Appraisal of Environmental Accounting Information In The Financial Statements of Consumer Goods Manufacturing Companies In Nigeria
The main objective of this study is to appraise environmental accounting information in the financial statements of consumer goods manufacturing companies in Nigeria. The study shall specifically, determine if there is a significant difference in the environmental disclosure themes of the firms; and, the effect of environmental disclosure theme on total asset turnover, cash flow ratio, current ratio, return on equity, and return on assets of consumer goods manufacturing companies in Nigeria. The study made use of descriptive research design. The study was centered on Consumer Goods Companies, a total of 28 companies were identified in that category. However, the study only made use of twenty two companies whose annual report were readily available as at the time of this research. The study finds that there is a significant difference in the environmental disclosure themes of consumer goods manufacturing firms. Also, there is a significant effect of environmental disclosure on total asset turnover and returns on equity, however no significant effect was found for cash flow ratio, current ratio, and returns on assets of the manufacturing companies. The study recommends a detailed and well spelt out environmental disclosure theme and evidence must be established to provide firm foundation for corporate social and environmental disclosures among companies. Also there is need for standard setting bodies to set up guidelines or principles or accounting standards in other to improve the financial and non financial environmental disclosures of companies in Nigeria. The study also calls for more efforts to be taken on the part of government to encourage managers on the need to embrace environmentally friendly practices in order to restore and guarantee a conflict free corporate atmosphere needed by managers and workers for maximum productivity. More so, funds expended in settling disputes could be applied to enhance corporate liquidity while management is able to plan better and make decisions when it is not engrossed in disputes. Introduction 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 NG Journal of Social Development, VOL. 5, No. 5, October 2016 7 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) 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) 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 NG Journal of Social Development, VOL. 5, No. 5, October 2016 8 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 Manufactu