ABSTRACT
Environmental costs comprise
both internal and external costs of environmental degradation due to industrial
activities. The internal costs includes; pollution costs, costs for prevention
and control, waste disposal, effluent control technologies, treatment,
sanitation and clean up expenditure, material purchase value of non-product
output, planning, shifting actions and damage repairs that can occur at
companies and affect governments or people. While the external costs are;
contaminated sites, fine and penalties, costs of regulatory compliance, legal
costs, fumigation to reduce bacteria effects, damage to the corporate image and
environmental liabilities. This study aimed at determining the influence of
these environmental costs on the performance of Nestle Nigeria Plc,
GlaxoSmithKline Nigeria Plc, Guinness Plc, Unilever Nigeria Plc and Nigerian
Breweries Plc. The objective of this study is to assess environmental costs
influence on profit indicators (Return of Capital Employed, Net profit Margin,
Earning per Share and Dividend per Share) of the sampled Companies. The study
made use of an exploratory research design. A sample of five companies were
selected from a population of 22 manufacturing companies quoted on the Nigerian
Stock Exchange using judgmental sampling technique. Data was collected through
secondary source from published annual financial reports (2005 – 2014), which
was analyzed using the Ordinary Least Square (OLS) method with the help of
E-view version 3.1. The study revealed that Environmental costs have a negative
but insignificant effect on ROCE and EPS, and positive but not statistically
significant on NPM and DPS. The study concluded that environmental costs can be
offset in generating revenue through the sales of waste, by products, recycling
of waste, grant of subsidies, tax credits, financial/non financial awards.
Also, accounting for environmental cost and performance can support an
organizations development and increase firms profitability and operations in an
overall Environmental Management System (EMS). It was recommended that
Government, Financial and Regulatory Bodies should make Environmental Reporting
in Annual Reports compulsory and Government Agencies should give tax credit,
subsidies and financial/non financial awards to organizations that comply with
its environmental laws of the land which will encourage environmental reporting.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Most
environmental degradations and emissions are anthropogenic, an advent traceable
to the industrial revolution of late 18th century where economic activities in
many communities moved from agriculture to manufacturing (Gray & Babington,
2001) as cited in (Papang, Bassey & Bessong, 2012). Production shifted from
its traditional locations in the home and the small workshop to factories. The
overall amount of goods and services produced expanded dramatically, new groups
of investors, business people, and managers took financial risks and reaped
great rewards (Lamberton, 2005) as cited in (Bassey, Sunday & Okon, 2013).
In the long run the industrial revolution has brought economic improvement for
most people in industrialized countries. Many enjoy greater prosperity and
improved health. There have been costs; however, because industrialization has
brought environment pollutants and greater land use, which have harmed the
natural environment (Mastrandrea & Schneider, 2008) as cited in (Makori
& Jagongo, 2013).
The ultimate disposal of the waste led to environmental pollution in many
parts of the world, the magnitude of pollution of the environment has already
reached an alarming level (Pramanil, Shil & Das, 2007). The awareness of
the environment and man’s ability to cause damage started from the fifties of
the 19th century. This concern had been repeatedly expressed in a
series of international summits and consensus right from the sixties. Between
1968 and 1972, two international conference were held to asses the problems of
the global environment and more importantly, to suggest corrective action. The
world conference held in Stockholm on global environment in June, 1972 where
the heads of the states all over the world came together for the first time,
was the pivotal event in the growth of the global environment movement. The aim
of the conference was to create a basis for comprehensive consideration with
the United Nation of the problem of human environment and to focus the
attention of the governments and public opinion to various countries on the
danger of the problem; it ultimately gave birth to special UN Agency titled
In
the mid-eighties, on the basis of changing situation and becoming the
environmental issues, a world-wide phenomenon on the developed and developing
countries, “World Commission on Environment and Development (INCED)” known as
“BRUNTLAND COMMISSION” headed by Norways Prime Minister, Mrs. Gro Haslem
Bruntland, was established by the UN. The commission published a report called
“Our Common Future,” in 1987, with the proposed concept of “sustainable
Development.” The concept received worldwide acceptance and led to the
convening of the United Nations Conference on Earth and Development (UNCED), in
Rio de Jenerio, Brazil known as Earth Summit. In this conference, heads of
different states signed four agreed documents including the “Agenda 21.” The
Agenda – 21 contains a checklist of do’s and don’ts to protect the environment
throughout the next century. Particularly, the role of corporate entities in
respect of overall management of the environment has been duly recognized in
the conference (Touche, 1996) as cited in (Peter & Arzizeh, 2012).
Thus accounting became concerned
with achieving new goals such as measuring and evaluating potential or actual
environmental impacts of projects in organizations. These new goals are of
great importance as they enable many users of financial statements to the
different development decisions that are economically and environmentally sound
(Bala & Yusuf, 2003) as cited in (Makori & Jagongo, 2013). In
cognizance of this, the study sought to identify the various environmental
activities and establish how their costs affect the performance of the
manufacturing companies in Nigeria.
1.2 Statement of the Problem
The
increasing global concern and the heightened awareness of stakeholders in
respect to environmental accountability, several companies have assumed the
responsibility of environmental disclosures in the financial reporting. It suffices
to note that one problem with environmental accounting is that the information
reported seems to be selective and as such, it is difficult to ascertain
whether such environmental disclosures are anything more than corporate
branding(Lehman, 1999) as cited in (Ebiringa, Emeh, Chigbu & Obi, 2013)......
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Item Type: Postgraduate Material | Attribute: 115 pages | Chapters: 1-5
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