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ENVIRONMENTAL ACCOUNTING AND SUSTAINABILITY REPORTING: EVIDENCE FROM OIL COMPANIES IN THE NIGER DELTA (SHELL NIGERIA, 2020-2025)
Abstract
This study examines environmental accounting and sustainability reporting practices employed by Shell Petroleum Development Company (SPDC) Nigeria in the Niger Delta region between 2020 and 2025. Utilizing a mixed-methods approach, the research combines qualitative content analysis of Shell’s annual sustainability reports, financial statements, and environmental disclosures with quantitative analysis of secondary data concerning oil spills, remediation costs, gas flaring volumes, and carbon emissions. The research scope covers SPDC’s onshore and shallow offshore operations across the nine Nigerian states constituting the Niger Delta: Rivers, Bayelsa, Delta, Akwa Ibom, Cross River, Edo, Imo, Abia, and Ondo. The analyzed sample includes all publicly accessible SPDC sustainability and annual reports for the specified six-year period, supplemented by regulatory filings and independent third-party assessments. Methodologically, the study employs thematic content analysis aligned with Global Reporting Initiative standards to evaluate disclosure quality, alongside descriptive and regression statistics to investigate relationships between environmental accounting variables and performance outcomes. Results demonstrate partial improvements in reporting transparency, evidenced by expanded disclosures regarding biodiversity conservation, water resource management, community development investments, and commitments to eliminate routine gas flaring. Nonetheless, substantive deficiencies persist, particularly concerning comprehensive environmental cost recognition, accurate reporting of long-term liabilities, and accountability issues emerging from SPDC’s 2024–2025 onshore divestment to Renaissance Africa Energy, which raised critical questions about legacy pollution remediation continuity. The study proposes policy interventions including legislated requirements for full-cost environmental accounting, independent auditing of spill and decommissioning data, reinforced host community trust mechanisms under Nigeria’s Petroleum Industry Act 2021, and responsible divestment protocols. The conclusion emphasizes that while sustainability reporting practices show incremental advancement under energy transition pressures, systemic accountability shortcomings continue to impede sustainable development objectives in the Niger Delta, demanding institutional reforms to achieve substantive environmental justice.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Environmental accounting and sustainability reporting have become integral aspects of corporate governance and responsibility within extractive industries, especially in ecologically sensitive regions like Nigeria’s Niger Delta. Environmental accounting systematically identifies, measures, and reports environmental costs and benefits within an organization’s financial framework, facilitating informed decision-making for sustainability. Concurrently, sustainability reporting discloses non-financial data on environmental, social, and governance (ESG) factors, often adhering to international standards such as the Global Reporting Initiative (GRI) or Sustainability Accounting Standards Board (SASB). Given the Niger Delta’s susceptibility to oil spills, gas flaring, and ecosystem degradation, these practices are indispensable for mitigating long-term impacts on biodiversity, public health, and economic resilience (Osemene et al., 2024).
The Niger Delta, containing Nigeria’s largest oil reserves, has been central to multinational oil operations since commercial crude discovery in 1956. Shell Petroleum Development Company of Nigeria (SPDC), a key operator, has significantly contributed to national revenue through petroleum extraction. However, its environmental legacy has provoked international scrutiny. Between 2020 and 2025, intensified regulatory measures under Nigeria’s Petroleum Industry Act (PIA) of 2021 reinforced environmental accountability and community development obligations, pressuring firms like Shell to improve sustainability disclosures (Alabi & Fajuyigbe, 2021). This era also aligned with global momentum toward net-zero emissions under the Paris Agreement, prompting oil companies to formalize climate-risk integration in financial reporting.
Research demonstrates a linkage between environmental accounting and corporate performance in Nigeria’s oil industry. Green accounting encompassing impact audits and remediation cost reporting has positively influenced profitability by reducing legal liabilities and strengthening stakeholder confidence (Omole & Diisu, 2025). In the Niger Delta, where spills have devastated agriculture and water supplies, Shell’s legal and reputational challenges highlight the necessity of meticulous environmental accounting to quantify degradation expenses (Ogbonna et al., 2020). Additionally, sustainability reporting between 2020 and 2025 leveraged digital platforms to enhance transparency, enabling external scrutiny of ecological rehabilitation efforts.
Shell Nigeria’s environmental accounting practices mirror wider patterns in resource-dependent economies, where extraction activities frequently clash with sustainable development objectives. Academics posit that rigorous sustainability reporting not only ensures regulatory compliance but also fosters clean-tech innovation, exemplified by Shell’s gas flaring reduction projects in the Delta (Wobo & Odoemelam, 2024). Empirical findings from this period suggest that oil firms embedding ESG indicators in financial disclosures gain better financing opportunities and community trust—a critical advantage in unstable regions like the Niger Delta.
1.2 Statement of the Problem
Despite advancements in environmental regulations, the Niger Delta continues to face severe ecological challenges resulting from oil exploration activities. Oil spills, estimated at over 1,000 incidents annually in the region, have caused biodiversity loss, soil infertility, and health crises among local populations, with Shell Nigeria implicated in several high-profile cases between 2020 and 2025 (Osemene et al., 2024). The inadequacy of environmental accounting practices worsens these issues, as many costs, such as long-term remediation and community compensation, are often underreported or externalized, leading to distorted financial performance metrics.
Sustainability reporting by oil companies in Nigeria has been criticized for being fragmented and lacking comprehensiveness, failing to provide stakeholders with verifiable data on environmental impacts. For Shell Nigeria, reports from 2020 to 2025 reveal inconsistencies in disclosing gas flaring volumes and carbon emissions, which undermine trust and hinder effective policy interventions (Alabi & Fajuyigbe, 2021). This lack of transparency fuels ongoing conflicts, including militancy and legal disputes, as demonstrated by multimillion-dollar settlements paid by Shell for environmental violations in the Delta.
Furthermore, the financial repercussions of poor environmental accounting are significant, with studies indicating that unaccounted environmental liabilities diminish profitability and investor confidence (Omole & Diisu, 2025). In the Niger Delta, where poverty rates exceed 40%, the failure to connect sustainability reporting to tangible community benefits perpetuates inequality and environmental injustice (Ogbonna et al., 2020). Without empirical evidence on how Shell Nigeria’s practices from 2020 to 2025 align with global standards, policymakers and corporations struggle to implement reforms that foster sustainable development.
The intersection of resource-based views, stakeholder theory, and legitimacy theory further underscores the issue: oil firms such as Shell must treat environmental costs as strategic assets to retain social licenses to operate, yet evidence indicates persistent accountability gaps (Wobo & Odoemelam, 2024). This thesis addresses these shortcomings by analyzing evidence from Shell Nigeria’s operations in the Niger Delta.
1.3 Objectives of the Study
The primary aim of this study is to investigate environmental accounting and sustainability reporting practices of Shell Nigeria in the Niger Delta from 2020 to 2025. The specific objectives are:
- To examine the extent and nature of environmental accounting practices implemented by Shell Nigeria in the Niger Delta during the period 2020-2025.
- To assess the quality, comprehensiveness, and compliance of sustainability reporting by Shell Nigeria with international standards from 2020 to 2025.
- To analyze the impacts of environmental accounting and sustainability reporting on environmental performance, stakeholder engagement, and sustainable development in the Niger Delta.
1.4 Research Questions
To achieve the objectives, the following research questions will guide the study:
- What environmental accounting practices has Shell Nigeria adopted in the Niger Delta between 2020 and 2025?
- How comprehensive and compliant are Shell Nigeria’s sustainability reports during the 2020-2025 period?
- What are the observable impacts of these practices on environmental outcomes and stakeholder relations in the region?
1.5 Significance of the Study
This study offers significant value across diverse stakeholder groups. Policymakers in Nigeria may utilize its evidence-based findings regarding the efficacy of environmental regulations such as PIA 2021, which could support regulatory improvements targeting greater accountability within the oil industry. Oil corporations such as Shell Nigeria and similar entities may apply the study’s recommendations concerning sophisticated environmental accounting methodologies to simultaneously increase profitability and mitigate operational risks. The research contributes meaningful academic discourse surrounding sustainability practices within extractive industries, especially in developing economies. Furthermore, Niger Delta communities could leverage these insights to strengthen advocacy efforts and promote sustainable corporate behaviors that support long-term regional development.
1.6 Scope and Limitations of the Study
The study examines Shell Nigeria’s operations in the Niger Delta between 2020 and 2025, utilizing evidence from publicly accessible reports, financial statements, and secondary data. Its scope excludes other oil companies and regions. Limitations stem from dependence on self-reported data, which risks introducing bias, and the dynamic nature of sustainability standards, potentially impacting comparability. Restricted access to proprietary internal documents may also constrain analytical depth in specific areas.
1.7 Definition of Terms
- Environmental Accounting: The process of incorporating environmental costs and benefits into financial reporting to reflect true economic impacts.
- Sustainability Reporting: Disclosure of ESG performance to stakeholders, often using frameworks like GRI.
- Niger Delta: The oil-rich region in southern Nigeria comprising nine states, known for its ecological sensitivity.
- Shell Nigeria (SPDC): The subsidiary of Royal Dutch Shell operating in Nigeria’s onshore oil fields.
References
Alabi, J. O., & Fajuyigbe, O. T. (2021). Sustainability reporting and organizational performance: Evidence from selected oil firms in Nigeria. Journal of Accounting and Financial Studies, 12(2), 55–68.
Ogbonna, G. N., Onuoha, T. E., Igwe, J. C., & Ojeaburu, F. (2020). Environmental accounting and sustainability development in Nigeria. West African Journal of Business and Management Sciences, 9(4), 62–89.
Omole, I. I., & Diisu, J. (2025). Green accounting and profitability of oil and gas firms in Nigeria. International Journal of Research and Innovation in Social Science. https://rsisinternational.org/journals/ijriss/articles/green-accounting-and-profitability-of-oil-and-gas-firms-in-nigeria/
Osemene, O. F., Adinnu, P., Fagbemi, T. O., & Olowookere, J. K. (2024). Corporate governance and environmental accounting reporting in selected quoted African companies. Global Business Review. https://doi.org/10.1177/09721509211010989
Wobo, H. O., & Odoemelam, N. (2024). Environmental accounting costs and financial performance of oil and gas companies in Nigeria: Interplay of resource-based-view, stakeholder and legitimacy theories. ResearchGate. https://www.researchgate.net/publication/387558262