Accounting for Green Cost Implication on the Financial Performance of Listed Manufacturing Firms in Nigeria
Abstract
The costs incurred to acquire green technology or install pollution-abatement facilities usually translate into direct, indirect, or operating expenses. This study examined the effect of green cost accounting practices specifically clean technology adoption, pollution control, and recycling costs on the financial performance of Nigerian listed manufacturing firms. An ex-post facto research design was employed to analyse data from a random sample of 47 firms listed on the Nigerian Exchange Group (NGX) as of December 31st, 2024. Descriptive and inferential statistics, including linear regression, were applied. Findings revealed that the coefficient of clean technology adoption cost was 0.2108, indicating a positive relationship with return on assets (ROA). Thus, a unit increase in clean technology adoption cost raised ROA by 0.2108 units. However, this effect was statistically insignificant (P=0.4393>0.05). The coefficient of pollution control cost was -0.0746, suggesting a weak negative relationship with ROA. A unit increase in pollution control cost reduced ROA by 0.0746 units, though this effect was also insignificant (P=0.8165>0.05). Similarly, the coefficient for recycling cost was 0.3630, reflecting a positive association with ROA, where a unit increase raised ROA by 0.3630 units. Yet, this relationship too was insignificant (P=0.8165>0.05).The study concludes that investments in green initiatives may not yield immediate financial returns for Nigerian manufacturing firms. Policymakers are therefore encouraged to design supportive policies and provide financial incentives to enhance the financial viability of adopting green practices.
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Enekwe, C. I., Ugwudioha, O. M., & Uyagu, B. D. (2023). Effect of environmental costs on the financial performance of listed oil and gas companies in Nigeria. International Journal of Accounting Research, 8(1), 31-36. https://doi.org/10.65453/ijar.v8i1.688
Gu, H., Yang, S., Xu, Z., & Cheng, C. (2023). Supply chain finance, green innovation, and productivity: Evidence from China. Pacific-Basin Finance Journal, 78, 101981. https://doi.org/10.1016/j.pacfin.2023.101981
Hoque, M. M., Islam, A., Islam, A. R. M. T., Pal, S. C., Mahammad, S., & Alam, E. (2023). Assessment of soil heavy metal pollution and associated ecological risk of agriculture dominated mid-channel bars in a subtropical river basin. Scientific Reports, 13(1), 11104. https://www.nature.com/articles/s41598-023-38058-0 https://doi.org/10.1038/s41598-023-38058-0
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Shi, J., Yu, C., Li, Y., & Wang, T. (2022). Does green financial policy affect debt-financing cost of heavy-polluting enterprises? An empirical evidence based on Chinese pilot zones for green finance reform and innovations. Technological Forecasting and Social Change, 179, 121678. https://doi.org/10.1016/j.techfore.2022.121678
Rahman, M. M., & Islam, M. E. (2023). The impact of green accounting on environmental performance: mediating effects of energy efficiency. Environmental Science and Pollution Research, 30(26), 69431-69452. https://doi.org/10.21203/rs.3.rs-2604713/v1
Robaina, M., & Madaleno, M. (2020). The relationship between emissions reduction and financial performance: Are Portuguese companies in a sustainable development path. Corporate Social Responsibility and Environmental Management, 27(3), 1213-1226. https://doi.org/10.1002/csr.1876
Thao, V. T. T., Tien, N. H., & Anh, D. B. H. (2019). Sustainability Issues in Social Model of Coporate Social Responsibility Theoretical Analysis and Practical Implication. Journal of Advanced Research in Management, 10(1 (19)), 17-29. https://doi.org/10.14505//jarm.v10.1(19).02
Trotta, L., Bernardini, V., Ermini, M. V., Campana, L. G., Verna, M., Raimondi, G., & Spazzafumo, G. (2024). Climate finance-driven feasibility study of a green ammonia and urea production plant in Italy. International Journal of Hydrogen Energy.137/suppl/C 987-999; https://doi.org/10.1016/j.ijhydene.2024.08.079
Abou Taleb, M., & Al Farooque, O. (2021). Towards a circular economy for sustainable development: An application of full cost accounting to municipal waste recyclables. Journal of Cleaner Production, 280, 124047. https://doi.org/10.1016/j.jclepro.2020.124047
Ayeleru, O. O., Fajimi, L. I., Oboirien, B. O., & Olubambi, P. A. (2021). Forecasting municipal solid waste quantity using artificial neural network and supported vector machine techniques: A case study of Johannesburg, South Africa. Journal of Cleaner Production, 289, 125671. https://doi.org/10.1016/j.jclepro.2020.125671
Bollinger, B. (2015). Green technology adoption: An empirical study of the Southern California garment cleaning industry. Quantitative Marketing and Economics, 13, 319-358. https://link.springer.com/article/10.1007/s11129-015-9163-0 https://doi.org/10.1007/s11129-015-9163-0
Damieibi, I. J. (2023). Environmental accounting practices and net profit of quoted oil and gas companies in Nigeria. Nigerian Journal of Management Sciences, 24 (19), 130, 141.
Enekwe, C. I., Ugwudioha, O. M., & Uyagu, B. D. (2023). Effect of environmental costs on the financial performance of listed oil and gas companies in Nigeria. International Journal of Accounting Research, 8(1), 31-36. https://doi.org/10.65453/ijar.v8i1.688
Gu, H., Yang, S., Xu, Z., & Cheng, C. (2023). Supply chain finance, green innovation, and productivity: Evidence from China. Pacific-Basin Finance Journal, 78, 101981. https://doi.org/10.1016/j.pacfin.2023.101981
Hoque, M. M., Islam, A., Islam, A. R. M. T., Pal, S. C., Mahammad, S., & Alam, E. (2023). Assessment of soil heavy metal pollution and associated ecological risk of agriculture dominated mid-channel bars in a subtropical river basin. Scientific Reports, 13(1), 11104. https://www.nature.com/articles/s41598-023-38058-0 https://doi.org/10.1038/s41598-023-38058-0
Hosam, A. R., Maher, A. A., Henry, H. H., Barbara, G., Salsabila, A. A. (2020). The Analysis of Green Accounting Cost Impact on Corporations Financial Performance. International Journal of Energy Economics and Policy 10(6), ISSN: 2146-4553 421-426. https://doi.org/10.32479/ijeep.9238
Kifordu, A. A. (2022). Recycling sustainability on organizational performance of publishing firms: a survey-based approach. Journal of Global Social Sciences, 3(10), 103-118. https://doi.org/10.58934/jgss.v3i10.35
Laine, M., Tregidga, H., & Unerman, J. (2021). Sustainability accounting and accountability. Routledge. https://doi.org/10.4324/9781003185611
Lanteri, A., & Rampini, A. A. (2023). Financing the adoption of clean technology. Mimeo.
Odum, A. N., & Arinomor, C. O. (2023). Green accounting cost and financial performance of Oil and Gas companies in Nigeria. Journal of Global Accounting, 9(4), 1-22.
Okorie, D. I. (2021). The energy use of capital inputs: towards cleaner production in Nigeria. Environmental Challenges, 4, 100104. https://doi.org/10.1016/j.envc.2021.100104
Okporo, E. N., Okafor, L. C., Chukwu, U. C., & Uguru, L. C. (2023). Green accounting and financial performance in Nigerian industries: A study of selected oil and gas firms in Nigeria. Certified National Accountant Journal, 31(4), 81-98. https://doi.org/10.70518/cnaj.v31i4.06
Olawumi, T. O., Chan, D. W., Saka, A. B., Ekundayo, D., & Odeh, A. O. (2023). Are there any gains in green-tech adoption? Unearthing the beneficial outcomes of smart-sustainable practices in Nigeria and Hong Kong built environment. Journal of Cleaner Production, 410, 137280. https://doi.org/10.1016/j.jclepro.2023.137280
Pratiwi, A., Nurulrahmatia, N., & Muniarty, P. (2020). Pengaruh Corporate Social Responsibility (CSR) Terhadap Profitabilitas Pada Perusahaan Perbankan Yang Terdaftar di BEI. Owner: Riset dan Jurnal Akuntansi, 4(1), 95-103. https://doi.org/10.33395/owner.v4i1.201
Riyadh, H. A., Al-Shmam, M. A., Huang, H. H., Gunawan, B., & Alfaiza, S. A. (2020). The analysis of green accounting cost impact on corporation’s financial performance. International Journal of Energy Economics and Policy, 10(6), 421-426.
Shi, J., Yu, C., Li, Y., & Wang, T. (2022). Does green financial policy affect debt-financing cost of heavy-polluting enterprises? An empirical evidence based on Chinese pilot zones for green finance reform and innovations. Technological Forecasting and Social Change, 179, 121678. https://doi.org/10.1016/j.techfore.2022.121678
Rahman, M. M., & Islam, M. E. (2023). The impact of green accounting on environmental performance: mediating effects of energy efficiency. Environmental Science and Pollution Research, 30(26), 69431-69452. https://doi.org/10.21203/rs.3.rs-2604713/v1
Robaina, M., & Madaleno, M. (2020). The relationship between emissions reduction and financial performance: Are Portuguese companies in a sustainable development path. Corporate Social Responsibility and Environmental Management, 27(3), 1213-1226. https://doi.org/10.1002/csr.1876
Thao, V. T. T., Tien, N. H., & Anh, D. B. H. (2019). Sustainability Issues in Social Model of Coporate Social Responsibility Theoretical Analysis and Practical Implication. Journal of Advanced Research in Management, 10(1 (19)), 17-29. https://doi.org/10.14505//jarm.v10.1(19).02
Trotta, L., Bernardini, V., Ermini, M. V., Campana, L. G., Verna, M., Raimondi, G., & Spazzafumo, G. (2024). Climate finance-driven feasibility study of a green ammonia and urea production plant in Italy. International Journal of Hydrogen Energy.137/suppl/C 987-999; https://doi.org/10.1016/j.ijhydene.2024.08.079
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