CHAPTER ONE
INTRODUCTION
Background of the study
Environmental reporting is an inclusive field of accounting. It provides reports for both internal use, generating environmental information to help make management decisions in pricing, controlling overhead and capital budgeting, external use, disclosing environmental information of interest to the public and to the financial community. Internal use is better termed environmental management accounting (Bartolommeo, Bennett, Bouma, Heydkamp, James and Wolters, 2000). The concept of environmental reporting was introduced in the early 1990s and since then it has rapidly gained acceptance as a means of communicating and demonstrating a company’s commitment to improving corporate environmental performance to its stakeholders (Association of Chartered certified Accountants, 2003). The historical development of Accounting attests to the fact that Accounting is a product of its commercial environment and rooted in capitalist ideology. Accounting has scarcely dropped the vestiges of Pacioli’s commercial capitalist era. This disposition of accounting has meant that it destroys its habitat within the ecosystem to the extent that a wide ri now exist between accounting and its environment. In the recent times, there has been an increased awareness of the interaction between firms and environment in which they operate. This enlightenment has been sharpened by concerns about resources depletion , resources scarcity, environmental degradation and the sustainability of economic activity have made the development of environmental accounting and reporting an area of significant interest in Nigeria. The success or failure of an organization may be determined not only by the products or services it deals with but also by the complexity of it environment.(Adediran and Alade, 2013). Recently, environment has become a very crucial issue not only for personal life but also for business life and hence, environmental movement and environmental reporting practices by different organizations throughout the world have gathered great momentum in recent years. Advancement and improvement of quality environment is the major issue for their activities.(Shil and Iqbal, 2005).
Since environmental pollution in the small and medium scale enterprises(SMEs) is very alarming, it requires justifying how much they are producing environmental information in their annual reports in creating awareness among the stakeholders. The more environmental information disclosure in annual reports of SMEs, the more awareness is created regarding the environment. (Dutta and Bose, 2008) Accounting and reporting for the environment has become increasingly relevant to enterprise because how an enterprise’s environmental performance affects its financial health is of increasing concern to investors, creditors, governments and the public at large (UNCTD, 1998). In recent years, adverse environmental effect on economic development has become matter of great public concern all over the world. Businesses and corporations all over the world are increasingly being made to account for the impact of their activities on the environment (Adekoya and Ekpenyong, 2009). There has been an increasing need for organizations to voluntarily disclose in their annual reports activities that interface between them and the society (Ebimobowei, 2011) but this has not been the case in developing countries as Nigeria. Uwalomwa (2011) emphasizes that the increasing demands for clear and hard facts about the environmental performance of SMEs by an increasingly well informed breed of stakeholders have made corporate environmental disclosure an essential issue of debate. Environmental information must be disclosed without impairing the usefulness of environmental reporting. It must meet the information needs of users, good quality must be appropriately guaranteed, and comparability with previous periods and other enterprises must always be ensured.
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