The Relationship Between Environmental Accounting and Reporting Practices and Profitability of Manufacturing Firms Listed on the Nairobi Securities Exchange

Abstract

Profit maximization goal has been a preserve for most firms listed on the Nairobi Securities Exchange. There has been a growing interest among various stakeholders to consider preservation of resources that originate from the environment. Environmental degradation has become a challenge that firms need to address even as they aim at achieving profitability. This study aimed at establishing the relationship between environmental accounting and reporting practices and profitability of manufacturing firms listed on the Nairobi Securities Exchange. This study used descriptive research design and the population of the study comprised of 10 manufacturing firms listed at the NSE as at 31st December 2016. Secondary data was used for the study and was collected from published financial reports of the firms under study, NSE handbook and CMA website. The period of study was from 2014 to 2016. Data was analyzed using SPSS and a regression model was used to determine the relationship between profitability and environmental accounting and reporting practices. The study established a positive relationship between profitability measured by ROA and the independent variables of the study (EARI, LQ and LV). The independent variables contribute 27% of the profitability of firms. Firms should therefore include environmental accounting and reporting practice as part of the strategy to attain profit.