CHAPTER ONE

INTRODUCTION

1.1 Background of the Research

In recent times, accounting has played a key role in mediating the relationship between organization, society and environment. Consequently, much debate has taken place regarding the demand for developments in social and environmental accounting and reporting (Teohet al, 2000).

Social and environmental accounting is looking for ways in which accounting might be adjusted within current practice to encourage being more social and environmental interaction. Social and environmental in this context, is usually taken to embrace: local and international communities; workforce issues; product safety and consumer welfare matters; plus, increasingly, environmental questions arising from organizational behavior (Gray et al, 1995 and Teoh et al, 2000).

So whilst current accounting has also been recognized as encouraging organisations, financiers and capital markets among others to take decisions that were likely to hasten environmental degradation, it was not like this until the academic or practitioner communities in accounting seemed willing to acknowledge that this represented an issue of relevant concern to the profession,( Gray, 1990).

An historical view suggests that social and environmental accounting (here after SEA) became an active area of research and practice during the 1970s (Gray and Bebbington, 2001). However, the decade of 1960 played a crucial role in its development. During that time capitalism was weakened and needed to legitimize its existence. Soon the novelty of the social aspect introduced between the businesses and the society was welcomed (Gray, 2002). SEA is already a well-defined research area that developed through corporate social responsibility literature of the 1970’s, which explores the relation between the accounting, the organization and the society. This literature reflected the importance of social matters to the economic growth (Jones, 2003).

Themes such as social justice, environmental degradation, accounting politics, morality (Tinker and Gray, 2003; Lehman, 1999), political nature of the linguistic dualisms (Everett, 2004), labor and environmental intentions, and performance (Gray, 2002), began to appear connected with SEA, during this period.

The decade of 1980 was also important for the increase of social, environmental and ethical disclosure, and in the decade of 1990, disclosures had more incidences in environmental questions than in social matters. Given the increasing importance of environmental issues, many companies started to report more environmental information through independent reports focusing only on environmental subjects (Adams, 2004).

The increase of legislation requiring companies to report environmental information probably contributed to this situation. Recent years have witnessed the increasing prominence of expressions, such as sustainability or sustainable development, which have become important issues within the political and organizational agenda. This makes companies improve their reporting practices and begin to disclose sustainability reports, following the triple bottom line ideas. That means giving information about social, environmental and economic issues in the same report.

The increase of interest in social and environmental issues has been followed by an increase in academic Writing and publications (Gray, 2002; Deegan, 2002; Parker, 2005; Mathews, 1997). Gray et al. (1996) argue that Social and environmental accounting and reporting play a relevant role in this context as tools for analyzing the sustainability performance of the organizations and note that these have been relevant subject in the academic literature. The current study expands the area of investigation by covering the Cameroon case.

Several frameworks were developed by Gray et al (1987), Mohamed and Hill (1996) and Teoh et al., (2000), to explain how social and environmental issues are translated to the accounting reports.

This study shall examine Cameroonian companies and organizations, on how they  incorporate and disclose social and environmental information, within their financial statements. The social and environmental issues, the green accounting issues, the policy of green accounting issues, the corporate social responsibility issues, social information, and environmental information.

And, are they captured and included in the financial financial statements in fiscal terms or not? Making a critique, of the impacts and effects, to these companies on these issues. Deciding, therefore, on the ‘evaluation approach’ which could be towards the policy of green accounting. The study generally could be summarized and analyzed as –social and environmental management accounting reports; qualitative and quantitative issues: a comparative, critical, evaluation of the policy of green accounting in Cameroonian companies.

1.2 Statement of the Problem

It is to be mentioned, here, that very few studies have been carried out in the context of developing countries. In Hong Kong, a study carried out by Ho et al. (1994) found that out of 182 companies only nine companies (representing only 4.9%) disclosed environmental information in their annual reports for the year 1991.

A recent Korean study, by Choi (1998), shows that out of 770 listed companies 64 companies; (8.3%) made environmental disclosures in their audited semi-annual financial statements for the year 1997. The average amount of disclosure per company was 7.5 times. Tsang (1998) made a longitudinal study of social and environmental reporting in Singapore over a ten year period from 1986 to 1995. He covered 33 listed companies and found that only 17 (52%) companies made social and environmental disclosures during the late 1980s and then a stable pattern since 1993. The reason for this may be attributed to the voluntary nature of the disclosures. Once the companies attained a certain level of disclosure, they were not motivated to go further.

In a study of 22 large multi-national corporations in Nigeria, Disu and Gray, 1998; noted that less than a quarter of companies made disclosures in the environmental, equal opportunities, and consumer areas. The data years for this study were 1994 and 1995. In another study, of only four companies, in Uganda, Kisenyi and Gray (1998) , observed that none of them made any environmental disclosure. They conclude that social and environmental disclosure in Uganda is scarce, low grade, and of little importance.

In a study, of 115 South African companies, Savage 1994, reports that approximately 63% companies made environmental disclosures. The length of disclosure measured by the number of page was 0.5. From the South Asian context, the study made by Singh and Ahuja (1983), is now a very outdated one. The data used for the study is now 25years old. Moreover, it considered public sector unit.

It is felt that more recent studies are needed in examining the Environmental Accounting Reporting, EAR, practices of both the public as well as private sector companies to know the current practices of South Asian companies. Most respondents were from within the organization. Bangladesh is facing the challenge of a very fast degrading environment.

Some examples of this deterioration are Dhaka’s Terrible air pollution (causing 5000 premature deaths and sickness every year), the clinically dead rivers of Bangladesh widespread arsenic pollution in the underground water, oil spillage at the coast, residues of waste management companies. In the absence of pressure groups and appropriate regulatory measures, the degradation has gone to a level from which redress is necessary on an urgent basis before Bangladesh faces an environmental catastrophe. It is said that Bangladesh has paid huge costs for its economic achievements.

The time has come to think about the environmental damage done by the economic activities that have been carried out by the corporate entities in Bangladesh. Had there been appropriate regulatory measures, pressure groups and environmental awareness in the peoples, Occidental’s Magurchhara disaster would have attracted serious consideration.

It will be observed in the literature review that very few studies as so far been made on EAR, (Environmental Accounting and Reporting) practices. But this issue of EAR is very vital from the view point of all the users of the financial statement both internal and external. Such EAR can obviously uphold the green image of these companies. Due to these situations the author has been interested to conduct a research on such vital issue of the organizations.

Environment accounting involves the identification, measurement and allocation of environmental costs, and the integration of these costs in the business, evaluating   and encompasses the way of communicating such information to companies’ stakeholders. It has to do with the process of communicating the social and environment effects of an organisation’s economic actions to particular interest groups within the society at large.

The performance of most corporate bodies drops below expectation when they fail to consider the benefits of social and environmental accounting. Again, the problem is that conventional approaches of accounting have become inadequate since conventional accounting practices have ignored important social and environmental costs activities affecting the environment and have poorly reported on it too.

In this sense, it is a comprehensive approach to ensure good corporate governance that includes transparency in its societal activities. The unserious attitudes of several forms not to take environmental accounting into consideration make performance below expectation.

This is because environmental accounting helps the firm to record all environmental costs incurred by the business thereby finding a way of reducing the cost (environmental expenses) so that the business can increase profit. Also environmental accounting helps the firm to disclose to the outside world their ability to be environmental friendly. According to Pramanik, Shil, and Das (2007), some of the specific issues (problems) regarding the environmental accounting and reporting include:

• Identification of environmental cost and expenses.
• Capitalization of cost.
• Identification of environmental liabilities.
• Measurement of liabilities.

At present, no accounting standard has been issued for accounting treatment of these specific problems. Some guidelines regarding these issues have been issued by many organizations such as International Chamber of Commerce, the Japanese Industry Association, the Chemical Manufacturing Association, Inter-governmental working group of expert on intimation standards of accounting and reporting. As regard environmental reporting, different organizations have also issued different guidelines. But these guidelines are only advisory in nature and not mandatory. Consequently, the researcher interest is, therefore, to investigate if companies in Cameroon practice social and environmental accounting and if so how accounting translation does affects the social and environmental information of these companies.

It is worth mentioning that conventional accounting practices have not or weakly recognized the social and environmental accounting for materials, water, energy and other natural usage. It has not also provided a better evaluation approaches and reporting manner. Conventional accounting has not provided such practices and has not also provided for accounting for negative externalities. Environmental Accounting can produce a lot of benefit for an organization; moreover, it can benefit from undertaking an environmental audit.

Environmental and social costs haven’t been recorded and reported according to the various natures of the current accounting year. Environmental accounting is one tool to help companies to understand the possibility of environmental obligations that will rise in the future.

Environmental accounting which  involves; identifying, measuring and allocating environmental costs; integrating these costs in the business, evaluating, and reporting the information of these costs to the companies’ stakeholders. It has to do with the process of communicating the social and environment effects of an organization’s economic actions to particular interest groups within the society at large. The performance of most corporate bodies drops below expectation when they fail to consider the benefits of social and environmental accounting. Again, the problem is that conventional approaches of accounting have become inadequate since conventional accounting practices have ignored important social and environmental costs activities affecting the environment and have poorly reported on it too.

Corporate neglect and avoidance of environmental costs leave gap in financial information reporting. “Green” accounting seeks to incorporate the costs of social and environmental measure and issues into financial reports of companies and organizations. However, though, companies in Cameroon promote their “green” credentials, for example through the “green” environment programs, recycling, limited access to vehicles and other polluting and emissions activities, fine CRS (Corporate Social Responsibility) policies and guidelines.

Good Corporate Environmental Management Systems (CEMS), through environmental impact assessments for their projects, strong adherence to norms, rules, and regulations, best practices and social and environmental laws/ standards. However, though, how do these companies acknowledge these factors in qualitative and quantitative variables in reporting their financial accounts?

There is need, therefore, to examine the social and environmental management accounting reports and published/ unpublished accounts of some major Cameroonian companies and organizations, with a wilder view – to the complete inclusion of “green” undertakings and determine whether there are significant cost differences or those companies/ organizations suppress the true costs of such measures.

It is true that companies are currently facing an increasing measure to disclose their Corporate Social Responsibility (CSR) documentation through qualitative and quantitative reports of the social and environmental management issues and inform all stakeholders about their voluntary activities that have been done in the course of the economic, social, environmental or possibly sustainable living (e.g. community involvement, workers quality, workers’ human rights, and EIA).

With regards to social and environmental reporting, different organizations have issued guidelines. But, these guidelines are only advisory in nature and not mandatory. It is important to point out, here, that, ethical organization and investors will only undertake and invests in ethically responsible companies; the need, therefore, to a proper evaluation and better translation of social and environment accounting reports.

As a result of these problems, which have enormous impact on corporate organization, the study will evaluate the need of inclusion of qualitative and quantitative accounting measures in social and environmental reporting in Cameroonian companies and organizations, which is a cause for concern for the researcher, what evaluation approach then?

This will go a long way to bringing in the positive impacts on the way forward for Cameroonian companies and organizations, with many more inherent advantages.

Within the OHADA Jurisdiction in Africa, where several firms have invested in sustainable development (Ondoua Biwole & al., 2009), the documents disseminated are mainly those required by current legislation and the OHADA accounting system, SYSCO (Ngantchou, 2011). Alternative documents (Social and Environmental) are very rare, and the financial statements of these companies are not always easily accessible.

This study shall examine how OHADA countries disseminate Social and Environmental Information (SEI), as a continuation of the contributions made by Haider (2010); Ali and Rizwan (2013) in seeking theoretical models of CSEA integrating contextual factors. It deals precisely with identifying the determinants of SEIs publications in developing countries, understanding OHADA companies motivations to disseminate such information and describes the accounting treatment of SEIs in these companies.

The development of social and environmental accounting is a complex and interdisciplinary issue which requires synergy and coordination between some fields like; economy, accounting, management, philosophy, and psychology (Herath, 2005).

If companies had made a remarkable social and environmental aim, and performance of non-financial standards, there would have been increased contributions made towards performance evaluation and budgetary systems. Companies management are lag staging behind in making use of financial resources in disclosing social and environmental information as a tool to advertising favorable prestige, and strengthen company’s environmental reputation and legitimating their activities in order to positively affect stake holders and maximize overall company’s value.

Traditional accounting paradigm can’t involve environmental consequences of organization activities since it has special structure on accounting numbers and figures. A social and environmental accounting system is, therefore, required to measure and disclose destructive environmental effects of companies.

These issues should include other cases about accounting, in a qualitative and/or quantitative manner, which could quantify financially, expenditures undertakings for air pollution, water contamination, natural resources extraction, and many other social and environmental projects. Recent analytical studies have shown that   accounting and accountants have achieve positive outcomes in social and environmental issues and financial and management issues. However, the strides made by Cameroonian companies in this domain are slow and weak.

Environmental costs may be controlled in designing, producing and giving production services and their production processes; in this regards, companies in Cameroon are increasingly improving, though at a “millipede” pace, an outstanding image of their positive cooperation in social activities to acquire legitimacy which should have led them turned to reporting.

1.3 Research Questions

1. Do Cameroonian companies use Social accounting in translating social and environmental reports to their accounting systems?
2. Do Cameroonian companies use Cost-Benefit analysis in translating social and environmental reports to their accounting systems?
3. Do Cameroonian companies use Environmental Accounting in translating social and environmental reports to their accounting systems?

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