ENVIRONMENTAL ACCOUNTING: AN ENVIRONMENTAL IMPACT ASSESSMENT OF BUSINESS ORGANIZATIONS (A Case Study of MTN and Chevron Nigeria Plc).
This research was conducted after a thorough work at
environmental accounting and its impact assessment on business
organization. The shift in business economics towards environmental
issues has led to the realization of the increasing importance of
research in environmental accounting. The need to increase research in
environmental accounting play an important role in effective management
of the environment, and issues such as environmental liability,
environmental exposure and environmental assessment are being undertaken
in environmental accounting.
This study employs the use of questionnaires in order to receive
direct (primary) information from companies that produces environmental
friendly products. The findings in this study suggests among other
things, that legal authorities, standard setting bodies and other
regulators cannot come to a consensus regarding the conceptual framework
of environmental accounting and its disclosure. Thus, disclosure is not
mandatory rather voluntary that has no specific style or format. Still,
such disclosure is guided by the social responsibility and commitment
on the part of entities that work as strong agents for polluting the environment.
Conclusively, issues related to managerial accounting, external
and internal auditing, tax and financial accounting need to be studied
further in order to deal with other environmental issues effectively.
1.0 Backgroundto the Study
Every business has an overriding responsibility to make the fullest
possible use of its resources both human and material. An enterprise is a
corporate citizen. . Like a citizen, it is esteemed' and judged by its
actions in relation to the community of which it is a member as well as
by its economic performance. The corporate sectors in Nigeria has not
been performing as a good citizen that is why there are so many laws
that have been laid down and further amended from time to time as when
required to bound the corporate sector to fulfil their social
responsibility for better development. Chauchan (2005), stated that
"Responsibility towards environment has become one of the most crucial
areas of social responsibility. Recent years have witnessed concern for
environmental degradation, which is 'taking place mainly in the form of
pollution of various types, viz, air, water, sound, soil erosion,
deforestation, etc. It is a worldwide phenomenon. It spoils human
health, reduces economic productivity and leads to loss of amenities
Theconcept of environmental accounting is an emerging and dynamic
one. It is also a fruitful attempt to identify and bring to the light of
the resources exhausted and cost rendered reciprocally to the
environmental. Bartolomeo, et al (2000), described
environmental information of interest to the public and to the financial
community. Internal use is better termed Environmental Management
Accounting (Bartolomeo et al, 2000:31). Environmental
accounting is an expansion path. With increasing social focus on the
environment, accounting fills an expectation role to measure
performance. The status of environmental awareness provides dynamic for
business reporting its environmental performance. Environmental
accounting is described as involving the identification, measurement and
allocation of environmental costs, the integration of these costs into
business, identifying environmental liabilities, if any, and finally
communicating this information to the company's stakeholders on a part
.of general purpose financial statements (Pramanik, Shil and Das, 2007:
18). In many countries, environmental accounting is taken to mean the
identification and reporting of environment specific cost such as
liability cost and waste disposal costs. It is accounting for any costs
and benefits that arise from change to a firm's products and processes
where the change also involves a change in environmental impact
(Chauchan, 2005:720). Environmental accounting needs to work as a tool
to measure the economic efficiency of environmental conservations
activities and the environmental efficiency of the business activities
of company on a whole. In this sense, it is comprehensive approach to
ensure governance that includes transparency in its societal activities.
It is seen as by corporate managers and environmental advocates alike
as a necessary complement to improve environmental decision making
within the private sector.
From a public perspective, poor environmental accounting means that
the private sector is likely to miss investment and predict design
opportunities that have 'financial and environmental benefits. It is
widely believed that environmental accounting practices, working in
organization with theprivate sector's own profit motive will crease
significant environmental benefits. However, environmental accounting is
a broader term and more expansive when compare to the traditional
accounting paradigm in that it allows the taking of corrective
management action to reduce environmental impacts and cost plans, where
appropriate, the external reporting of the environmental and financial
benefits in verified corporate environmental reports or published annual
reports, thus serving as a vital tool to assist management of our
environmental risks and operational costs and for understanding the role
played by the natural environment in the economy.
1.1 Statement of the Problems
It is amazing that despite the technological advancement worldwide,
the development of human cultures, together with man's capacity to
store, retrieve knowledge and apply informed foresight to the conduct of
affairs, man is yet to possess adequate capacity and holistic
responsibility which would enable him to ensure a total harmonious
relationship with the environment. In Nigeria, where the population is
more than 150 million yielding an average density of more than 120
persons per square kilometer.
From this fact, it is obvious that' Nigeria is already experiencing
high population density. The interaction of these millions of Nigerian
with their respective" environment has left indelible mark on the
landscape. The manifestation of these impacts includes: urbanization,
deforestation, desertification, overpopulation and all kinds of
pollution. These impacts have both negative and positive effects on the
natural environment. It is the negative impacts of man's interaction
with the environment that is emphasized in this study (Omofonmwan and
In recent years, environmental pollution becomes so acute and the
stakeholders' awareness to the issue becomes so serious that
environmental accounting has become a strong branch of accounting. The
present civilization has involved us in varied activities. The ultimate
disposal of the waste leads to environmental pollution: In many parts of
the world, the magnitude of pollution has already reached an alarming
level. During fifties through sixties of the 19th century, people all
over the world become more concerned about the quality of their
environment. Well-known environmental tragedies such as the massive oil
spill in the Niger-Delta region of Nigeria has reinforced in people's
mind the sense that the quality of air, water and a wide range of other
natural resources was being seriously degraded. The intensity of danger
from chemicals can be gauged from the extent of havoc caused by the
accident in some of the multinational companies which has killed and
affected several people. The awareness of the environmental and man's
ability to cause damage started from the fifties of the 19th century.
The adverse environmental effect of economic development has become a
matter of great public concern all over the world. Gradually,
environment is becoming a much more urgent, economic, social and
Accountants, as the basic custodian and light bearers of economic development can no longer shut their eyes to the effect of environmental issues on business management, accounting, auditing and disclosure system.
Protection of environmental and the potential involvement of
accountants is becoming a common subject of discussion among the
accountants all over the world. Nowadays, accountants are expected to
take a proactive role in the environmental protection process. With the advent of liberalization, removal of trade barrier makes it logical that the costs of environmental degradation due to industrial activities should be internalized in corporate accounts to the extent possible. That is why environmental accounting is of paramount important today.
1.2 Objectives of the Study
The objectives of the study are stated as follows: To
(a) Discuss the principles and theories of environmental accounting.
(b) Investigate the causes of population in the Nigerian industries
(c) Assess the impact of the social responsibilities of the Nigerian oil companies on its operating environment.
(d) Help businesses understand the full range of environmental
costs they incur and how to incorporate these costs into their decision
(e) Proffer possible solutions on how efficiently and effectively to properly manage our environment.
1.3 Significance of the Study
The significance of the outcome of this study is as follows:
(a) It will help companies improve their environmental performance, achieve cost savings or increased revenues;
(b) Environmental accounting will also help in supporting
rational making in an organization by having a better insight into the
potential befit of investment and costs.
(c) It will also help in the disclosure of environmental
accounting results which will function as a means for companies to
fulfil theirresponsibility to stakeholders and simultaneously, as a
means for appropriate evaluation of environmental conservation
(d) It will help companies and other organizations boost their
public trust and confidence and are associated with receiving a fair
1.4 Research Questions
(a) What are the principles and practices of environmental accounting?
(b) What are the causes of pollution and other environmental problems in the Nigeria industries?
(c) What are the impacts of the-social responsibilities of the
Nigerian oil companies on its operating environment and how can it be
(d) What are those environmental costs to be incorporated into business costs for decision making?
(e) What are the 'possible solutions to the environmental problem?
1.5 Research Hypotheses
The following hypotheses are postulated for the study.
Ho: Environmental accounting is not useful in the identification of environmental costs and benefits.
Hi: Environmental accounting is useful in the identification of environmental cost as benefits.
Ho: Environmental Accounting does not translate to profitability.
Hi: Environmental Accounting translates to profitability.
1.6 Scopeand Limitations of the Study
This research work is designed to cover the various business
undertakings in Nigeria, in particular, the MTN Telecommunications,
Chevron PIc. However, the study was constructed' by the various factors
which hindered in bringing about a broader scope of the study. These
(i) The time with which the study was to be submitted.
(ii) The negative attitude of the personnel in the various organizations in Nigeria.
(iii) Distrust of the personnel due to their thinking that the study was meant to disclosure their flaws.
(iv) Finance i.e. limited funds.
(v) Distance: Distance was also a limitation of this study.
1. 7 Research Methodology
Primary data shall be used in the course of this research work. It
shall be sourced via the survey method i.e. the questionnaire designed
by the researcher and distributed to the respondents. The researcher
would then collect the filled questionnaire from the respondents in
order to analyses the data collected with the appropriate statistical
The data, which will be collected from the questionnaire, will be
analyzed using the simple percentage method and chi-square. The simple
percentages will be calculated by dividing the total number of questions
answered by the total number of questions and then multiply by 100.
1.8 Plan of the Study
This research work will be divided into five chapters. The first
chapter will be introduction. Chapter two will focus on the literature
review and theoretical framework of environmental accounting. The third
Chapter will be based on the methodology stating the sample design and
the sampling method to be used. Chapter four would comprise the
interpretation and analysis of responses from the questionnaire that
would be collected using the Chi-square(X2) statistical tool while the
final chapter, which is chapter five, comprises the summary of
findings, conclusion, and recommendation.
1.9 Definition of Terms
(i) Environmental Degradation: It is defined as the abuse of the environment due to improper resources management (Omofonmwan and Osa-Edoh, 2008).
(ii) Environmental Conservation: This is the
prevention, reduction and/ or avoidance of environmental impact, removal
of such impact, restoration following the occurrence' of disinter and
other activities (Omofonmwan and Osa-Edoh, 2008).
(iii) Deforestation: The act of cutting down or burning the trees in an area (Oxford Advanced Learner's Dictionary).
(iv) Desertification: The process of becoming or making something a desert (Oxford Advanced Learner's Dictionary).
1.10 Outline of other Chapters
The rest of the researches carried out were as follows:
Chapter Two: Literature Review - This chapter
highlights the view of other works and provides tentative answers to the
research question stated in chapter one.
Chapter Three: Research Methodology - This chapter
describes the various methods used in the Research study. Sampling
design and procedure will be the 'major work in this chapter.
Chapter Four: Data Analysis and Presentation - This
chapter covers the analysis of the data gathered in chapter three
through the use of statistical tools to test the research hypotheses and
interprets the results.
Chapter Five: Summary, conclusion and
recommendations - This chapter will summarize the whole research paper.
Conclusion will also be drawn from the findings and recommendation will
also be given to the Research problems.
Adefemi, O. (1987): Characteristics of Environmental Problems in Nigeria and Management Prospects. http:fwww.springerlink.com.