AN EVALUATION OF ENVIRONMENTAL RESPONSIBILITY OF CORPORATE BODIES IN NIGERIA

ABSTRACT

This study is directed towards examining environmental responsibilities of companies in Nigeria, and the effects of companies operation on the host communities where it operates, the extent they are accounting for the resources they are exploiting from the environment and the programs they have in place to tackle the environmental and socio-economic problems of the region of their operation for development that is environmental sustainable.

In Nigeria exploiration and production operations are subject to separate environmental permitting and licensing procedures administered by two governmental organizations. The Federal Environmental Protection Agency (FEPA) and the Development of Petroleum Resources (DPR) of the Ministry of Petroleum Resources.

The ideas that the environmentalist are mostly concerned with pollution rather than anything else seemed to have influenced the transfer in 1978 of the environment division (without urban development division) to the Federal Ministry of Industries. It functions as part of the Industrial Planning Department within this ministry.

CHAPTER ONE

INTRODUCTION

PREAMBLE

In the past, environmental consideration used to get less attention and minimum importance in economic policies. However, this has been subject to gradual change, which is widely accepted, particularly in the industrialized countries. This better awareness of environmental problems and the need to combat them has gradually been given more importance in the industrialized countries and the worries are that this maybe achieved at the expense of economic development. Neither extreme are preferable since economic development and improved environment need each other in the long run for sustainable growth and therefore they should be integrated in a balanced way to achieve sustainable development.

Industrial development brings obvious benefits but it frequently entails damage to the environment and to human health. The main negative impacts of industrialization are wasteful impacts of industrialization are wasteful use and depletion of scarce natural resources, air, water and soil pollution, congestion noise and squalor, accumulation of hazardous wastes and accidents with significant environmental consequences. Industrialization patterns and the consequent exploitation of natural resources and environment degradation have been markedly unbalanced.

A company is an integral part of society and is subject to the pressures of the company in which it operates. Most companies seeking a good public image are increasingly conscious of the needs to conserve energy to protect the environment from the pollution of industrial waste and spillage attempt to be good employers to provide facilities and/or welfare to the local community or the country as a whole.

In the production account of companies where exploitable resources (renewable such as natural forests and natural fish and non-renewable such as mineral deposits) are extracted and sold only the direct costs associated with its extraction, including labour are recognized as the costs of production. They do not include the cost of their consumption of the natural capital and environmental degradation. This has led to companies presenting misleading financial information and ignoring how people live and the quality of life which is associated with an understanding that respect for life is intimately and inevitably bound up with respect for the environment.

The environment is being endangered because economic policy stresses increase in production, but neglects to account for the depletion of natural resources and damage to the environment. The continued damage to the fragile natural environment and the health of the people is due mainly to the uncontrolled greed of oil companies in their exploration and exploitation of crude oil and natural gas.

These activities have led to numerous spillages, gas flaring, pollution, flooding, coastal erosion, earth tremors, etc all of which constitute a threat to the people survival.

The result has been a rapid decline in the quality of life of the people. Many of them forced out of their traditional occupation of farming, fishing and the production of palm oil and kernels. There is need for organization and the government to recognize “defensive expenditure” to protect or restore the environment and “user cost” for the depletion and the degradation of natural resources as part of their production costs.

Companies should be committed to minimizing the impact of its operations on the environment and they should have programs updated annually that will help in bringing about important and measurable development.

THE RESEARCH PROBLEMS

The host communities have feet the impact of operations of companies on their environment, which has led in recent time to agitation for more compensation and active participation in the company’s operations.

The problems that this study intends to address includes the following:

What are the effects of companies on the host communities?

How are the exploitable natural resources accounted for in the financial statement of these companies?

To what extent are companies responsible to their host communities?

What programs are in place to reverse the degradation that has occurred and how they are funded?

What are legal or standards available with regard to accounting for the use of resources from the environment?

To what extent do the people know their right in the communities in which companies operates?

These are the major problems, which this study shall focus, and attempt to find solutions to.

THE OBJECTIVE OF THE STUDY

There is evidence that there has been increase in agitation for more compensation and participation in company’s operation by the host communities. This is as a result of neglect of developmental program for the communities in their area of operations.

The objective of this study, is to find out the effects of company’s operations on their host communities, the extent they are accounting for the resources they are exploring from the environment and the programs they have in place to tackle the environmental and socioeconomic problems of the region of their operation for development that is environmentally sustainable.

STATEMENT OF RESEARCH HYPOTHESIS

Hypothesis I

Ho:There are no fully funded programmes put in place to reverse the degradation that has occurred in the community.

Hi:There are fully funded programmes put in place to reverse the degradation that has occurred in the community.

Hypothesis II

Ho:There are no legal implications or standards available with regards to accounting for the use of resources from the environment.

H1:There are legal implications or standards available with regards to accounting for the use of resources from the environment.

Hypothesis III

Ho:The host communities do not know their right as regards to companies operating in the environment.

Ho:The host communities know their right as regards to companies operating in the environment.

SCOPE OF THE STUDY

The areas of the study will be restricted to Nigerian Petroleum Development Company Limited and its areas of operations. The study will focus on the effect of company’s operations on the environment, the depletion, and degradation of natural resources and the responsibilities of companies in restoring the environment from the side-effects of its operations and the provision of developmental projects for the host communities and the society at large. Government developmental projects in the communities in which these companies operates.

RELEVANCE AND SIGNIFICANCE OF THE STUDY

Environmental Accounting is a new concept in accounting. Presently, the conventional accounting structure of companies only reflects the cost of materials, labour and overheads incurred in generating their income. They have not recognized the side effects of production and consumption activities on the environment as part of their cost of production. As a result of this form of accounting for the use of resources, the conventional accounting method has led to companies presenting misleading financial statements. Up to now, focus have been on the use of resources from the environment and on the associated pollution without considering the damages associated with exploitation of these resources and the denial of the use of the resources by someone else.

The recent development of community clashes with companies operating in their host communities is as a result of the non-recognition of their negative side effects of their operations on the environment and the need for sustainable development of the host community and the society at large.

There is need for adequate procedure for evaluation and recognition of environment effects in the determination of the company cost of operations. This study will therefore provide some enlightenment to companies of the need to have proper procedure for evaluation and recognition of environment effects for sustainable development of the host communities and society and for sustainable performance of the company.

LIMITATION OF THE STUDY

The dearth of textbooks on the subject: it is well known fact that environmental accounting is a new field making it difficult in getting written texts on it. In the presence of this constraint, we made extensive use of materials, journals and seminar papers.

Primary data in social sciences is prone to errors because of the unwillingness of respondents to sometimes give true and unbiased responses. In the light of this we set a margin for error which was put at 5%.

The imprecise measurement of some variables is one of the problems encountered in this work. Some figures were also rounded up, so as to get round figures.

It will not be advisable to use findings of this work for generalizations about all companies within the country as the study only focuses on companies operating within the Niger Delta Area.

DEFINITION OF TERMS

Environment: Environment is defined in Oxford Dictionary as surroundings. Surrounding objects or a condition, region, circumstances, influences.

Development: Oguntunde defined development as “a measure of the ability of an individual or a society to utilize its resources in the production of goods and services (wealth), which are needed for modern living”.

Sustainability: Oguntunde defined sustainability as “the production of this wealth continuously both now and in the future”.

Sustainability Development: Adas (1999) defined sustainable development as development “to meet the needs of the present without compromising the ability of future generation to meet their own needs”.

Social Responsibility: Osaze (1998) defined social responsibility as “the obligation of decision makers to take action which project and improve the welfare of the society as a whole along with their own interests”. Drucker (1974) defined social responsibility as “what business should do or might do to tackle and solve problems of society”.

Income: Adams (1999) sees the notion of income as “the amount that a person can consume in a year and still be as well as the beginning” an approach to accounting measurement that much later become known as “capital maintenance”. Harrison (1989) defined income as “what you can consume in the period and be as well off at the end as at the beginning” – is equivalent to saying that new capital consumed during the year so that the capital stock at the end is as great at the start.

True Income: This can be thought of as the maximum amount that can be consumed in a given without reducing the amount of possible consumption in a future period.

Defensive Expenditure: Is the cost against unwanted side effects of production and consumption (such as pollution). These costs include cost of environmental protection activities, car repair and medical expenses as a result of traffic accidents etc.

Pollution: Blades (1989) defined pollution as “the disposal of wastes in ways that harm people or reduce the enjoyment of their surroundings. He also sees pollution as causes of damages, such as sickness, and premature death, stunted growth of crops, disappearance of wildlife, or corrosion of metals and masonry.

Pollution Abatement: Blades (1989) defined pollution abatement as “the activities, like scrubbing smoke or cooling waste water, which are undertaken because of recent anti-pollution legislation.

User Cost: Serafy and Luts (1989) defined user cost as “the maximum net value which might have been conserved if it (the equipment) had not been used”.

Oil Mining Lease (OML): SAS 14 defined OML as “a licence granted to a company under the Petroleum Act 1969 for the purpose of winning petroleum or any assignment of such lease. This usually has a term between twenty and thirty years”.

Oil Prospecting License (OPL): SAS 14 defined it as “a license granted to a company under the Petroleum Act 1969 for the purpose of winning petroleum or any assignment of such licence. The term is usually between three and five years”.

REFERENCES

Adam, R. (1994), “Performance Indicators for Sustainable Development”, Accounting and Business, A Journal of the Association of Chartered Accountants, Vol. 2, Number A.

Blades, D. W. (1989), “Measuring Pollution within the Framework of the National Accounts”, A UNEP – World Bank Symposium, Washington D. C., The World Bank.

Drucker, B. O. (1996), Role and Responsibilities, in the Private Sector in Infrastructure Strategy, Regulation and Risk, World Bank, Finance and Infrastructure Network, Washington, D. C.

Osaze, E. B. (1998), Business Policy in Nigeria, Nigeria Center for Management Development.