Environmental cost measurement and its effects on investment return in United Cement company, Calabar.
(Accounting)
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Despite best efforts in Measuring Environmental Impact, industries continue to generate and discharge enormous amounts of wastes that pollute the natural environment and impose damages on households and other enterprises. Economists call these damages externalities because their costs typically fall not on the firms that discharge the wastes but on those that suffer the damages. Consequently, accounting systems don’t ascribe these costs to their sources or even record them systematically (Ashford, Ayers and Stone,2000).
Increasingly, however, companies are being forced to internalize these environmental costs, either through stricter environmental regulations or through liability for damages caused to others. Accurate measurement of a company’s true environment-related costs now offers a wide range of benefits: It provides management with a benchmark for tracking performance relative to peers or its own past performance. It can also serve as an external benchmark for investors concerned about the environmental performance of companies as well as their finances (Bartik, 2007).
This research work therefore examines environmental cost measurement and its effects on investment return in United Cement company, Calabar. This becomes important, because it can serve as a measure of a company’s environmental exposure and the financial risk originating in its environmental performance. True cost estimates the firm’s emissions and wastes by using the firm’s own information sources or others, then assigns each category of emissions a monetary value by multiplying its physical quantity by a notional price based on economic estimates of the marginal damages of an additional ton of emissions (Caves, Christensen, and Diewert ,1982a).
1.2 Statement of the problem
In order to see if a company is viable as a going concern, environmental costs are vital to know for the long-run. The benefits to preserve the environment in terms of investment returns may be surprising. One of the growing global concerns is the issue of lack of awareness among so many business leaders. A private sector solution may be the best solution on a global scale. Other growing issues of concern relates to inability of companies to measure their cost of waste and land-use change. Ecosystems are vital to the performance of most companies, and integrating the true costs of extracting these services could significantly impact bottom lines in the future.
Environmental costs are not always easily seen, but in taking a closer look, the results are scary. It is on this note that have prompted this research which focused on “environmental cost measurement and it effect on investment returns in United Cement Company (UNICEM) Calabar”.
1.3 Objectives of the study
The main objective of this study is environmental cost measurement and it effect on investment returns in United Cement Company (UNICEM) Calabar.
The specific objectives of the study include;
(i) To determine the benefits of preserving the environment in terms of investment returns in United Cement Company (UNICEM) Calabar.
(ii) To examine the effect of cost of waste measurement and land-use change on company’s viability in United Cement Company (UNICEM) Calabar.
(iii) To evaluate the importance of Ecosystems preservation to the performance of company’s in United Cement Company (UNICEM) Calabar.
(iv) To determine the true costs of environmental impact on company’s future investments in United Cement Company (UNICEM) Calabar.
1.4 Research question
(i) To what extent does preserving the environment benefit investment returns in United Cement Company (UNICEM) Calabar?
(ii) To what extent does cost of waste measurement and land-use change affect company’s viability in United Cement Company (UNICEM) Calabar?
(iii) How does Ecosystems preservation impact on the company’s performance in United Cement Company (UNICEM) Calabar?
(iv) To what extent does true costs of environmental impact affect company’s future investments in United Cement Company (UNICEM) Calabar?
1.5 Research Hypothesis
(i) There is no significant relationship between preserving the environment and investment returns in United Cement Company (UNICEM) Calabar
(ii) There is no significant relationship between cost of waste measurement, land-use change and company’s viability in United Cement Company (UNICEM) Calabar
(iii) There is no significant relationship between Ecosystems preservation and company’s performance in United Cement Company (UNICEM) Calabar
(iv) There is no significant relationship between costs of environmental impact and company’s future investments in United Cement Company (UNICEM) Calabar
1.6 Scope of the research area
the scope of the study focuses on environmental cost measurement and its effect on investment returns, the study area for this research will be narrowed down to United Cement Company, Calabar. This company will be taken into consideration because of its uniqueness as a manufacturing company that emits mush waste into the environment and also because of its easy accessible nature.
1.7 Significance of the study
This study will be of immense benefits to oil exploring companies, mining industries, manufacturing industries and construction industries to enable them determine adequate measures in measuring the cost of their environmental waste and also understanding the influence its has on future investments. The study when conducted will be of significance to the ministry of environment in both state and federal levels to enable them make policies that will guide and direct the operations of manufacturing, minning and oil exploring companies. The research will equally be significant because it would provide answers to the effect of environmental cost measurement on investment returns in the financial industry as a whole and also valuable tool for students, academician, institutions and individuals that wants to know more about environmental cost measurement.
1.8 Organization of the study
For the researcher to achieve the objectives of the study the research was organized into following Chapters in order to relate each one of them to the main study
(i) Chapter one: This chapter presents an introduction and background on the subject matter and as well highlight a problem statement, objectives of the study, research questions, research hypothesis, scope of the study, significance, definition of term and historical background of the study area.
(ii) Chapter two: This chapter reviewed related works from different scholars and authors pertaining to the subject matter.
(iii) Chapter three: This chapter presents the methodology used in the research. Hence the following headings were taken into consideration, the design, population, sample size, method of data collection instrumentation, model specification etc
(iv) Chapter four: the chapter highlighted data presentation, analysis and discussion of findings
(v) Chapter five: This chapter presents the summary, conclusion and recommendations made in the study as well make necessary suggestions for further studies. It also displayed the list of referenced authors and closes with appendicies.
1.9 Operational definition of terms
Cost: Is the value of money that has been used up to produce something, and hence is not available for use anymore
Measurement: Is finding a number that shows the size or amount of something.
Investment returns: is the concept of an investment of some resource yielding a benefit to the investor.
Environmental cost: This is expenditures incurred to prevent, contain, or remove environmental contamination.
1.10 Historical Background of the Organization under study: United cement company (UNICEM) limited
The United Cement Company of Nigeria Ltd (UNICEM) is formed as a private limited liability company under Nigerian law with registered office in Nigeria by Holcim Trading S.A. and Flour Mills of Nigeria Plc. In Nigeria, the name, UNICEM stands for advanced technology, quality product and the leading supplier of cement in the South-South and South-East regions. As the second largest cement plant in Nigeria, their core activities are the manufacture and sale of Ordinary Portland Cement.
UNICEM has its head office based in Calabar and all cement manufacturing operations have been consolidated at the 2.5million tons per annum Mfamosing plant, north-east of Calabar.
Their mission statement indicates a strive to be one of the most socially responsible cement companies in Nigeria. In achieving this they operate on the basis of best practices in accordance with shareholder, lender and local Nigerian legal and regulatory requirements so far as corporate governance, good corporate citizenship and sustainable practices.
UNICEM acquired the assets of Calcemco, a state owned cement company sold by the Nigerian Government after liquidation. The CALCEMCO plant was planned and constructed by Salzgitter Industriebau GmbH (SEG); Germany in the 1970’s to meet the high demand for cement in Nigeria (UNICEM Bulletin, 2006).
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