Abstract-- Despite 2014 full convergence to IFRS in Nigeria, environmental accounting disclosure practice remains voluntary due to the absence of standard that should mandate such disclosure. However, the effect on the public image of the company from failure to comply with environmental regulations enforced by environmental regulatory agency contributed to the disclosure practice among public companies in Nigeria.  This study examines the level of environmental accounting disclosure practice among listed companies registered with NESREA. Content analysis was employed to analyze published 2015 annual reports of companies. Based on a sample of 63 companies, the result indicates that accounting standards do not significantly contribute to environmental disclosure albeit environmental agency motivates companies to voluntary disclosure.

Keywords- environmental accounting; disclosure; regulatory agency;

I. INTRODUCTION

   Environmental pollution and contamination lead to unhygienic environment. Many people in Nigeria are prone to diseases such as Cholera, Malaria, Typhoid and other related diseases that are affecting their good health due to unhygienic environment cause by the activities of manufacturing companies in the country. However activities caused cost thus the cost of decontamination and cleaning up of environment is hidden within the category of general overhead. The fact that environmental costs are often ‘hidden’ the difficulty lies in identifying them. Therefore, environmental cost is becoming increasingly relevant; as society as a whole is equally becoming more environmentally aware about the carbon foot print and recycling that is taking place in many countries. Despite the lack of specific standard issued by International Accounting Standards Board (IASB) on environment accounting, companies are increasingly identifying the effects on the public image of the company from failure to comply with environmental regulations. As a result companies are portraying themselves as environmentally responsible through compliance with environmental regulations. Companies in Nigeria are taking steps toward ensuring that they comply with the environmental regulation set out by the regulatory bodies such as National Environmental Standards and Regulation Enforcement Agency (NESREA) to protect their reputation in the eyes of the public.   Reference [8] argue that firms which are more visible in the public eyes are likely to have more voluntary disclosure information. Furthermore [16] posit that it enhance their corporate reputation. Although some companies are reluctant to disclose environmental related information in their financial statement in order to avoid commitment to environmental cost [5]. This is the case in some companies in Nigeria. Although legal responsibility has made it clear through giving concern to environmental effects of the company’s activities in the area of environmental compliance [13], [1]therefore environmental accounting practice have become imperative especially in the areas of environmental accounting reporting [12]. Therefore, the aim of this study is to shed more light on environmental accounting disclosure practice among companies in Nigeria and its relationship with environmental agency.

II. THEORETICAL FRAMEWORK

Various theories have been developed and used to explain corporate disclosure by researchers of different areas. This study employed the ideas of both political economy theory, legitimacy theory, and beneficiary theory.  According to [11] political economy theory emphasizes the fundamental interrelationship between political and economic forces in society. The theory posits that economic activities must be studied in the context of political, social and institutional framework in which the event occurs. Reference [15] posits that social and environmental disclosure is used as a management tool in the face of social and political pressure instead of informing stakeholders. Therefore, a study of the political economy allows researchers to contemplate broader issues about the information companies choose to disclose in their annual reports [3]. Legitimacy on the other hand has been derived from political economy paradigm as it relies on the concept of an implicit social contract between the company and society, thus, can be seen as an assumption that the accounting information of an entity is acceptable through their constructed system of norms, values and belief [6]. Managers continually attempt to ensure that their company complies with society’s expectations; this implies that managers have incentives to disclose which is not in breach of the norm and belief of the society [4]. Beneficiary theory in this study is also employed to explain voluntary disclosure of information as it distinguishes between the beneficiary and society as a whole. This study suggests an application framework to evaluate and asses the social responsibility of the company using social and environmental information disclosure as society has right to receive information about organizational activities as well as investors pay more attention to annual report. Social and environmental information disclosed by companies is usually in response to information requested by stakeholders [1].

III. LITERATURE REVIEW

 Environmental accounting information could be in form of explicit or implicit content that is used as financial input to a firm’s decision making. Product designers, financial analysts, and facility managers are form part of the users of environmental accounting information. However, [9] emphasized that the task of environmental accounting is to fill information needs of interested parties. However financial accounting does not identify environmental costs because these are aggregated together. There is evidence however that some environmental liabilities and risks that are in principle covered by reporting requirements are often not reported. For example cleaning up contaminated land cost [17] the expected future costs for a necessary waste treatment plant re-grading should be part of the current budgeting circle. Potential future liability claim and corporate image cost from poor environmental performance should be considered when comparing investment option.

Reference [10] state the need for sustainability of the environment. For the environment to be sustainable, the society needs not only to limit the level of pollution, but also to improve the eco efficiency of a society as a whole. Thus, society has become increasingly concerned with the health of the natural environment and the role of corporations in impacting ecosystems and human health [6]. As a result regulations have been developed to govern waste management and to ensure that corporation firms are environmentally conscious.  In the past both corporations and individuals often ignored environmental issues, at present enterprises are confronted by many constraints and responsibilities in connection with environmental factor [7].

IV. ENVIRONMENTAL REGULATION

The government of Nigeria has enacted several environmental laws to cater for the generation, handling and disposal of solid waste and effluent. These laws include harmful waste act 1988, environmental impact assessment EIA Act 1992 among others. Despite the establishment of these laws the difficulties lies in compliance and enforcement as most corporations and individuals neglect environmental issues perhaps as a result of lack of awareness of the negative impact this may have on the environment.

Regulatory bodies have been established for decades to regulate companies’ operation in Nigeria. These bodies include National Effluent Limitation Regulation s.18 of 1991, Federal Environmental Protection Agency (FEFA) act no. s8 of 1998. However, in 2007 the National Environmental Standards and Regulation Enforcement Agency (NESREA) act repealed the FEFA act. Furthermore, companies operating without a relevant permit are said to commit an offence under its act which is subject to fine. Therefore, NESREA has amongst other functions the power to enforce compliance with laws, guidelines, policies and standards on matters related to environment. Environmental matters amongst others include regulatory driven environmental cost driver.  Thus cost drivers could be described as cost incurred in conducting environmental impact assessment (EIA) for projects that are likely to have significant impact on the environment in compliance with the EIA act 1992, waste and toxic substances permit, air quality permits, used electrical electronics permit, biodiversity conservation permits. Therefore this study further aims to identify the effect of environmental agencies in firms’ disclosure of environmental information in their annual reports.

V. RESEARCH METHODOLOGY

Data for the study is gathered by analyzing the annual reports for the fiscal year ended 2015 to determine the level of environmental disclosure being provided in companies annual reports. Therefore the study is based on Nigerian listed companies registered with NESREA. The idea behind this selection is to allow the researcher to examine the contribution of regulatory agency in promoting environmental disclosure. For this purpose, all sections in sample companies’ annual reports were carefully examined to note the presence of environmental accounting disclosure.

A total number of 63 sample corporate annual reports of companies have been obtained through NSE website.  The data year is 2015 collected from secondary source. Furthermore, the sample selection is influence by the objective of the study.  Content analysis method was used because this is the common and widely employed technique in previous researches such as in [4] and [2]. The sample design of the study is depicted in table I.

TABLE I. SAMPLE SELECTION PROCESS

The measure of disclosure is based on check list administered on a sample firm’s fiscal year. The check list is on relevant environmental disclosure requirement.

TABLE II. SAMPLE DESIGN

VII. DATA ANALYSIS AND FINDINGS

TABLE III: Environmental Accounting Disclosure Sector Wise Selected Industries

Source: Companies annual report 2015

Table III. Depicts the content disclosure made by the selected firms in each sector. The table clearly represents sector disclosure of environmental accounting information made by selected firms.

TABLE IV. SECTOR DISCLOSURE ANALYSIS.

Source: Companies annual reports

Table IV. Shows existence of variation with close margin among sector disclosure of environmental accounting information.

TABLE V. DISCLOSURE BY CONTENT INDEX

Source: Companies annual reports 2015

The finding in Table IV and V show that companies’ voluntarily comply with environmental accounting disclosure.

The environmental accounting disclosure is further refined to capture the extent of NESREA contribution in promoting environmental disclosure. Table VI represents environmental disclosure level, sector wise industries.

TABLE VI. ENVIRONMENTAL AGENCY DISCLOSURE INFLUENCE

                                                               Source annual report 2015

Table VI. Shows disclosure made by companies among sector; this is an indication that the level of disclosure is influence by environmental enforcement agency

A.       Testing of hypothesis

·         Hi: accounting standards significantly influence environmental accounting disclosure by Nigerian listed companies.

·         Ho: regulatory agency do not influence environmental disclosure in firms annual reports

The hypothesis was tested using SPSS, one way analysis of variance at a significant level of 0.05.

TABLE VII. ANALYSIS OF VARIANCE

Source: Companies annual report 2015

The hypotheses testing result in Table VII using ANOVA shows that F-ratio (2.979) is greater than F- table (1.5) that is (2.979>1.5). Therefore alternative hypothesis is not rejected that is accounting standards do not significantly influence environmental accounting disclosure. Thereby given a further indication of the agency contribution to voluntary environmental disclosure in Nigeria.

VI. CONCLUSION

Safeguarding environment for good living is paramount to any meaningful society, hence influencing livelihood of the environs. Environmental pollution and contamination cause by manufacturing companies in Nigeria has to a greater extent affected the livelihood of common Nigerians as they are prone to diseases. That is why nowadays society has become aware of the value of good environment thus pushing companies to be more environmentally responsible through the influence of regulatory agency in the country. 

However, the findings of the study show that there is variation in the level of disclosure practice among sectors as a result of lack of specific standard on environmental information disclosure issued by regulatory bodies such as NASB/IASB impeding proper compliance, thus the reporting remains full of ambiguity. Furthermore, the study documents that environmental agency motivates firms to voluntarily disclosure as pressure groups and society as a whole is becoming more aware of the carbon footprint that is taking place around the global. These factors led companies to increasingly show positive image in their social activities in order to acquire legitimacy.

In order to ensure uniformity in compliance, the study suggests that accounting standards setters should give more attention to enactment of standards on environmental accounting information disclosure to allow full compliance with environmental regulation otherwise the trend may continue as it is. 

VII. ACKNOWLEDGMENT

I gratefully acknowledge the effort of the management of Federal Polytechnic Bali especially the Rector, Dr. S. U. Jen and the Registrar, Zanna M. Kashim for their total support and encouragement in ensuring that this paper is complete and sponsored.

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