Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.5, No.14, 2014 66 Environmental Accounting and Social Responsibility Disclosure on the Earning Capacity of Nigerian Manufacturing Firms Beredugo, Sunny Biobele* Department of Accounting, University of Calabar, Cross Riversstate, Nigeria *E-mail of the corresponding author: suntap2747@yahoo.com Abstract This study assessed environmental accounting and social responsibility on the earning capacity of selected Nigerian manufacturing companies. The study highlighted some environmental relatedcosts incurred in preventing, reducing or repairing damages to the environment and social cost incurred to acknowledge organizations’ responsiveness to the society at large. Emphasis was also carried out to ascertain the extent of compliance by Nigerian companies on environmental accounting and social responsibility with the International Standard of Accounting and Reporting disclosure (ISAR) requirements. Data were collected from three manufacturing firms in Nigeria through the administration of questionnaires and researchers’ checklist. These data were tested using population t-test, ordinary least square and multivariate statistics and was revealed that there is a significant difference between the compliance level of Nigerian companies on environmental accounting and social responsibility disclosures and the ISAR requirements.Environmental cost proxy as: waste management cost, pollution abatement cost, and Fines & Penalty significantly affect companies’ earning capacity. It was recommended that firmsshould be sensitive to their environmental activities, and account for all environmental related costand they should desist from environmental pollution and degradations. Keywords: Environmental Accounting, Social Responsibility, Waste management cost, pollution abatement cost, Fines & Penalty 1.1 Introduction Organisms and their environment constantly interact, and both are changed by this interaction. Like all other living creatures, humans have clearly changed their environment, and they have done so generally on a grandeur scale than have all other species. Some of these human-induced changessuch as the destruction of the world’s tropical rain forests for economic expansion and pollutionhave led to altered climate patterns, habitat destruction, species extinction, and environmental degradation (Zimmerman, 2008). Auer (2010) suggested that knowledge about the environment cost and their challenges should be adequately accounted for,in compliance with standards; as a moral commitment to environmental stewardship and the desire to promote good relations with the residents of local communities, while the many ways in which environmental costs, losses or benefits may go unrecorded in traditional accounting systems is becoming obsolete. Odemerho (2008) added that the unwise use of the natural environment due to ignorance, neglect, poverty, overpopulation and greed amongst others as led to the degradation of environment. The costs (degradation) occur as Nigerians attempt to adjust their seemingly endless wants and desires for food, shelter, recreation, infrastructural facilities, and so no to the land and other resources available to them. These land use activities contribute to the overall development of the country but they equally produce negative impacts on the environment. These negative impacts are referred to as environmental costs (degradation) which implies abuse of the environment due to improper resources management. Accountants have begun to define the ecological issues as falling within their range of skills. For example, CIMA (1997) argued that the forward thinking management accountant should be taking an active role in environmental management, as he or she has key skills to apply to the process. The basic financial accounting model is an impediment to change because it only records and employs the data which arise from a transaction which generates a price. Prices are only generated when property rights are transferred. The majority of the matters that are of concern in ecology are things over which property rights do not exist. As a result, the basic financial accounting model ignores those (Gray, 2003). Although there is an active and essential role that accountants can play in the development of sound environmental and reporting procedures, much work must be done to develop a more comprehensive reporting system involving both quantitative and qualitative techniques. The United Nations Environment Programme (UNEP) has directed its attention to issues of environmental disclosures. Recommendations have been made for companies to disclose; key environmental issues facing the company and plans for addressing them; progress in addressing changes required by future legal requirements; actual and projected-levels of environmental expenditure; energy use, materials use, emissions and waste disposal routes; financial estimates of savings and benefits flowing from pro-environment efforts; and an independent audit statement (Adams, 2000). The manufacturing and related industries occupy a key position in the economic life of a nation. These industries supply a vast range of products which find their ways into a wide spectrum of human activity. Many of these