Influence Of Social And Environmental Accounting On The Survival Of Non-Financial Institutions In Nigeria

Introduction

1.1 Background to the Study

Environmental problems has become a global issue, one which cuts across every country and business organizations. Mostly, environmental problems arise when the productive activities of firms’ results in negative consequences for the natural environment and in the long run causes damages, which also affects the society. According to Hasan and Hakan (2012) nowadays, companies cause a lot of environmental problems because of profit maximization, the endless needs, rapidly advancing technological developments, unconscious consumption of natural resources, as they execute their operations. Salvioni and Bosetti (2014) opined that for a long time corporate governance was directed at satisfying shareholder expectations concerning profit maximization, sometimes with differences among sub-categories of stockholders according to their importance. In this regard, the financial information contained in the financial statements and, if necessary, the consolidated ones used to be considered essential (Salvioni, 1990).

Social accounting as an approach began developing in the U.K in the early 1970s, when the Public Interest Research Group established Social Audit Limited. This organization carried out, and publicized investigations into the operations of large public companies, without necessarily gaining their permission or co-operation. Whilst lending support to consumer pressure, there is an argument that this had a negative effect on accountability, as organizations sought to ensure that sensitive information was hidden from such investigations.
Globalization has brought with it a wide realization that companies do not operate in isolation, but can have marked impacts on the environment and people at local, national and global levels, (Chris, 2006:1). This has led to an increasing awareness of Corporate Social Responsibility (CSR) and the “triple bottom-line” of business success measuring the business not only in the financial performance, but by its social and environmental impact as well. Traidcraft and the New Economics Foundation (NEF) pioneered a form of social accounting in the early 1990s that is voluntary in nature and rooted in engagement with stakeholders. This can assist organizations, both commercial and NGO, in understanding and improving their social impact.

The concepts of Social accounting is growing in recognition and sophistication, as it becomes one of the foundations of good practice in corporate social responsibility (CSR), interest is growing within large corporations, consultancies and voluntary organization alike. If large companies are using a social accounting methodology to assess their social impact, the question sensibly arises as to whether this is something that can be usefully adopted by those seeking to assess the impact of enterprise development activities. Most of the organizations that adopt this concept are concerned with poverty reduction and enterprise development.

However, the last quarter of the twentieth century, has seen the need for firms to recognize the value of interacting with all major stakeholders (Salvioni & Bosetti, 2014). The severity of environmental problems as a global phenomenon has its adverse impact on the quality of our lives. Accounting has an instrumental role in disclosing environmental responsibility for different entities whether industrial or commercial services, and at all levels whether micro, meso and macro. Thus, accounting became concerned with achieving new goals such as measuring and evaluating potential or actual environmental impacts of projects and organizations (Asuquo, 2012). Environmental accounting helps in accurate assessment of costs and benefits of environmental preservation measures of companies (Schaltegger & Burritt, 2000). It provides a common framework for organizations to identify and account for past, present and future environmental costs to support managerial decision-making, control and public disclosure (KPMG & United Nations Environment Programme [UNEP], 2006). Measures are being taken both at the national and international level to reduce, prevent and mitigate its impact on social, economic and political spheres (Global Reporting Initiative [GRI], 2002; GR1, 2006).

Presently, corporations wishing to survive in this new dispensation have to adopt a broader concept of responsibility, which stresses the strong interdependencies among economic, social and environmental goals (Salvioni & Bosetti, 2014). This has necessitated the disclosure of social and environmental information in addition to financial information for meeting the needs of a variety of stakeholder groups. Environmental accounting generates reports for both internal use, providing environmental information to help make management decisions on controlling overhead, capital budgeting and pricing, and external use, and the disclosure of environmental information of interest to the government, public and to the financial community (Eze, Nweze, & Enekwe, 2016).

1.2 Statement of the Problem

Ijeoma (2015) observed that the global business environment has been facing increased competitive, regulatory and community pressures. Presently firms need to be assessed not just with financial indicators, but environmental and social costs of operation are also among factors taken into consideration (Macve, 1997). This has led to a series of enactments aimed at safeguarding the environmental (Ijeoma, 2015). However, most profit oriented firms in Nigeria are mainly interested in the enormous amounts of profit they make without considering the environmental implications of their actions (Enahoro, 2009). Although the environmental pollution is a common problem of all countries, the importance of environment has been understood in recent years. Industries are becoming progressively more aware of the environmental and social liabilities pertaining to their operations and products. In addition to social pressure, accounting and especially environmental costs are critically important to form this environmental awareness (Hasan & Hakan, 2012).

The operational activities of manufacturing companies especially oil companies have caused extensive hazard to the environment. This spans from destruction of wildlife and biodiversity pollution of air, water, farmland to damage of aquatic ecosystem (Ijeoma, 2015). Yakhou & Dorweiler (2004) stressed that the impact of business activity on the environment is found in several forms: air, water, underground pollution, drinking water, land and habitat for endangered and threatened species, oceans, atmosphere, land, mass etc. Organisations are now expected to be able to demonstrate that they are aware and addressing the impact of their operations on the environment and society in general. Despite some variations among countries in different regions, corporate environmental disclosures have increased globally in both size and complexity over the past two decades (Uwuigbe & Jimoh, 2012).

Presently in Nigeria, there is no definite accounting standard to ensure the uniform reporting of environmental information, but guidelines have been issued by some organizations (Bassey, Effiok, & Eton, 2013). These guidelines are advisory and not mandatory in nature, firms therefore chose whether to apply or not to. Companies tend to disclose this information to conform to industry practices, pressures from environmental activist and advocates, relationship with parent company (Multinational Corporations), ownership structure of the company, size and level of profitability etc. (Jerry, Teru, & Musa, 2014).

This has led to most financial statements issued by quoted companies in the country to be deficient, in the sense that they lack the needed information on environmental and social issues (Wallace, 1988; Adeyemi, 2006; Nzekwe, 2009). Studies which seem to support this view include studies done by Wallace (1988), Okike (2000), Adeyemi (2006) and Ofoegbu and Okoye (2006), which conclude that financial statements by Nigerian companies are information deficient on sustainability issues.

The study by Owolabi (2008) using content analysis on 20 listed companies in the Nigerian Stock Exchange, covering 10 sectors of the economy from 2002 to 2006, found that only 35% of companies show social disclosure in their annual reports. This study though carried out 10 years ago, Jerry, Teru, and Musa (2014) assert that the current position of environmental accounting reporting and disclosures might best be described as confusing and full of ambiguity.

Also, studies have shown a lacuna on the subject of environmental accounting in developing nations, despite the increased attention on environmental issues (Abu-Baker & Naser, 2000; Imam, 2000; Belal, 2001; Uwuigbe & Jimoh 2012). In Nigeria, Arong, Ezugwu, and Egbere (2014) identified paucity in the awareness of environmental costing principles and methodology in the country. Mostly studies have focused on companies in the Oil & Gas sector, while others on a randomly selection of companies from different sectors of the economy. The study by Asuquo (2012) on a sample of Oil and Gas companies in the Niger Delta Region of Nigeria revealed that the cost of ensuring environmental friendly policies as well as firm competitiveness have significant relationship with the firms’ profitability (Corporate performance). The study by Uwuigbe and Uadiale (2011) on the level of corporate social environmental disclosure among listed companies in the brewery and building material industry in Nigeria revealed a significant difference in the level of corporate social environmental disclosures between the selected industries. Another, study by Uwuigbe and Jimoh (2012) on a sample of Cement Manufacturing Companies in the country found that there is a significant relationship in the level of corporate environmental disclosure practices among firms in the Nigerian manufacturing industries.

The seeming problem tackled in this study is the dearth of research on companies in the consumer goods sector of the Nigerian economy. Also, the addition of ratios in the classification of activity and cash flow may provide insights on the relationship between corporate environmental disclosure and performance of firms in the sector. Moreover, the spate of conflict which has grown in the country calls for a justification on the need to examine the legitimacy of shareholder orientation on corporate survival. Consequently, this study intends to appraise environmental reporting disclosure by Non-Financial Institutions In Nigeria.

1.3 Objective of the Study

The main objective of this study is to appraise the influence of social and environmental accounting on the survival of non-financial institutions in Nigeria.

The specific objectives of the study are:

• To determine if there is a significant difference in the environmental and social disclosure themes of consumer goods manufacturing firms.
• To ascertain the effect of environmental and social disclosure theme on total asset turnover of consumer goods manufacturing companies in Nigeria.
• To determine the effect of environmental and social disclosure theme on cash flow ratio of consumer goods manufacturing companies in Nigeria.
• To ascertain the effect of environmental and social disclosure theme on current ratio of consumer goods manufacturing companies in Nigeria.
• To determine the effect of environmental and social disclosure theme on return on equity of consumer goods manufacturing companies in Nigeria.
• To evaluate the effect of environmental and social disclosure theme on return on assets of consumer goods manufacturing companies in Nigeria.

1.4 Research Questions

The study will provide answers to this questions:

• Is there a significant difference in the environmental and social disclosure themes of consumer goods manufacturing firms.
• What is the effect of environmental and social disclosure theme on total asset turnover of consumer goods manufacturing companies in Nigeria.
• What is the effect of environmental and social disclosure theme on cash flow ratio of consumer goods manufacturing companies in Nigeria.
• How is the effect of environmental and social disclosure theme on current ratio of consumer goods manufacturing companies in Nigeria.
• What is the effect of environmental and social disclosure theme on return on equity of consumer goods manufacturing companies in Nigeria.

1.5 Hypothesis of the Study

H1: There is a significant difference in the social and environmental disclosure themes of consumer goods manufacturing firms

H2: There is a significant effect of social and environmental disclosure on total asset turnover of consumer goods manufacturing companies in Nigeria.

H3: There is a significant effect of social and environmental disclosure on cash flow ratio of consumer goods manufacturing companies in Nigeria

H4: There is a significant effect of social and environmental disclosure on current ratio of consumer goods manufacturing companies in Nigeria.

H5: There is a significant effect of social and environmental disclosure on return on equity of consumer goods manufacturing companies in Nigeria.

1.6 Significance of the Study

This study has a number of significant dimensions to it. The result of this study should provide information to the public, private and NGOs organizations.

The finding of the study will enable the enterprises to discover the expenditure habits of the various departments or units that make up the enterprises. Armed with the knowledge, the enterprise patterns their productive activities to suit the various departments of the enterprise and the members of the public.

More importantly, if organizations in Nigeria properly embrace social accounting techniques as enterprise development activities will help boost their financial performance or profit earnings. This will in turn lead to an improvement in the enterprises which will equally benefit the government, the stakeholders in the business enterprise and voluntary organizations.

This study will equally assist organizations to know how to apply social accounting techniques to make future development plan of the business enterprises. More so, it will be of immense help to those in marketing business, consultancy firm, audit, management firm, production to forecast profit plan by the way of adopting strategic plan of action.

The recommendations of the study should serve as important palliatives for the various economic and structural ills.

1.7 Scope of the Study

The subject matter is very deep and broad topic. The depth lies in the secrecy of the real account of what actual happens at the management and stakeholders. The scope proper covers reporting of accounting information to parties involve in the enterprise and relating the information to the external environment within Nigeria.

More thorough analysis of the subject matter will be requiring the ability of undiluted financial/audit and non financial details about the industry. Therefore total reliance on the published facts may limit the chances of optimum result of the research work.

1.8 Limitation of the Study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. However, the researcher were able to manage these just to ensure the success of this study.

1.9 Definition of Terms

The major terms that relate to this work are listed and defined as follows:

i ISEA:

The Institute of Social and Ethical Accounting. This is an international professional body committed to strengthening social responsibility and ethical behavior of the business community and non- profit organizations.

Ii Principles of AA1000 AND SA8000:

These are the principles or process of continuous improvement through iteration over time and setting performance standard in an organization/enterprise.

iii SIGMA:

This is a project that aims to help organization, irrespective of their size or sector to address sustainability issues in a strategic and integrated fashion.

iv ETI: The Ethical Trading Initiative is a tripartite initiative.

This is a U.K development NGO’s which provide a learning space where different approaches to monitoring code of corporate conduct could be reviewed.

v GRI: (Global Reporting Initiative).

This provides reporting guidelines for the content of sustainability reports which cover the Economic, Social and Environmental factors of the organization.

vi Business Enterprises:

This, as used in this study refers to all business activities include private, public and NGO’s.

SAT: (Social Accounting Techniques).

This is a suitable tool for estimating the distribution of enterprises earnings.

1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

• Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
• Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
• Chapter three deals on the research design and methodology adopted in the study.
• Chapter four concentrate on the data collection and analysis and presentation of finding.
• Chapter five gives summary, conclusion, and recommendations made of the study.