Account and Financial Management Journal e-ISSN: 2456-3374

Volume 3 Issue 07 July- 2018, (Page No.-1621-1633)

DOI:10.31142/afmj/v3i7.03, I.F. - 4.614
© 2018, AFMJ

Social and Environmental Accounting Effect on Companies' Profit

(An empirical study of some companies in Erbil)

Arshad Sedeeq Abdullah

Abstract: In the past two decades, the relations among environmental accountings information and company performances have
pulled in critical research consideration. The effect of economic logical appears to be particularly inside the setting of deliberate
accounting revelation and powerless state control experienced in creating economies. Therefore, the influence of environmental
accounting on market execution has inspired a crucial number of empirical examines (Bowman and Haire, 1975; Vance, 1975;
and Abbot and Monsen, 1979) done as ahead of timetable in the 1970s. Apparently, administration has an essential duty to
stockholders, furthermore, their continuousness with pertinence depends on their capacity to create profound fortune.
The purpose of this study is to know whether (SEA), a company organization in Erbil, Kurdistan Region has an influence on
profit.
This study, based on 50 local and international firms located in Erbil, KRG, were given a questionnaire, which was answered, by
either the CFO or the accountant of the firm. This in an attempt to find out to what extent they care about the environment and
society and if there are any governmental regulations and policies that needs to be followed and what affects this policy has on
profits annually particularly in 2017.
Key words: Environmental Accounting, Firm Profitability, Environmental reporting, company financial performance

List of Abbreviations
SEA: Social and Environmental Accounting
HICPA: The Hong Kong Institute of Certified Public Accountants
GAAP: Generally Accepted Accounting Principles
CSEDs: Corporate Social and Environmental Disclosures
ROCE: Return on Capital Employed
EPS: Earnings per Share
CFO: Chief Financial Officer
EA: Environmental accounting
SA: Social accounting
KRG, KRI: Kurdistan regional Government or Kurdistan Regional- Iraq

Chapter One: Introduction universal and local level. Earth environment is a rich legacy
1.1 Introduction that has been passed down to us by previous eras. The
The accounting system is liable for various difficulties, of present progress has included us in shifted exercises. A hefty
which this paper should inspect the difficulties created by portion of these exercises created squander with potential
natural exercises. The accounting system is poorly prepared constituents. A definitive transfer of the waste prompt to
in giving sufficient data about the environmental exercises natural contamination in many parts of the world, the size of
of associations. Environmental issues have turned out to be contamination of the environment has, as of now reached a
worldwide, and accordingly environmental accounting worrying level (Pramanil, Shiland Das, 2007).
might be deciphered at a few unique levels, for example, Accounting is seen today as the precise advancement and
authoritative, territorial, and national. Due to the way that a examination of data identifying with monetary undertakings
huge part of environmental harm is connected to the of an association. What's more, a standout amongst the most
business segment, the corporate parts of environmental critical motivations behind accounting in present day, is the
accounting are a key point of research. The review looks to office it provides for end-clients and makers to have entry to
discover the elements that drove to the arrangement of significant data concerning an association's money related
environmental accounting, the procedures that it positions. The financial information can help operational
experienced and additionally its current significance on a chiefs regarding arranging and controlling and works to
diminish hazard and vulnerability. They can likewise help
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“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
proprietors and administrative elements judge and survey 2004 notes that natural substances constitute inborn hazard
the association's execution and help them settle on to corporate financials. In specific situations, these dangers
satisfactory choices about the association's future (Rodica, incorporate hazard of material error of important data that is
Alina, and Selina, 2014). The data concerning the execution of noteworthy enthusiasm to shareholders.
of the firm is critical for proprietors, loan specialists, Thus, there is expanded mindfulness from both shareholders
providers, workers and others since it will figure out if they and partners on the significance of representing the earth,
ought to put resources into the firm or not (Armstrong, and an ever increasing number of associations have found
Barth, Jagolinzer, and Riedl, 2010). Representing themselves being stood up to with issues of natural
environment aids in exact appraisal of expenses and responsibility. In any case, the expanded accentuation of the
advantages of natural protection measures of organizations requirement for organizations to represent the earth, the
(Schaltegger, 2000). It gives a typical system to associations impact of environmental accounting on association's money
to distinguish and represent past, present and future related execution has developed as of late as a subject of
ecological expenses to bolster basic administrative intrigue. The strength of financial soundness as cultivated by
leadership, control and open revelation (KPMG and UNEP, the deliberate ecological divulgences has flagged firms'
2006). The seriousness of ecological issues as a worldwide expanded enthusiasm for money saving advantage point of
phenomenon has its harsh effect on the nature of our life. view to environmental accounting. Howes (2002) takes note
Measures are being taken both at the national and global of that environmental accounting manages the era,
level to decrease, anticipate and alleviate its effect on social, investigation and utilization of adapted naturally related data
financial and political circles (GRI, 2002; GR1, 2006). keeping in mind the end goal to enhance corporate
Worldwide awareness of partners on corporate ecological environmental and financial execution. Inside this unique
execution has officially made conventional announcing circumstance, environmental accounting is seen to stretch
excess. Corporate houses keep running into the danger of the out past inward and outside natural bookkeeping, and
loss of confidence in their partners, if in the future, furthermore sets up a practical connection with financial
ecological execution data is excluded in their standard performance
announcing (Swift, 2001). The method of reasoning behind In relating environmental accounting with profitability,
the long-standing carelessness of firms of their natural Roberts (1992) clarifies utilizing partner's hypothesis that
suggestions is delineated inside the setting of the partner financial execution of a firm influences administration's
shareholder banter about. The thought which underlies the choice to take part in representing the earth. Ali (2000)
'shareholder point of view' is that the main obligation of highlights the likelihood that money related execution of
supervisors is to serve the interests of shareholders in the organizations acquiring cost from environmental accounting
most ideal way, utilizing corporate assets to increment the may vary altogether from those that do not and this could
abundance of the last by looking for benefits (Freedman, flag a practice where organizations can contaminate the
1998; and Jensen, 2001). In contrast, the 'partner viewpoint' environment but then seem more monetary proficient than
recommends that other than shareholders, different others seem which bring about expenses to secure nature.
gatherings or constituents are influenced by an Likewise, there is confirmation that revelations of natural
organization's exercises, (for example, workers or the nearby execution measures are important to the estimation of the
group), furthermore, it must be considered in administrators' firm, with high contamination levels bringing down firm
choices, conceivably similarly with shareholders (Werhane valuations (Hughes, 2000). There is likewise a proposal that
and Freeman, 1999). organizations that rate well on social and ecological criteria
Nonetheless, late talks on the rising ecological difficulties likewise give superior to normal comes back to shareholders
recommend that the shareholder view may essentially speak (Al-Tuwaijri et al., 2004).
to a gullible comprehension of ecological matters. In
divulging the ramifications of environmental accounting that 1.2 Research Problem
may even represent a danger to shareholders' advantage, Researchers endeavors to cover social and environmental
Akhaiyea (2009) contends sturdily that "Corporate accounting and its impact on the organizational income and
carelessness and shirking of environmental costing leave acts. Some of the accounting establishments are spending
crevice in monetary data detailing, consequently there is no many of their wealth as part of their social and environment
fulfillment and accuracy of reasonable view to clients of responsibility and that surely will have impact on
money related data, for example, shareholders, furthermore, performance of the company in the market. This study
potential budgetary financial specialists." This proposes attempts to find out to what extent KRG based firms have
natural ramifications of business operations could influence social and environmental responsibility and how companies
corporate monetary explanation, for example, making use social and environmental accounting? If the answer to
liabilities which might be real or unexpected and may the above question is yes then to what extent, if the answer
represent a critical danger to resource values. The Hong is no this research attempts to sort out an academic answer.
Kong Institute of Certified Public Accountants (HICPA),

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“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
1.3 Research Motivation more about the environmental performance of the firms.
The reason for writing this essay is due to the lack of insight Akhaiyea (2009) provides a delineation of the concept of
and knowledge on SEA in the Kurdistan Region as well as environmental accounting incorporating various
how to take care of the surrounding environment and society perspectives. Note that, in the context of national income
by the company in the region. In a developing country, it is accounting, environmental accounting indicates the
critical to study environmental and social concerns, accounting of natural resources that refers to the statistics of
especially pollution and environmental damage. In this the consumption of natural resources of a nation or region,
study, the researcher will attempt to understand to what furthermore takes into account the scope, quality and value
extent the local and international companies follow SEA of natural resources that are renewable or non-renewable. In
policies, how significant it is to them, and if they follow the context of financial accounting, environmental
these policies, how much fund they make in a year. accounting knows the preparation of financial reports to
external users using the Generally Accepted Accounting
1.4 Aims and Objectives Principles (GAAP). This is the financial information to
The main aim of the present review is to write a more external users that conveys the impact on the environment
reasonable evaluation of the relations between and the activities impacting eco-efficiency.
environmental disclosure and firm’s financial performance
The issues of environmental accounting and reporting has
by determining a single and a few different relapse models.
gotten significant enthusiasm from scholarly and scientists
Which record for both individual impacts of environmental
amid the most recent three decades (Rajapakse, 2003,
disclosure and the impact relations between natural exposure
Surman and Kaya, 2003, Thompson and Zakarai, 2004,
and a few firm-particular factors on corporate a financial
O'Donovan &Gibson 2000). The effects of various reviews
performance. The purpose of this study is to find out if SEA
that count the relationship between corporate financial
has an impact on wealth accumulation.
performance and complete social and environmental relation
demonstrate blended outcomes.
1.5 Research Structure
This research contains four fundamental parts, which are; These specialists found a positive relationship amongst
the literature review, methodology, discussing the data benefit and the farthest point of corporate social and
analysis and results, and the conclusion. First, the literature environmental disclosure (Waddock and Gravess, 1997),
review will include two sections, which are the hypothetical while Cowen et al. (1987) found no relationship between
foundation and presentation. The hypothetical foundation factors. Once more, the consequences of Belkaoui and
section contains the speculations, which identify with this Kirkpik (1989) have a tendency to be additionally charming.
review, for example, Legitimacy Theory, Stockholders Altogether they demonstrated a combined connection, yet an
Theory, and Institutional Theory. In other words, the field unimportant negative relapse coefficient for the arrival on
on the philosophy and gathering of information will resources and connect social and environmental disclosure.
concentrate on the way toward collecting data and depicting Information on social performance, social auditing, social
the factors. The third segment concerns the examining of accounting, socio-economic accounting, social responsibility
information and talk of the outcomes, which will incorporate accounting, and social and environmental reporting have
the examination of the information and its elucidation in been used interchangeably in the literature. Corporate
connection to the writing in the area of finance and environmental disclosure is a part of social information and
accounting. This done by getting advantage of PC projects environmental disclosures are mainly non-financial in
to support the information, for example, utilizing SPSS to nature. The scope of the corporate disclosure literature
investigate the entire dataset and utilizing Excel focuses on the determinants of voluntary disclosure and on
programming to collect information and draw charts. the effect of voluntary disclosures on the return-to-earnings
Examination of the data takes after many levels; initially, ratio (Healy & Palepu, 2001; Lundholm & Myers, 2002).
utilizing illustrative investigation to find out the factors' However, there is not enough research of specific studies on
midpoints and also the base, most extreme and standard Corporate Social and environmental disclosures (CSEDs) in
deviations for every variable. Finally, the part's last segment both modern and developing countries.
will report the results and additionally the constraints of, and The profitability, as well as the financial performance of the
reflections. companies, was used by several researchers as variable for
differences in the stages of disclosure. In the cases, the
Chapter Two: Literature Review relationship between corporate financial performance and
2.1 Introduction corporate social and environmental disclosure is apparently
The financial report presents a variety of data in details, a standout amongst the most disputable issues yet to be
includes environmental cases; and given that the financial (Choi, 1998). Defenders contend that there are extra
performances of companies is related, in part, to the expenses connected with the environmental disclosure and,
company’s environmental performance, stakeholders care the gainfulness of the revealing organization is discouraged.
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“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
There are those analysts utilizing advantage enlistment and Stakeholder theory postulates a positive relationship
among these specialists, Roberts (1992) has found a positive between economic performance and the level of the decision
relationship between level of benefit of an organization and of a company to engage in audit. (Joshi et al., 2011), in a
corporate social and environmental disclosure. Be that as it study in India found profitability exhibiting a significant
may, Patten (1992) neglects to locate a critical positive inverse relationship to the environmental issue, appears to
relationship amongst productivity and social and monetary suggest that environmental information in India has different
disclosure. Various reviews have been completed on priorities from the information in the Western world. Also in
accounting and environmental/social assertions. a study on companies listed on the Bombay Stock Exchange,
resulting in environmental accounting and solid profitability
Survey of the testimony literature shows that firms are
seems to be mixed. While net profit and dividend per share
exploring social and environmental information in corporate
shows a positive ratio, return on capital employed and
annual reports and this has grown over the years.
earnings per share exhibit negative relationships with
Researchers have argued that the level of Corporate
environmental accounting (Makori, 2013). This point of
Environmental Accounting and Disclosure depends on a few
view also it corroborates the practice of reporting that
corporate qualities and there are observational reviews that
disclosures of environmental information are voluntary,
inspected the extent of environmental disclosure and counts
Hence diversity in the practice of reporting.
the relationship between the disclosure of environment and
different corporate properties. Nevertheless, many of them However, Jaggi and Freedman (1992) examine the long-
concentrated on created nations and less reviews term relationship between
concentrated on creating nations, for example, India. It has Environmental performance and corporate performance,
additionally been contended that the social and using the percentage change in three
environmental disclosure of organizations cannot be Contamination measures and various accounting ratios as
connected generally to all nations that have diverse empirical variables for performance and corporate
monetary advancement and with partnerships that have performance, respectively. The results give credence to the
distinctive levels of mindfulness and states of mind towards existence no significant association. The authors note that
corporate environment disclosure (Makori, 2013). It has this lack of importance they have resulted from a negative
likewise been seen that a large portion of them depended on association between the variables of interest that actually it
substance examination of yearly reports. Content countered any positive association suggested by previous
investigation is right now the most utilized method for the studies. An inverse relationship between environmental and
examination of accounts in money related reports (Shil and corporate is in line with the orthodoxy associated with
Iqbal, 2005). Since this technique is more utilized by the traditional economic thinking that represents this
creators, this review has a little deviation examination of the relationship as compensation between the profitability of the
substance to look at the impact of environmental accounting company and acting on their environmental responsibility
on the productivity of specific organizations utilizing (Freedman, 1992).
multiple regression models.
Razeed (2009) argues that the economic performance
The main idea of the study reveals many significant negative (measured by profitability) is critical in the decision to
correlations between environmental accounting and return become involved in the environmental disclosure. However,
on capital employed (ROCE) and share (EPS) and a the relationship between environmental performance and
significant positive correlation between environmental economic performance is based on a contradictory
accounting and Net Earnings and dividend per share theoretical theory support that prior empirical research has
(Makori, 2013). There is a significant correlation between not clarified. It is imperative to note that the profitability
environmental accounting disclosure and the company's could influence the decision of the companies to reveal
financial results when environmental accounts are managed information. Additionally, Bassey et al. (2013), investigating
by company-specific variables such as firm size, industry the impact of accounting and reporting on the organizational
type and auditor firm type (Che-Ahmad, Osazuwa, and performance of selected oil and gas companies in Niger
Mgbame, 2016). According to stakeholder theory, the Delta area of Nigeria using Pearson's product moment
economic performance of a company affects the correlation, found environmental cost to be positively
management's decision to engage in environmental significant with the performance of the organization.
accounting and also disclose the results. When companies
are not doing well, financial requirements take precedence 2.2Theoretical Perspectives
over social and environmental responsibility expenditure There have been several theories as to why a company can
(Roberts, 1992). decide to act responsibly. These theories are seen by many
environmental accounting researchers as the theories to
Moreover, such activities are less likely to have financial
understand social and environmental accounting and
ability to provide more information to meet the needs of the
reporting practices. Based on a review of the literature
various stakeholders of the company (Meek et al., 1995).
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“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
regarding different theories on social and environmental corporate responsibility and ethical factors (Ashman and
accounting, it is understood that the theory of legitimacy, Winstanley, 2007).
stakeholder theory and institutional theory are the most According to existing literature, explanations based on the
appropriate theories to develop a theoretical framework for point of view of sustainable development, special attention
this research. And Elkington (1994) triple bottom line to the construction of the macroscopic theory, focus mainly
concept integrates financial, social and environmental on the relationship between the company and the society, the
dimensions, insists on the positive relationship between environment and the economy from the height of the
sustainability, and the value of companies (Perego, 2005). strategy the relevant literatures mainly to present the
positioning, the functions and the motivations of the
Based on this principle firms provide information on social,
sustainability accounting, and to emphasize the importance
environmental and economic matters that fall within a single
Non-financial information and management. However,
report (EugenioEt al., 2010). Schaltegger establishes new a
current studies only point out that sustainability accounting
form of accountability by bringing environmental
is the direction of extension and development of
accounting as a means of measurement on the basis of
environmental accounting, but not the specific differences
Physical units - in the field of the environment accounting.
between sustainability accounting and environmental
Ecological accounting is developed regardless of traditional
accounting in that raise neither a specific framework or a
accounting, and it is later integrated into traditional
system of sustainability accounting.
accounting at both the management and financial
Accounting. Environmental Accounting takes the existing
2.2.1 Legitimacy Theory
financial accounting system as a given fact, and does not
The theory of legitimacy offers a view that the
deal with the Compilation of accounting information
interrelationship between an organization and the related
(Schaltegger-Burritt, 2000). The triple bottom line trend has
social expectations is simply a fact of social life. According
been led by pioneering firms such as Interface, Inc,
to this theory, the survival of an organization is established
Electrolux and Bristol Meyers Squibb, but it has also been
by both market forces and the expectations of the
adopted by many other corporations. 3M's perspective is
community, and thus an understanding of the broader
expressed by W. James McNerney, Jr., its Chairman and
concerns of society expressed in community expectations
CEO (McNerney 2004):
become a necessary precondition for the survival of an
"For a hundred years, 3M people have provided innovative
organization. The theory it focuses on the assumption that an
and useful products to generations of satisfied customers.
organization must retain its social role by responding to the
3Mers have also recognized that the long-term success of
needs of society and give society what it wants (Shocker and
the company stems from the adoption and implementation
Sethi, 1974, Suchman, 1995; And Deegan, 2002).
of the principles of sustainable development: management
to the environment, contributions to society and the
2.2.2 Institutional Theory
creation of economic value and worth."
Lounsbury (1997, 2008), Dillard et al. (2004) and Ball &
Next Step Consulting, a London-based consulting firm, has
Craig (2010) make an analysis about social and
produced a website (2004) that has a database of thousands
environmental accounting from an institutional theory angle,
of social and environmental reports, which can be searched
according to institutional theory, organizational behavior is
by company name, business sector, affiliation UK FT 250,
conditioned by expectations derived from the institutional
(CERES), the World Business Council for Sustainable
environment. Institutional theory deals with examine and
Development (WBCSD), and / or country. Sustainability
explain how institutionalized norms and pressures affect
reports are also available on Green @ Work (2004) and
social change among the organizations. This theory is
International Corporate Environmental Reporting (2004)
emerging slowly but steadily as a useful theoretical theory.
websites. The WBCSD provides broad guidance on
In relation to the environmental implications of the
sustainability reporting through its Sustainable Development
operations of an organization and behavior, the institutional
Reporting Portal (WBCSD 2004).
framework emphasizes the importance of regulation, and the
The exact reasons that motivates managers to build an cognitive factors that affect the decisions of companies to
accounting system is to provide information on the adopt a specific organizational practice. Bail & Craig (2010)
evaluation of the sustainable development of the company. argued that the theory especially the new institutionalism
Additionally, to the essential motivation of the managers provides "a major paradigm of research in organizational
and the importance of accounting for the corporation's sociology.’’ The institutional analysis of the organizations,
sustainable development, include the following five main and applied the method of analysis of four quadrants
factors: green company propaganda (Gray, 2006), imitation presented by Lounsbury (1997, 2008) to research on
and industrial pressure (Schahegger et al. 2005), pressures of environmental accounting problems in Canada and England
law, shareholders and commercial license (Cooper & Owen, under the background of different systems, in order to
2007), company self-discipline (Gunningham, 2007) and

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“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
propose a standardization perspective and study the theory Ho3: The firms don’t care or neglect any Social or
and theory of social environment accounting. Environmental practice.
2.2.3 Stakeholder Theory 3.3 Research Model
Freeman and Reed (1983) identify stakeholders as those Like we said earlier that our main variable or our dependent
groups that have interest in the actions of the corporation. variable will be profitability, but we also know that
In a follow-up study, Freeman (1984) reviewed stakeholder profitability is composed of so many things together that we
theory and redefined stakeholders as any individual or group can show in the following model that will be considered as
that has an interest in the company because he or she can the independent variable:
affect or is affected by the activities of the company. Carroll X0 = X 1 + X 2 + X 3 + X 4
(1991) defines an interested party as "any individual or
group that may affect or be affected by actions, decisions, X0: Profitability
policies, practices or goals of the organization. X1: Return on Capital
X2: Net Profit Margin
X3: Dividend per Share
Chapter Three: Methodology X4: Earnings per Share
3.1 Introduction
Chapter three explains the methodology that has been used 3.4 Sample and Data collection
to prove our main point that was discussed in the previous Because of limited sources, there is quite often the need to
chapter, which is how Social and Environmental accounting test respondents for any examination (Saunders et al. 2007).
affects the profitability of a firm. In this chapter, the It might be included that it is not functional to utilize the
researcher will give an explanation of how the case study entire populace to direct the overview since that procedure
had been conducted. Robson defined case study as “a requires a considerable measure of exertion and devours a
strategy for doing research which involves an empirical ton of time. The expression "Test" is part picked from the
investigation of a particular contemporary phenomenon entire arrangement of information, which is called
within its real life context using multiple source of "populace" to mirror the reactions of the entire populace
evidence” (Robson, 2002). The strategy that had been used (Denscomble, 2010). "When you have chosen the strategy
is an empirical case study of a chosen number of companies for gathering your hands on work information and you have
local or international. The case study was conducted to see pondered what to ask, you ought to be prepared to choose
which kind of relationship does Social and Environmental the qualities of the respondents" (Naoum, 2007).Saunders at
accounting has on firm profitability in Erbil in 2018. al. (2007) include that the span of the example may effect on
Erbil, capital city of Kurdistan Region is now home of many the degree of importance of relationship between factors of
industrial companies, international companies, malls, the study.
construction sites and new higher buildings for new While a little example size may not be illustrative, a
businesses, a world trade center is about to open and a large specimen measure too expansive can make the view of
variety of businesses opened recently in the fast developing essentialness of a non-existing relationship. Independent of
city. Erbil became also home for many local businesses, these, it is illustrative to choose a specimen measure suitable
industries and institutions, such as schools, universities, for the review with the utilization of a technique that offered
hospitals and banks. Since Erbil has a fast growing each other equivalent shot of choice. It must be noted that
economy and is slowly going towards globalization, we the two organizations were advantageously chosen because
have to discover whether the firms that work here really care of the simple access to information by the researcher. In this
about the environment and social aspects or they just neglect study, we tried to target the manufacturing firms and the
it and only care about their own profit. factories, since the topic is closely related to them than any
other company, it could be local or an international one.
3.2 Research Hypothesis Some of them are Erbil Steel, Al-Hayat Co., Erbil Nayab
During the research we wanted to find out if there is a Dairy, Karin Industrial Group, and many more.
positive relationship with Environmental accounting and
The different types of information gathering are clarified:
profitability, if there is a negative relationship with Social
thus, the review embraces questionnaire as instruments for
accounting and profitability, or the firms actually don’t care
information accumulation in a joint qualitative approach.
about any Social or Environmental practice or it’s been
The overview procedure of study organization allows the
neglected. Here the following hypothesis expressed by
accumulation of information from an extensive variety of
(Makori, 2013):
reactions. The extensive method of information gathered
Ho1: There is a positive relationship with Environmental
accumulates enough confirmation that built up conclusions
accounting and profitability.
for the review. Yin (2003) contends that the study procedure
Ho2: There is a negative relationship with Social accounting
allows the gathering of a lot of information which are later
and profitability.

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“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
broken down with the assistance of the suitable measurable In the next section we will discuss in more detail about the
modules towards establishing of conclusions. results of the survey.
The next section explains how the questionnaire will be
addressed to the different firms. 4.3 Results
This section discusses the answers of the organizations that
3.5 Survey Questionnaire were addressed or made a request to take part for the
This research will be questioning companies in Erbil, KRG situation think about, the examination of every firm and
as of 2017 to gather data needed. The data to be collected their accounting policies. Every firm has been asked similar
from this questionnaire will be qualitative primary data. The inquiries as indicated by a survey that was given to the
questionnaire will question a number of manufacturing or Accountant or CFO of every firm. The individual addressed
Industrial forms and factories local or international to know was asked whether he or she needed to fill the poll
what kind of Social and Environmental policy are they independent from anyone else or if they needed the
following. researcher to ask the inquiries. A portion of the population
addressed wanted to fill the poll independent from anyone
Due to the limit of time, a shorter number of firms will be
else. The inquiries were anything but difficult to answer, for
questioned in each sector, however it is still representative
example, the yes or no inquiries, or inquiries that break
and reliable and verifiable information that will be given by
down the degree with which they are in concurrence with
the firms. The purpose of this research is to understand the
the announcement. For instance, the inquiries were given the
usefulness of the Social and Environmental policy and their
likelihood of answers from less to more.
effects, each question was clearly explained so a fair and
verifiable answer is expected from the CFO, Accountant or
4.3.1 Questions with possibility of answers
Finance Manager.
The number of the population was about 50, and the first 10
questions have possibility of answers and it was mostly
Chapter Four: Results and Discussion
about EA. The first question was if you contribute in
4.1 Introduction
reducing waste and using public transport the highest
In this chapter, the researcher will discuss the results of the
percentage was 28% neutral rate, second, was if you feel
findings from the questionnaire. The expected results are
that environment destruction is a big threat and it was 24%
that SA and EA have an effect on profitability of a firm, that
for both low and very high rate. Third, to what extent you
the firms in Erbil actually think about pollution and how it
think consumption of goods as a threat to natural
effects the environment surrounding them and not only think
environment and it had 38% with neutral rate, fourth, was
about their own profit and neglecting the environment. So
your ability to sense when you project destructive feelings
the effect might be as following: EA has a positive effect on
onto the environment it had 28% for high rate. Fifth, was
profit. 2- SA has a negative effect on profit. 3- Or the firms
people have to change their consciousness to avoid an
totally neglected these policies. For those reasons, the
environmental catastrophe it had 30% for low rate, sixth,
researcher conducted the questionnaires in order to know the
was the ability to identify environmental factors that
firms in Erbil how much they follow these policies. If they
contributes in illness ad stress it had 28% for low rate.
do how much is their profit annually after following these
Seventh, was ability to create and maintain a felt sense of
policies. To what extent they help the environment and
oneness with the creation it had 24% for both neutral and
society, whether the government helps them to follow these
high rate, eighth, the extent to which you regard the natural
policies, and many more questions.
environment as a source of healing, inner peace, and
The next section will discuss the results from the
inspiration it had 30% for neutral rate. Ninth, the extent to
questionnaire and the expected findings he or she would
which you are actively involved in political and social
expect to find.
actions to protect the natural environment it had 26% for
both low and very high rate. Finally, was the extent to which
4.2 Data analysis expectations
you engage in “inner work” such as meditation to improve
This section discusses the data analysis expectations of the
your personal sustainability and the sustainability of the
researcher. The expected results were that EA has a positive
world around you it had 26% for neutral rate.
effect on profitability, and SA has a negative effect on
profitability. However, the results from the questionnaire 4.3.2 Yes/NO questions
turned out to be different from what the researcher expected. This part of the survey was yes/no and “Don’t Know”
First of all, most of the firms didn’t want to answer the questions for both SA and EA.
questionnaire since they thought that they are giving private Questions YES NO Don’t know
information about the firm to the public. Second, most of 11 40% 40% 20%
them didn’t even what I was talking about; because they said 12 36% 34% 30%
we are considered as a developing area we still haven’t 13 42% 28% 30%
14 42% 24% 34%
reached that level to care for the environment and society.
1627 Arshad Sedeeq Abdullah, AFMJ Volume 3 Issue 07 July 2018
“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
15 52% 34% 14% attention concerning the environment or the society that’s
16 42% 32% 26% due to the location and economy of Kurdistan region, since
17 40% 34% 26% Kurdistan Region is considered as a developing state and
18 50% 26% 24% economy so these kinds of acts will be neglected.
19 26% 44% 30%
20 32% 38% 30%
4.3.3 Profit Question
21 42% 30% 28%
In this part, the researcher only had a question for
22 38% 38% 24%
23 36% 38% 26% profitability thinking that it will be enough to find the effect
24 44% 34% 22% of SEA on profit, so it lead to the result of “there is no
25 32% 46% 22% relationship between SEA and profit”. A chi-squared test,
26 34% 38% 28% additionally composed as χ2 test, is any factual speculation
27 42% 30% 28% test wherein the inspecting circulation of the test
28 36% 36% 28% measurement is a chi-squared appropriation when the
29 40% 42% 18% invalid theory is valid. Without other capability, 'chi-squared
30 44% 26% 30% test' regularly is utilized as short for Pearson's chi-squared
31 36% 40% 24%
test.
32 28% 34% 28%
33 36% 36% 28% In statistics, the quantity of degrees of freedom (df) is the
34 32% 38% 30% quantity of qualities in the last figuring of a measurement
35 36% 42% 22% that are allowed to fluctuate. The quantity of autonomous
Table (1) Survey questions percentage courses by which a dynamic framework can move, without
I conclude as can be seen from the the above data which abusing any limitation forced on it, is called number of
shows that not many of the firms really take reasonable degrees of freedom.

Count
During, this year how much profit you made by following the social and
environmental accounting policy

10,000-50,000 50,000-100,000 100,000 and above None Total

Environmental 7.00 0 1 0 1 2
Accounting 8.00 0 1 0 4 5
9.00 0 1 0 4 5
10.00 3 1 1 5 10
11.00 2 1 0 8 11
12.00 2 1 0 5 8
13.00 1 0 0 6 7
14.00 0 0 0 1 1
16.00 0 1 0 0 1
Total 8 7 1 34 50

Chi-Square Tests

Value df Asymptotic Significance (2-sided)

a
Pearson Chi-Square 18.752 24 .765
Likelihood Ratio 17.894 24 .808
Linear-by-Linear Association
.069 1 .793

N of Valid Cases 50
a. 33 cells (91.7%) have expected count less than 5. The minimum expected count is .02.

1628 Arshad Sedeeq Abdullah, AFMJ Volume 3 Issue 07 July 2018

“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
Table (2) EA profit question
Count
During, this year how much profit you made by following the social and
environmental accounting policy
10,000-50,000 50,000-100,000 100,000 and above None Total
Social Accnt 2.00 1 1 0 3 5
3.00 2 1 0 8 11
4.00 5 3 0 9 17
5.00 0 1 1 9 11
6.00 0 1 0 5 6
Total 8 7 1 34 50

Chi-Square Tests

Value df Asymptotic Significance (2-sided)

a
Pearson Chi-Square 10.125 12 .605
Likelihood Ratio 11.980 12 .447
Linear-by-Linear Association
1.661 1 .197

N of Valid Cases 50
a. 17 cells (85.0%) have expected count less than 5. The minimum expected count is .10.
Table (3) SA profit question
whatever we want then the results will be very bad. We can
Chapter Five: Conclusion work as mediator to share ethics about environment from
5.1 Conclusion one company to another by holding seminars and
It expected to come up with a result that indicates a conferences, by specifying some of the incomes to spend on
relationship between SEA and profitability, but through the these issues. Due to lack of a strong regulation and
survey that was carried out, it came up with that the observation by government and public institution many
relationship doesn’t exist due to lack of knowledge about companies are not protecting environment, in the long term
this topic and not having enough questions about the damage will be a disaster for nature, society and
profitability to reach the expected results. businesses. Its important that government and other public
institution such as parliament to consider long term progress
The outcomes demonstrate that there exists a critical
continue with no damage or minimum damage to the
relationship between environmental accounting revelation
environment.
and company's benefit when firm directs natural
bookkeeping. factors like; size, industry sort and huge four
5.2 Recommendations
evaluators, however the outcomes give an impression of
At last, it can be presumed that absence of environmental
being blended with industry sort and enormous four
reporting and disclosure principles essentially influences the
evaluators demonstrating positive relationship, while
reporting and disclosure uniformity of environmentally
estimate displaying a negative relationship. The result is pair
related data in financial statements, annual reports, and
with the Shareholder-Stockholder perspective. The negative
accounts. Emerging from the above discoveries, the
opinion is in accordance with the shareholder school of
researcher wishes to prescribe as takes after:
thought which contain that the duty of administration is to
i. Accountants must prepare report on environmental
serve the enthusiasm of shareholders in the most ideal way
accounting.
utilizing organization's assets to build the abundance of the
ii. distribute environmental accounting models locally
shareholders.
and universally and checked on persistently to
Thus, the results of this paper conclude many facts to come guarantee dynamism consistence and meets natural
across through out empirical study. These results are; situational needs.
companies can have flash on many important possible iii. define and actualize firms on environmentally
regulations such as rise awareness among people to use friendly approaches to increase the chance of their
public transportation, also the environmental issues become competiveness.
crucial to humanity if we forget about environment and do

1629 Arshad Sedeeq Abdullah, AFMJ Volume 3 Issue 07 July 2018

“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
iv. receive uniform reporting and arguments of simultaneous equations approach." Accounting,
environmental issues with the goal of control and organizations and society 29.5 (2004): 447-471.
measurements of performance. 2. Armstrong, Christopher S., et al. "Market reaction
v. authorising and announcing environmental related to the adoption of IFRS in Europe." The accounting
issues better to be left to substantial company just review 85.1 (2010): 31-61.Australian Accounting
as even little businessmen ought to be urge to Review (July 2002); [Online] Available:
report and reveal natural affect/related exercises in 3. Bassey, E. B., Sunday, O. E., & Okon, E. E.
their annual reports and records. (2013). The impact of Environmental Accounting
vi. Provide training and information regarding and Reporting on organizational performance of
environmental awareness by using mass media and selected oil and gas companies in the Niger Delta
technology. Region of Nigeria. Research Journal of Finance
vii. Appropriate environment requires for a company to and Accounting, 4(3), 57-73.
establish and make profit. 4. Bebbington, J., Gray, R., Thomson, I., & Walters,
viii. Cooperation between academic institutions and D. (1994). Accountants' attitudes and
business organizations to produce suitable cadre. environmentally-sensitive accounting. Accounting
and Business Research, 24(94), 109-120.
5.3Limitation and Ethical Consideration 5. Burritt. R., T. Hahn and S. Schaltegger. (2002).
Limitations Towards a Comprehensive Framework for
It might be seen that most of this paper geographically Environmental
related and bound to the KRG, Erbil city. A critical 6. Choi, J. S. (1998). An evaluation of the voluntary
impediment is the constrained measure of time offered to corporate environmental disclosures: A Korean
finish the present review by the researcher's establishment. evidence. Social and Environmental Accountability
This chart takes up a specific end goal to beat such Journal, 18(1), 2-8.
impediments relating to interval entries and support of 7. Cooper, D. J., & Robson, K. (2006). Accounting,
different turning points important to finish the review in professions and regulation: Locating the sites of
time. It is basic to build up a timetable with pre-decided professionalization. Accounting, organizations and
gains turning points trying to monitor vial exercises that are society, 31(4), 415-444.
central in meeting basics due to dates of venture. The 8. Cooper, S. M., & Owen, D. L. (2007). Corporate
researcher’s critical work routine likewise served as a social reporting and stakeholder accountability:
noteworthy hindrance around there. Other vital difficulties, The missing link. Accounting, Organizations and
for example, the time assignment to every survey and Society, 32(7), 649-667.
meeting organization was changed because of experience 9. Cowen, S. S., Ferreri, L. B., & Parker, L. D.
picked up from the pilot study. Different ramifications of the (1987). The impact of corporate characteristics
methodology to discoveries are talked about in the following on social responsibility disclosure: A typology
chapter. and frequency-based analysis. Accounting,
Organizations and society, 12(2), 111-122.
Acknowledgment 10. Deegan, C. (2006). Legitimacy theory.
I would like to start by thanking everyone who has helped Methodological issues in accounting research:
me in completing the following study. Throughout this theories and methods, 161-182.
process, some of you have been of great assistance; I 11. Ding, H., Li, S., Liu, T., & Liu, B. (2014). A
appreciate the time and effort that these individuals have put literature survey of research on environmental
into this research. I particularly would like to thank Farhad accounting: theoretical review and prospect.
Rafat, and my colleagues Jangish Awakalay, and Mina Sami International Journal of Financial Economics,
for their valued time and guidance as well as Kayghan for 2(1), 13-25.
her kind support. 12. Elliot, S. (2011). Transdisciplinary perspectives on
I am especially grateful for my family particularly my environmental sustainability: a resource base and
parents, whom without their support I would not be able to framework for IT-enabled business transformation.
accomplish my academic achievements. Mis quarterly, 35(1), 197-236.
13. Eugénio, T., Costa Lourenço, I., & Morais, A. I.
References (2010). Recent developments in social and
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15. Gray, R., Kouhy, R., & Lavers, S. (1995). 27. Mgbame, C. O., & Ilaboya, O. J. (2013).
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20. Jagongo, A. O., and D. M. Makori. "Environmental practices on financial performance of listed
accounting and firm profitability: An empirical manufacturing companies in Sri Lanka.
analysis of selected firms listed in bombay stock 33. Porter, M E & Krammer, M.R. (2006). Strategy &
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Environmental Performance Indicators (pp. 3-18). reporting with special reference to India." (2007):
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22. Jensen M C (2001), “The Modern Industrial 35. Roberts, Robin W. "Determinants of corporate
Revolution, Exit and the Failure of Internal Control social responsibility disclosure: An application of
Systems”, Journal of Finance, Vol. 48, pp. 831- stakeholder theory." Accounting, organizations and
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Current trends and Approaches in Voluntary and Relation between social-environmental
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investor allocation choice. Journal of Accounting 43. Werhane, Patricia H., and R. Edward Freeman.
and Public Policy, 30(5), 481-500. "Business ethics: the state of the art." International
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link. Strategic management journal, 303-319.

Appendix
Questionnaire
I am a senior student in the University of Erbil, and for my graduation research project I am conducting a questionnaire to
examine the impact of social and environmental accounting on profitability in international as well as local firms in Erbil in 2018,
the capital of Kurdistan Region of Iraq. Feel free to answer the questions, no name or information will be published to public
under any circumstances.

NO. Scale
1 If you don't mind rate the degree to which you abstain from damaging the 1 2 3 4 5
earth in your day by day life, e.g., through recycling your waste, using Less More
public transport If possible, and so on.
2 Please rate the extent to which you feel that environmental destruction is a 1 2 3 4 5
serious threat to our health and the health of future generations.
3 Please rate the extent to which you regard the present level of 1 2 3 4 5
consumption of goods as a threat to the natural environment
4 Please rate your ability to sense when you project destructive feelings onto 1 2 3 4 5
the natural environment.
5 Please rate the extent to which you believe that people have to change 1 2 3 4 5
their consciousness in fundamental ways to avert an environmental
catastrophe.
6 Please rate your ability to identify environmental factors that might be 1 2 3 4 5
contributing to stress and illness.
7 Please rate your ability to create and maintain a felt sense of oneness with 1 2 3 4 5
the creation, a state of being often also called person-planet unity, ecstasy,
or grace.
8 Please rate the extent to which you regard the natural environment as a 1 2 3 4 5
source of healing, inner peace, and inspiration.
9 Please rate the extent to which you are actively involved in political and 1 2 3 4 5
social actions to protect the natural environment.
10 Please rate the extent to which you engage in “inner work” such as 1 2 3 4 5
meditation to improve your personal sustainability and the sustainability
of the world around you.

ENVIRONMENTAL PRACTICES DEGREE OF APPLICABILITY

Water Supply and Wastewater Disposal YES NO DON’T KNOW
11. Investment in water storage, distribution and purification
facilities are keeping pace with local demand for water.
12. There is no evidence of salt-water intrusion or other sign of
subsidence owing to the over extraction of ground water.
13. Measurable progress is being made to promote any onsite
sanitation system (non-polluting, resource recovery technology, or
even traditional on site systems such as septic system).
14. The city’s sewerage treatment system is being expanded as
needed to keep pace with collected waste water demand.
15. The natural environment is still capable of absorbing wastewater
so that no risk exists of lasting damage to natural water courses or
1632 Arshad Sedeeq Abdullah, AFMJ Volume 3 Issue 07 July 2018
“Social and Environmental Accounting Effect on Companies' Profit (An empirical study of some companies in Erbil)”
health hazards to the population.
Solid Waste Reduction and Recycling
16. Alternative technologies are being considered for the routine
collection of household waste to avoid littering and the use of less
environmentally friendly methods.
17. Increased pressure on local institutions to reduce generation of
water and to recycle has achieved a major reduction in the amount of
waste paper, plastic, and metal products ending up in the landfill.
18. Use is being made of methane gas generated during landfill
decomposition as an alternative energy source.
19. Landfill conditions are monitored regularly for the suppression
of nuisances from odour, dust, airborne paper, combustibles, and
various pests.
20. There is strong public support for waste reduction, reuse, and
recycling. Priorities of reducing and revising wastes are
acknowledged.
Land Use and Planning
21. Proposals for new development are reviewed in relation to their
possible effects on the environment (e.g., groundwater sources,
geological terrain, and soil contamination).
22. Green spaces and corridors within the town are preserved and,
where scarce, are being provided.
23. New developments provide convenient opportunities for
growing food locally.
24. Current policies favour preserving woodland areas and
increasing the number of tree in town.
25. Conservation areas have been identified and published plans for
preservation and enhancement have been implemented.

26. Should accounting professionals play their part in social and

environmental aspects of companies/organisations in Erbil?
27. Do we need a mandatory requirement to prepare a corporate
social responsibility and environmental report?
28. Have you ever given permission to your employees to take a
vacation for his weeding?
29. Have you hired employees from the areas surrounding you?
30. The productivity of employees are closely monitored
31. Laws are maintained for the benefits of the employees.
32. The company is giving enough money to the charity.
33. Different measurements are taken to reduce wastage.
34. Wastage material is going for recycling.
35. Keep workplace clean and neat.

During, this year how much profit you made by following the social and environmental accounting policy:
 $10,000-$50,000
 $50,000-$100,000
 $100,000 and above
 None

1633 Arshad Sedeeq Abdullah, AFMJ Volume 3 Issue 07 July 2018