Social and Environmental Accounting: The Challenges of Implementation in Oil Prospecting Companies in the Niger Delta States of Nigeria

Abstract

Social and environmental accounting is the ability to provide accurate information in the financial statements regarding the estimated social cost occasioned by the production externalities on the environment and how much deliberate intervention cost had been incurred to bridge the gap between the marginal social cost and the marginal private cost by a firm. This study examines the factors affecting the practice of social accounting disclosure in Nigerian oil prospecting companies. Three (3) companies operating in the Niger Delta States of Nigeria where randomly sampled with thirty (30) host communities drawn from Delta, Bayelsa, Rivers and Akwa-Ibom states. Secondary data were collected from each company’s annual reports from 2002 to 2011 and one hundred and seventy two questionnaires were administered to staff and host community members for direct inter personal information. The researchers used least square regression analysis with the help of Econometric view (E-view) model to analyse the effect of the identified variables on the practice of social and environmental accounting. The study revealed that the sampled companies did not in detail, report a close to reality estimate of the externalities generated by their production activities but reports the little intervention cost incurred under the directors or the chairman’s report. Again, that factors such as cost of implementation, the effect on profitability, the existence of a legal frame work, the peaceful environment and top management support affects 79% of the level of implementation of social and environmental accounting practice among the companies studied. The paper recommended that a strong legal frame-work should be provided to ensure that more than 80% value of actual economic value of externalities generated in a year is to be reported in the director’s report and the actual intervention cost is to be reported in the profit and loss account under social cost.

Key words: Social, Environmental, Accounting, Implementation, Challenges, Niger Delta States, and Nigeria.