β1ECi + β6CPi + µi SHVi = β0i + β1ECi + β6CPi + µi LRVi = β0i + β1ECi + β6CPi + µi GRVAi = β0i + β1ECi + β6CPi + µi That is: SVi = β0i + β1ECi + β6CPi + µi For the third hypothesis which stated that environmental preservation does not have significant effect on stakeholders’ value of listed manufacturing companies in Nigeria. Hypothesis Three MEVi = β0i + β1EPi + β6CPi + µi SHVi = β0i + β1EPi + β6CPi + µi LRVi = β0i + β1EPi + β6CPi + µi GRVAi = β0i + β1EPi + β6CPi + µi That is: SVi = β0i + β1EPi + β6CPi + µi For the fourth hypothesis which stated that environmental restoration strategy does not have significant effect on stakeholders’ value of listed manufacturing companies in Nigeria. Hypothesis Four MEVi = β0i + β1ERi + β6CPi + µi SHVi = β0i + β1ERi + β6CPi + µi LRVi = β0i + β1ERi + β6CPi + µi GRVAi = β0i + β1ERi + β6CPi + µi That is: SVi = β0i + β1ERi + β6CPi + µi
122
For the fifth hypothesis which stated that environmental sustainability does not have significant effect on stakeholders’ value of listed manufacturing companies in Nigeria. Hypothesis Five MEVi = β0i + β1ESi + β6CPi + µi SHVi = β0i + β1ESi + β6CPi + µi LRVi = β0i + β1ESi + β6CPi + µi GRVAi = β0i + β1ESi + β6CPi + µi That is: SVi = β0i + β1ESi + β6CPi + µi Bringing these together the model for the study is as stated below: Model 1 MEVi = β0i + β1EJi + β2ECi + β3EPt + β4ERi + β5ESi + β6CPi + µi Model 2 SHVi = β0i + β1EJi + β2ECi + β3EPt + β4ERi + β5ESi + β6CPi + µi
Model 3 LRVi = β0i + β1EJi + β2ECi + β3EPt + β4ERi + β5ESi + β6CPi + µi Model 4 GRVAi = β0i + β1EJi + β2ECi + β3EPt + β4ERi + β5ESi + β6CPi + µi For the estimation of the effect of environmental accounting on stakeholders’ value, the linear regression models show: SVi = β0i + β1EJi + β2ECi + β3EPt + β4ERi + β5ESi + β6CPi + µi where: Dependent variable = Stakeholders’ value 123
Independent variable = Environmental Accounting Where: SV = y1, y2, y3, y4 y1 = Management & employees’ value (MEV) y2 = Shareholders’ value (SHV) y3 = Local residents’ value (LRV) y4 = Government/regulatory agencies’ value (GRAV) X = x1 = Environmental Justice (EJ) x2 = Environmental Conservation (EC) x3 = Environmental Preservation (EP) x4 = Environmental Restoration (ER) x5 = Environmental Sustainability (ES) Z = Control variable = Corporate Performance (CP) i = individual respondents µ = error term. This was used to represent other possible factors of concern that are not captured in the model. β0 = Parameter to be estimated β1 – Coefficient of independent variable EJ β2 - Coefficient of independent variable EC β3 - Coefficient of independent variable EP β4 - Coefficient of independent variable ER β5 - Coefficient of independent variable ES β6 - Coefficient of independent variable CP 3.10.
Model Evaluation The level of significance of independent variable was tested at 95% level of confidence. The normality of the model was determined; p0; signified that the presence of EJ leads to higher SV β2>0; signified that the presence of EC information leads to higher SV β3>0; signified that the presence of EP information leads to higher SV β4>0; signified that the presence of ER information leads to higher r SV β5>0; signified that the presence of ES information leads to higher SV β6>0; signified that the presence of CP information leads to higher SV
3.12. Ethical Consideration The study was carried out with ethical policy and guidelines of Babcock University in mind. Ethical consideration considers the anonymity, confidentiality and voluntary participation of human subjects. The researcher ensured that data gathered for the research were handled safely and used solely for the study while using perfect data analysis procedure in the analysis of the data (Quinlan 2011). This study further adhered to the four principles of ethical practice as pointed out by Myers (2013) which are: truthfulness, thoroughness, objectivity and relevance. 125
The researcher was given written consent by the Babcock University Research Ethics Committee (BUHREC) to carry out this study.
CHAPTER FOUR DATA ANALYSIS, RESULTS AND DISCUSSION OF FINDINGS This chapter dealt with the presentation and analysis of the study. Findings on relationship between environmental accounting and stakeholders’ value using a Statistical Package for Social Science (SPSS version 20.0) for the analysis. Data presentation in this chapter is mainly by the use of frequency Tables, Pearson Correlation and a multiple regression analysis of the model. Test of research hypotheses are performed with the aim of providing empirical evidence to answer the research questions earlier stated in the study. 4.1.
Response Rate 126
The response rate for the study showed the suitability of the study procedure. This study administered four hundred copies of questionnaire to the selected stakeholders and achieved a response rate of 81.50%. This is due to the fact that there was a face to face interaction with the leaders of the unions and the cooperative societies operating within the organisation which is a key factor to the achievement of this rate of return. Table 4.1: Sample size and percentage of response rate Stakeholders
Sample
Questionnair
returned
e
Response
not rate
Management & Employees
120
106
returned 14
88.33%
Shareholders Local community resident Government/Regulatory
120 120 40
89 102 29
31 18 11
74.17% 85.00% 72.50%
326
74
81.50%
Agencies Total 400 Source: Researcher’s Field Survey, 2018
4.2.
Questionnaire
Characteristics of the Sample This section explained the characteristics of the sample collected reflecting: gender and age of the respondents, educational qualification of the respondents are shown in Tables 4.2 – 4.7 below. This information was collected for the purpose of having a better understanding of the respondents.
4.2.1. Age of Respondents The frequency distribution table was used to describe the age distribution of respondents as shown in Table 4.2. Table 4.2: Age of Respondents Age Under 30 years 30 – 40 years
Frequency 3 47
Percentage % 0.9 14.4 127
41 – 50 years 151 46.3 51 – 60 years 113 34.7 61 and above 12 3.7 Total 326 100.0 Source: Researcher’s Field Survey, 2018
F re q u e n c y
150
100
50
0 Under30yrs
30 - 40yrs
41 - 50yrs
51 - 60yrs
61 and above
Figure 4.1: Age of respondents Source: Researcher’s Field Survey, 2018 The findings in Table 4.2 and Figure 4.1 show that 14% are within the age group of 30 – 40 years while most of the respondents were within the age group of 41 - 60 years constituting 81% of the respondents and 3.7% are 61 years and above this showed that the respondents are very experienced with the issue under debate. 4.2.2. Educational Qualification The educational qualification of the respondents is important because education facilitates the acquisition of more skills which made them to be better equipped as depicted in Table 4.3 and Figure 4.2. Table 4.3: Educational Qualification Qualification Frequency HND/BSc 218 Postgraduate 108 Total 326 Source: Researcher’s Field Survey, 2018 128
Percentage % 66.9 33.1 100.0
250
F re q u e n c y
200
150
100
50
0 HND/B.Sc
Postgraduate
Figure 4.2: Educational Qualification of Respondents Source: Researcher’s Field Survey, 2018
The result in Table 4.3 and Figure 4.2 indicate that most of the respondents had attained first degree constituting about 67%, while 33% were postgraduate degree holders. This implied that all the respondents understood the instruction and were able to answers the questions. 4.2.3. Department of Respondents The findings in Table 4.4 and Figure 4.3 show that the finance department is represented by 21.2%, Administrative staff is 22.1%, 16.3% are workers from Technical (production) department and other department not spelt out in the study took up 40.5%. This is possible as the respondents are not limited to the organisations’ employees only. Table 4.4: Department Department Frequency Finance/Account 69 Administrative 72 Technical 53 Others not specified 132 Total 326 Source: Researcher’s Field Survey, 2018 129
Percentage % 21.2 22.1 16.3 40.5 100.0
F re q u e n c y
125
100
75
50
25
0 Finance/Account
Administrative
Environmental/Technical
Others not specified
Figure 4.3: Department of the Respondents Source: Researcher’s Field Survey, 2018 4.2.4. Relationship with the organisation The findings showed in Table 4.5 and Figure 4.4 that 27.3% of the respondents are shareholders, 8.9% are representing government/regulatory agencies 31.3% are local community members while the difference which is 32.5% represents the management & employees. These are all the respondents to the questions administered. Table 4.5: Relationship with the organisation Relationship Shareholders Government/Regulatory Agencies Local community Residents Total Source: Researcher’s Field Survey, 2018
130
Frequency 89 29 102 220
Percentage % 40.5 13.2 46.3 100.0
120
F re q u e n c y
100
80
60
40
20
0 Shareholder
Government/Regulatory Agencies
Local communityresident
Figu re 4.4: Relationship with the organisation Source: Researcher’s Field Survey, 2018
4.2.5. Length of Relationship with the organisation The findings indicated as detailed in Table 4.6 and Figure 4.5 that 38% have a 1 – 10years relationship with the organisation, 50.3% have a relationship of 11 – 20years, 11% have a relationship of 21 – 30years while 0.6% have 31 years above relationship with the organisation. Table 4.6: Length of Relationship with the organisation Length 1 – 10yrs 11 - 20yrs 21 – 30yrs 31yrs above Total
Frequency 124 164 36 2 326 131
Percentage % 38.0 50.3 11.0 0.6 100.0
Source: Researcher’s Field Survey, 2018
200
F re q u e n c y
150
100
50
0 1 - 10yrs
11 - 20yrs
21 - 30yrs
Above 31yrs
Figure 4.5: Length of relationship with the organisation Source: Researcher’s Field Survey, 2018
4.3.
Descriptive Analysis This section contained descriptive statistics for the variables used in this study. The independent
variable
was
environmental
Accounting
(environmental
justice,
environmental conservation, environmental preservation, environmental restoration strategy and environmental sustainability) while the dependent variable was stakeholders’ value (management and employee value, shareholders’ value, local resident’s value, Government/regulatory agencies’ value) and the control variable was corporate performance. The effect of each independent variable on each dependent variable was investigated. 4.3.1. Environmental Justice S/
Statement
SA
A 132
U
D
SD
Mean S.D
(5) Freq
N
1
2
3
4
(4) Freq
(3) Freq
(2) Freq
(%) (%) (%) (%) Protecting the environment, 267 51 8 preserving nature is the duty 0 (81.5) (15.6) (2.5) of all stakeholders. Stakeholders have been duly 30 99 involved in organisations’ 73 0 environmental decision (22.4) (9.2) (30.4) making. When organisations incorporate environmental 232 7 13 61 information into its financial (18.7) (2.1) (4) statement and accounts (71.2) stakeholders’ value increases. Stakeholder should treat 92 34 unfairly organisations that 182 0 negatively affect the (49.7) (28.2) (10.4) environment. Table 4.7: Responses to questions on environmental Justice
(1) Freq (%) 0 124 (38) 13 (4) 38 (11.7)
4.770
0.570
2.476
1.596
4.491
1.007
3.939
1.402
Source: Researcher’s Field Survey, 2018
Interpretation The respondents were required to state their position on whether protecting the environment; preserving nature is the duty of all stakeholders. 97.7% of the respondents agreed to this statement that it is the duty of all stakeholders to protect the environment while 2.5% were not in agreement. On the average, the respondents strongly agreed with the statement as detailed in Table 4.7 (mean = 5, SD = 0.570). They were asked if stakeholders have been duly involved in organisations’ environmental decision making. A total of 31.6% respondents agreed with the statement and 68.4% disagreed. Majority of the respondents indicated that stakeholders have not been duly involved in organisations’ environmental decision making as detailed in Table 4.7 (mean = 2, SD = 1.596). 133
When an organisation incorporates environmental information into its’ financial statements and accounts stakeholders’ value increases. A total of 89.9% agreed with this statement, 2.1% were undecided while 8% disagreed. This showed that majority of the respondents were of the opinion that incorporating environmental accounting information by organisations into their financial statement and accounts increases stakeholders’ value and this has a mean response of 5 on the average, the respondents strongly agreed with the statement as detailed in Table 4.7 (mean = 5, SD =1.007). To measure if stakeholder should treat unfairly organisations that negatively affect the environment, the findings were as follows: A total of 77.9% of the respondents agreed with this statement 22.1% disagreed with this statement. Indicating that majority of the respondents was of the opinion that stakeholders should be hostile to organisations that negatively affect the environment and this has a mean response of 4. On the average, the respondents agreed with the statement as detailed in Table 4.7 (mean = 4, SD = 1.402). In summary, it could be observed that majority of the respondents indicated their agreement with the extent of the importance of environmental justice to stakeholders in their environmental accounting information. This findings support Miller (2011) who identified that those who would be affected by the impact of environmental decisions have a right and should take part in such decisions and have their opinions and interest genuinely put into consideration and Belkaoui (1976) where it was discovered that stakeholder interest increases towards organisations that make available environmental information in their financial statement as against those organisations that do not disclose. 4.3.2. Environmental Conservation Table 4.8: Responses to questions on Environmental Conservation
S/ N 5 6
Statement
SA
A
U
D
SD
(5) Freq
(4) Freq
(3) Freq
(2) Freq
(1) Freq
(%) 104 (31.9) 40
(%) 3 (0.9) 7
(%) 48 (14.7) 110
(%) 32 (9.8) 146
(%) Environmental conservation 139 reduces stakeholder agitations. (42.6) Protection of environmental 23
134
Mean S.D
3.828
1.373
2.031
1.265
7
8
sensitive/designated areas and rare unique species has been (7.1) (12.3) (2.1) on an increase in Nigeria. Organisations should be aware that the environment also 262 64 0 belong to the generations yet (80.4) (19.6) unborn. Proper management of environmental conservation 2 5 12 costs would not increase (0.6) (1.5) (3.7) corporate market performance. Source: Researcher’s Field Survey, 2018
(33.7) (44.8)
0
0
4.804
0.398
107 200 1.472 (32.8) (61.3)
0.700
Interpretation The study sought to analyse the effect of environmental conservation on stakeholders’ value of listed manufacturing companies in Nigeria. In response to the statement that environmental conservation reduces stakeholders’ agitations. A significant majority 74.5% agreed with the statement, 0.9% were undecided and 24.5% disagreed. This implied that majority of the respondents agreed that environmental conservation reduces stakeholders’ agitations. On the average, the respondents agreed with the statement as detailed in Table 4.8 (mean = 4, SD = 1.373). Asked if protection of environmental sensitive/designated areas and rare unique species has been on an increase in Nigeria 19.4% agreed with the statement, 2.1% were undecided, 75.8% disagreed with the statement. With this, it could be concluded that the protection of environmental sensitive/designated areas and rare unique species have not been on an increase in Nigeria. On the average, the respondents disagreed with the statement as detailed in Table 4.8 (mean =2, SD = 1.265). The respondents were asked if organisations should be aware that the environment also belong to the generations yet unborn. All the respondents were in agreement with the statement that the organisations should be aware that the environment belong to the generations yet unborn and this had a response on the average mean of 5 and SD of 0.398 as seen on Table 4.8.
135
Proper management of environmental conservation costs would not increase corporate market performance. 2.1% of the respondents were in agreement with this statement, 3.7% were neither in agreement nor in disagreement and 94.1% disagreed with the statement and a response mean of 1 on the average and 0.700 SD as detailed in Table 4.8. This is in agreement with the findings of Keun-Hyo et al., (2017) that management of environmental cost is important such that organisations producing eco-friendly products can effectively compete in product pricing and expand their market share. In summary, it could be observed that the respondents indicated the extent of the importance of environmental conservation information to stakeholders in their decision making. This findings support Wang et al., (2014) where it was decided that organisations with environmental expenditure can accomplish significant increases in efficiency and productivity and also Sueyoshi and Goto (2009) on the importance of environmental conservation information to stakeholders’ value. This showed that the issues of environmental conservation needed to be taken seriously by organisations in Nigeria.
4.3.3. Environmental Preservation Table 4.9: Responses to questions on Environmental Preservation S/ N
Statement
Organisations should conduct its business activities without 9 minding the environment because of the opportunity of restoration. The type of management system in operation in the country does 10 not encourage maintenance of natural resources. 11 Conservation is about spending money to guide against
SA
A
U
D
(5) Freq
(4) Freq
(3) (2) Freq Freq
(1) Freq
(%)
(%)
(%)
(%)
(%)
SD
Mean S.D
110 41 18 (33.7) (12.6) (5.5)
67 90 3.043 (20.6) (27.6)
1.671
173 66 4 (54.6) (20.2) (1.2)
42 41 3.883 (11.3) (12.6)
1.478
139 92 29 (42.6) (28.3) (8.9)
29 27 (10.4) (9.8)
136
3.834
1.340
environmental impact and ensure business survival and sustainability. Environmental preservation 181 57 8 12 activities have not greatly (55.5) (17.5) (2.5) improved in Nigeria. Source: Researcher’s Field Survey, 2018
33 42 3.911 (11.6) (12.9)
1.485
Interpretation The respondents were asked if organisations should conduct its business without minding the environment and the responses gotten showed 46.3% in agreement with this statement, 5.5% are undecided on the issue while 48.2% are in disagreement with an average response mean of 3 and SD of 1.671 as shown in Table 4.9. When asked if the type of management system in operation in the country does not encourage maintenance of natural resources. 73.3% of the respondents are in agreement with the statement, 1.2% are undecided while 25.5% are in disagreement and a response mean on the average of 4 and SD of 1.478 as shown in Table 4.9. The respondents were asked if conservation is about spending money to guide against environmental impact and ensure business survival and sustainability. 70.9% agreed with the statement, 8.9% are undecided while 20.2% are in disagreement with a response mean of 4 and SD of 1.340 as shown in Table 4.9. Environmental preservation activities have not greatly improved in Nigeria. 73% are in agreement with this statement, 2.5% are neither in agreement nor disagreement with the statement while 24.5% are in disagreement with a response mean of 4 and SD of 1.485 as shown in Table 4.9. This implied that many of the stakeholders believed environmental preservation activities have not improved in Nigeria. There is therefore the need for the policy makers to look into this area and ensure that efforts are geared towards preservation of nature and the environment. Summarily, it could be observed that the respondents indicated the extent of the importance of environmental preservation information to stakeholders in their decision 137
making. This findings support Martensson and Westerberg (2016) that stakeholders are particularly interested in knowing that organisations are highly committed to environmental preservation and Md. Hafij et al., (2014) where it was recommended that government and other regulatory agencies should enforce and motivate the textile organisations to take care of environmental issues and report them in the annual report. 4.3.4. Environmental Restoration Strategy Table 4.10: Responses to questions on Environmental Restoration Strategy
S/ N
13
14
15
16
Statement
SA (5) Freq (%)
When organisations conduct environmental restoration they 219 enjoy stakeholder support and (67.2) directly impact stakeholders’ value. Manufacturing companies should be made responsible for cleaning 276 up the toxic waste products it has (69.3) emitted into the environment. Government should sanction erring company or individual whose 216 activities continue to cause (66.3) environmental degradation even on the environment. Restoration can actually take the 179 natural environment back to the (54.9) form it was before damage. Source: Researcher’s Field Survey, 2018
A (4) Freq (%)
U (3) Freq (%)
D (2) Freq (%)
SD (1) Freq (%)
77 (23.6)
0
12 (3.7)
18 (5.5)
4.433
1.064
72 (22.1)
0
20 (6.1)
8 (2.5)
4.500
0.957
44 (13.5)
2 (0.6)
35 29 (10.7) (8.9)
4.175
1.369
46 (14.1)
5 (1.5)
49 (15)
47 3.801 (14.5)
1.560
Mean S.D
Interpretation The respondents were asked to state their agreement or otherwise with the statement that when organisations conduct environmental restoration, they enjoy stakeholder support and directly impact stakeholders’ value. 90.8% agreed, 9.2% disagreed and on the average a response mean of 4 and SD of 1.064 showed that the respondents agreed with this statement as detailed in Table 4.10.
138
Manufacturing companies should be made responsible for cleaning up the toxic waste products it emitted into the environment. 91.4% are in agreement with this statement, while 8.6% are in disagreement with an average response mean of 5 and SD of 0.957 to confirm that the respondents strongly agreed with this statement as detailed in Table 4.10. When asked if government should sanction erring company or individual whose activities continue to cause environmental degradation on the environment. 79.8% are in agreement with this statement, 0.6% is neither in agreement nor disagreement with the statement while 19.6% are in disagreement with an average response mean of 4 and SD of 1.369 to confirm that the respondents agreed with this statement as detailed in Table 4.10. When asked if restoration can actually take the natural environment back to the form it was before damage. 69% are in agreement with this statement, 1.5% neither in agreement nor in disagreement with the statement while 29.5% is in disagreement and this is shown by an average response mean of 4 and SD of 1.560 which showed on the average that the respondents agreed with the statement as detailed in Table 4.10. This findings is in support of the activities of government and shell in the Niger Delta region, where restoration work is presently on going, a service to yield to the prolong cry of the people of that region. The responses were as presented in Table 4.10. In summary, majority of the respondents indicated the extent of the importance of environmental restoration strategy to stakeholders’ decision making. This findings support Khater et al., (2012) that stakeholder interest should be included in restoration plans and also the studies of Cormier and Magnan (1997) where it was concluded that refusal to identify environmental issues may expose organisations to sanctions and fines. 4.3.5. Environmental Sustainability Table 4.11: Responses to questions on environmental Sustainability S/ N 17
Statement
SA
A
U
D
SD
(5) Freq
(4) Freq
(3) Freq
(2) Freq
(1) Freq
(%) (%) 90 8 (27.6) (2.5)
(%) 9 (2.8)
(%) 13 (4)
(%) Incorporating environmental 206 accounting information in the (63.2) 139
Mean
S.D
4.433
0.970
18
19
20
annual reports and account is a means of ensuring environmental sustainability Companies should regularly review current standards and practices with regards to 273 disclosure of environmental (83.7) accounting information in corporate financial statement A well-defined environmental management practices would 235 ensure environmental (72.1) sustainability. For sustainability to be achieved there is a need to review the 217 present environmental (66.6) regulations. Source: Researcher’s Field Survey, 2018
53 (16.3)
0
0
0
4.837
0.370
87 (26.7)
0
4 (1.2)
0
4.670
0.535
15 (4.6)
20 (6.1)
4.362
1.141
65 9 (19.9) (2.8)
Interpretation When asked to state their agreement or otherwise with the statement that incorporating environmental accounting information in the annual reports and account is a means of ensuring environmental sustainability. 90.8% agreed, 2.5% neither agreed nor disagreed, 6.8% disagreed with an average response mean of 4 and SD of 0.970 which showed that on the average, the respondents agreed with the statement as detailed in Table 4.11. Companies should regularly review current standards and practices with regards to disclosure of environmental accounting information in corporate financial statement. All the respondents are in agreement with this statement with an average response mean of 5 and SD of 0.370 showed that the respondents strongly agreed with the statement as detailed in Table 4.11. When asked if a well-defined environmental management practices would ensure environmental sustainability. 98.8% of the respondents are in agreement with this statement while 1.2% are not in agreement with an average response mean of 5 and SD of 0.535 depicting that the respondents strongly agreed with the statement as detailed in Table 4.11.
140
When asked if for sustainability to be achieved there is a need to review the present environmental regulations. 86.5% are in agreement with this statement, 2.8% are neither in agreement nor disagree with the statement while 10.7% are in disagreement with an average response mean of 4 and SD of 1.141 as detailed in Table 4.11. In summary, majority of the respondents indicated the extent of the importance of environmental sustainability to stakeholders in their environmental accounting information. This is in agreement with Przychodzen & Przychodzen, (2013) that an organisation is said to be sustainable when it considers its long term health in addition to proper management of every aspect of its’ business activities at the same time and also the study of Judge and Douglas (1998) where it was determined that organisations can reduce waste and save costs through the use of environmental friendly materials.
4.3.6. Corporate Performance Table 4.12: Responses to questions on management & employees’ value
S/N
Statement
SA
A
U
D
SD
(5) Freq
(4) Freq
(3) Freq
(2) Freq
(1) Freq
(%)
(%)
72
127
(%) (%) (%) Companies cannot assess 63 64 corporate performance by 21 0 the quantity of waste and (19.3) (19.6) emission produced. Source: Researcher’s Field Survey, 2018 Interpretation 141
(22.1) (39.0)
Mean S.D
2.193
1.151
When asked to state their agreement or otherwise with the statement that companies cannot assess corporate performance by the quantity of waste and emission produced. 19.3% agreed with the statement, 19.6% are undecided while 61% are in disagreement with the statement with an average response mean of 2 and SD of 1.151 as detailed in Table 4.12. This is in agreement with the study of Deegan and Rankin (1997) where it was stated that users of financial statements believed that environmental reports is needed in making decision.
4.3.7. Management and employee value Table 4.13: Responses to questions on management & employees’ value
S/N
22
23
Statement
SA
A
U
D
SD
(5) Freq
(4) Freq
(3) Freq
(2) Freq
(1) Freq
(%)
(%)
(%)
(%)
(%)
27
79
Employees believed they do not deserve fair 0 0 0 compensation for their effort in the organisation. Proper planning & control mechanisms have been put 31 16 12 into place by my organisation as it regards (30.2) (15.1) (11.3) the environment. 142
(25.5) (74.5) 17
30
(16)
(28.3)
Mean S.D
1.255
0.438
3.009
1.624
For credibility and 5 responsibility to be 3 24 improved, employees do not (2.8) (4.7) need training The introduction of environmental accounting to 4 manufacturing companies 5 25 has not contributed to (4.7) (3.8) improved level of environmental protection. Source: Researcher’s Field Survey, 2018
0
14
84
(13.2) (79.2)
9
19
69
(8.5)
(17.9) (65.1)
1.387
0.932
1.651
1.096
Interpretation The respondents particularly the management and employees of the organisations were asked specific questions to identify their values. Employees were asked if they believed they do not deserve fair compensation for their effort in the organisation. All the respondents disagreed with the statement and this has an average response mean of 1 and SD of 0.438 which showed that the respondents disagreed with the statement as shown in Table 4.13. They were further asked if proper planning & control mechanisms have been put into place by their organisations as it regards the environment. 44.3% are in agreement, 11.3% are undecided while 44.4% are not in agreement with the statement with an average mean of 3 and SD of 1.624 showing that the respondents are undecided as regard the question as detailed in Table 4.13. When asked if for credibility and responsibility to be improved, employees do not need training. 7.5% are in agreement while 92.9% of the respondents disagreed with this statement while with an average response mean of 1 and SD of 0.932 that is the respondents’ disagreed with the statement as detailed in Table 4.13. The introduction of environmental accounting to manufacturing companies has not contributed to improved level of environmental protection 8.2% are in agreement with this statement and 8.5% are neither in agreement nor disagree while 83% disagreed with an average response mean of 2 and SD of 1.096 as detailed in Table 4.13.
143
The study concurs with Zhang (1997) where it was stated that environmentally conscious design and manufacturing centered on reducing disposal costs and environmental risks, improve product quality at lower cost, minimize waste and increase productivity and the study of Huang and Kung (2010) that increase in the awareness of environmental issues, would make employees and management to have interest in their company’s environmental performance.
4.3.8. Shareholders’ value Table 4.14: Responses to questions on shareholders’ value S/ N
26
Statement
SA
A
U
D
SD
(5) Freq
(4) Freq
(3) Freq
(2) Freq
(1) Freq
(%)
(%)
(%)
(%)
(%)
0
0
Shareholders do not believe that getting better returns on their 19 4 investment as they believed is a 66 way of demanding justice for (74.2) (21.3) (4.5) their involvement in the organisation.
144
Mean S.D
1.562
0.852
27
28
29
Business investment is risky and as such there is no way to enjoy 15 18 6 good returns without affecting the (16.9) (20.2) (6.7) environment.
13 (14.6 )
Environmental accounting 17 12 7 information has not been 45 adequately incorporated into (50.6) (19.1) (13.4) (7.9) business decision making. Environmental accounting 18 information does not empower 0 0 shareholders’ decision making (20.2) 0 ability.
37 (41.6)
8 (9.0)
3.438
1.588
3.944
1.335
1.202
0.404
71 (79.8)
Source: Researcher’s Field Survey, 2018 Interpretation The respondents were asked if shareholders do not believe that getting better returns on their investment as they believed is a way of demanding justice for their involvement in the organisation and the responses gotten showed 6.8% are in agreement while 93.2% are in disagreement with this statement an average response mean of 5 and SD of 0.552 showed that the respondents agreed with the statement as detailed in Table 4.14. When asked if business investment is risky and as such there is no way to enjoy good returns without affecting the environment. 37.1% are in agreement with the statement while 6.7% are undecided and 56.2% are not in agreement with an average response mean of 3 and SD of 1.588 it showed that there is a mixed feeling among the respondents on this issue as detailed in Table 4.14. When asked if environmental accounting information has not been adequately incorporated into business decision making 69.7% are in agreement with this statement, 13.4% are undecided while 16.9% are in disagreement with an average response mean of 4 and SD of 1.335 showed that the respondents agreed with the statement as detailed in Table 4.14. Shareholder would not be better empowered with environmental accounting information. All the respondents disagreed with this statement. This implied that shareholders believed
145
they would be better empowered when they have environmental accounting information average response mean of 1 and SD of 0.404 which showed that the respondents strongly agreed with the statement as presented in Table 4.14. The findings concur with the study of Meek, Roberts and Gray (1995) where it was found out that disclosing adequate and relevant information is needed to enter into international markets and Dalborg (1999) where it was stated that shareholders’ value is created in situations when the returns in the form of dividend and shares prices increases and is higher than the risk adjusted rate of return gotten in the stock market.
4.3.9. Local residents’ value Table 4.15: Responses to questions on local residents’ value
S/N
30
Statement
SA
A
U
D
SD
(5) Freq
(4) Freq
(3) Freq
(2) Freq
(1) Freq
(%)
(%)
(%)
(%)
14
84
(%) Conducting corporate social responsibility cannot serve as a way to remediate the effect of 3 organisations’ activities on the (2.9) residents.
146
1 (1.0)
0
(13.7) (82.4)
Mean S.D
1.284
0.788
31
Patronising locally made materials from the community would not play any role in 9 encouraging stakeholder (8.8) support.
5
6
25
(4.9)
(5.9)
(24.5) (55.9)
32
Community residents have not been well represented in the plans of government and 39 manufacturing companies as it (38.2) regards environmental issues.
32
11
8
(31.4) (10.8) (7.8)
(11.8)
33
Communication between manufacturing companies and 28 host communities has not (27.5) improved lately.
36
24
(35.3)
0
14
57
12
(13.7) (23.5)
1.863
1.267
3.765
1.351
3.294
1.571
Source: Researcher’s Field Survey, 2018 Interpretation The respondents were asked if conducting corporate social responsibility cannot serve as a way to remediate the effect of organisations’ activities on the residents. 3.9% of the respondents were in agreement while 96.1% are not in agreement with this statement average response mean of 1 and SD of 0.788 which showed that the respondents disagreed with the statement as detailed in Table 4.15. Patronising locally made materials from the community would not play any role in encouraging stakeholder support. 13.7% are in agreement with the statement, 5.9% are undecided while 80.4% are in disagreement with an average response mean of 1 and SD of 1.267 showed that the respondents disagreed with the statement on the average as detailed in Table 4.15. When asked whether community residents have been well represented in the plans of government and manufacturing companies as it regards environmental issues. 69.6% are in agreement 10.8% are undecided while 19.6% are in disagreement with an average response mean of 4 and SD of 1.351 showed that the respondents agreed with the statement on the average as detailed in Table 4.15.
147
Communication between manufacturing companies and host communities has improved lately. 62.8% are in agreement with this statement, while 37.2% are in disagreement with an average response mean of 3.294 and SD of 1.571 showed that the respondents are undecided about the statement, on the average as detailed in Table 4.15. The finding is in agreement with the study of Raza (2011) where it was stated that when organisations understand the powers of the community where it operates and make meaningful deductions, such organisation would be more successful.
4.3.10. Government/regulatory agencies’ value Table 4.16: Responses to questions on Government/regulatory agencies’ value S/ N 34 35
SA (5) Statement Freq (%) Tax is not a means of controlling 2 environmental pollution. (6.9) The present environmental 13 regulations is not adequate, there (44.8) 148
A (4) Freq (%) 5 (17.2) 7 (24.1)
U (3) Freq (%) 0 3 (10.3)
D (2) Freq (%) 7 (24.1) 3 (10.4)
SD Mean S.D (1) Freq (%) 15 2.035 1.375 (51.7) 3 3.828 1.391 (10.3)
36
37
38
is a need to promulgate new ones. Manufacturing organisations have 6 strictly adhere and complied with (27.6) legislative rules. Monitoring mechanisms should not be put in place to regularly follow up on the effectiveness, 0 efficiency, adequacy and relevancy of the regulations. Accounting standards that serves to unify environmental reporting systems should not be put into place in Nigeria as this would encourage comparisons among organisations. 0 Source: Researcher’s Field Survey, 2018
4 (13.8)
5 (17.2)
9 (31)
3 3.172 (10.3)
1.416
0
0
8 21 1.276 (27.6) (72.4)
0.455
0
0
15 14 (51.7) (48.3) 1.517
Interpretation When asked if tax is not a means of controlling environmental pollution. 24.1% are in agreement while 75.8% are in disagreement with this statement with an average response mean of 2 and SD of 1.375 which showed that the respondents disagreed with the statement on the average as detailed in Table 4.16. The present environmental regulations is not adequate, there is a need to promulgate new ones. 68.9% are in agreement with the statement 10.3% are undecided while 20.7% are in disagreement with an average response mean of 3 and SD of 1.416 showed that the respondents were undecided about the statement on the average as detailed in Table 4.16. Manufacturing organisations have strictly adhered and complied with legislative rules. 46.5% agreed with the statement while 53.5% are in disagreement with an average response mean of 3 and SD of 1.538 showed that the respondents were undecided about the statement on the average as detailed in Table 4.16. When asked whether monitoring mechanisms should not be put in place to regularly follow up on the effectiveness, efficiency, adequacy and relevancy of the regulations. All the respondents are in agreement with this statement with an average response mean of 1 and SD of 0.455 showed that the respondents strongly disagreed with the statement on the average as detailed in Table 4.16. 149
0.509
Accounting standards that serve to unify environmental reporting systems should be put into place in Nigeria as this would encourage comparisons among organisations. All the respondents were in disagreement with this statement with an average response mean of 1and SD of 0.509 showed that the respondents agreed with the statement on the average as detailed in Table 4.16. The finding is in line with that of Aloni et al., (2015) where it was stated that government and regulatory agencies would want to see their policies and regulations address environmental issues. 4.4.
Descriptive Statistic of the Variables in the Study Table 4.17: Environmental Accounting and Stakeholders’ value
SV EJ EC N Valid 326 326 326 Mean 2.0078 3.9187 3.0337 Std. Deviation .52296 .68494 .54456 Skewness .988 -.496 -.061 Std. Error of Skewness .135 .135 .135 Kurtosis .516 .099 .008 Std. Error of Kurtosis .269 .269 .269 Minimum 1.15 1.50 1.75 Maximum 4.00 5.00 4.75 Source: Descriptive Statistic Result 2018, using SPSS 20.
EP 326 3.6679 .89763 -.295 .135 -.500 .269 1.00 5.00
ER 326 4.2262 .81854 -.968 .135 .186 .269 1.25 5.00
ES 326 4.5821 .50988 -1.557 .135 2.715 .269 2.25 5.00
The study employed descriptive statistics as shown in Table 4.17 where the mean, minimum statistics, maximum statistics and standard deviations of the variables in the study are presented. Table 4.17 showed environmental sustainability with the highest average response (mean of 4.582 and SD of 0.510) and environmental conservation with the lowest average response (mean of 3.033 and SD of 0.545) this indicated the closeness of the standard deviation to the mean and the mean value. While skewness and kurtosis statistic disclose that the data for all the variables explanatory and the dependent variables are normal. The normality test for the data are consistent with the skewness and kurtosis signifying that the data are normally spread. For minimum statistic showed 1 strongly disagree and 5 for strongly agree for maximum response rate.
150
4.5.
Multiple Regressions Multiple regression was used to predict environmental accounting in manufacturing companies in Nigeria and determine the magnitude and direction of the effect of the study variables. The results of the regression tests are as reflected.
4.5.1. Test of Hypotheses Hypothesis One: H01: Environmental Justice has no significant effect on stakeholders’ value of listed manufacturing companies in Nigeria. Table 4.18: Regression Analysis of Environmental Justice and Stakeholders’ value Model
1
(Constant) EJ CP
Unstandardized Coefficients Std. B Error 2.764 .154 -.284 .034 .160 .021
Standardized Coefficients Beta -.392 .352
t 17.920 -8.394 7.554
Sig. .000 .000(***) .000(***)
Adj. R2 = 0.357 F (2, 323) = 91.144 Sig = 0.000
a Dependent Variable: Stakeholder ***, **, * Correlation is significant at the 0.01, 0.05 and 0.10 level (2-tailed). Source: Researcher’s Computation, 2018 SPSS Ver.20 Interpretation The result in Table 4.18 establishes the explanatory power of the independent variables (EJ) for explaining and predicting the dependent linear regression between the observed and the model. The adjusted R2 showed a value of 0.357 (about 35.7%) of the variation in the dependent variable is explained by the model. A statistically significant F(2, 323) of 91.144 (more so, p0.05, local residents' value β = -0.252, t(323) = -5.756 and p0.05, local residents' value β = -0.187, t(323) = -4.418 and p
