Corporate Social Responsibility and Environmental Accounting of the Oil and Gas Industry in the KSA - Research Proposal Example

Corporate Social Responsibility and Environmental Accounting of the Oil and Gas Industry in the Kingdom of Saudi Arabia (KSA) Name Class Unit Abstract This paper proposes research on Corporate Social Responsibility and environmental accounting of the oil and gas industry in the Kingdom of Saudi Arabia (KSA).The oil and gas sector has been chosen due to fact that it is one of the most environmental sensitive industries. Also, there is little research on the CSR and environmental accounting in Saudi Arabia oil and gas industry and Arab region in general. The oil and gas industry in Saudi Arabia has been making major steps in CSR and environmental accounting which are vital to analyse. The study has chosen 5 of the largest Saudi Arabia oil and gas companies (Aramco, Saudi Arabian Chevron, Arabian American Oil Company, BP international and Exxon Saudi Arabia). This is due to claims that size of the firm influences their level of disclosure. The research will be based on the companies’ annual reports where CSR and environmental information is given to stakeholders. The report is based from 2010 to 2015 period. The methodology proposes use of content analysis and environmental disclosure index as method to collect and analyse data where the sentences are the unit of analysis. Table of Contents Abstract 2 Table of Contents 3 Topic Background 4 Research aims and objectives 6 Research questions 7 Significance of the study 7 Research methodology and methods 7 Data collection methods 8 Content analysis 9 Unit of analysis 10 Coding frame 10 Disclosure measurement 11 Timeline 12 References 12 Topic Background Accounting plays a vital role in ensuring that natural environment and society is catered for by the firms. According to Yakhou & Dorweiler (2004), accounting helps in disclosing the corporate social responsibility (CSR) and environmental responsibilities for different firms. Through accounting, it is possible to reduce the environmental costs through business decisions. In Saudi Arabia, corporate governance has been subjected to reforms while others are pending. There are also rules which support corporate disclosure in the Saudi listed firms (Al-Janadi, Rahman and Omar, 2013). In 1985, ministry of commerce came up with the disclosure and transparency standard. This made disclosure and transparency to be one of the most vital elements in corporate governance. In 2006, a major step was made through the issuance of code of corporate governance (Aldosari and Atkins, 2015). The code made it possible to harmonise the international standards of corporate governance including the OECD standards. There have also been efforts to adopt the IFRSs which were issued by the International Accounting Standards board (IASB) (Eljayash, James and Kong, 2012). Rules used in Saudi Arabia corporate reporting are derived from two main sources. These are the companies’ law act of 1965 and the capital market law of 2003 (Al-Janadi, Rahman and Omar, 2013). Studies have shown that the size of the company is a major determinant of the level of disclosure. This is due to idea that larger firms have more social repercussions with high agency and political costs. Also, large firms’ benefits from the disclosure since they have a larger access to the capital market (Milne and Adler, 1999). Research has shown that firms with greater debt have more disclosures to enhance confidence from various groups that are interested in them. This is also aimed at gaining legitimate in their public conduct. Firms that have higher profits tend to dedicate more cash to the social causes and environment protection (Yakhou & Dorweiler, 2004). There is also a large deference between the public owned and private firms on level of disclosure. Most of the private companies have high level of disclosure on social information (Roberts, 1992). Majority of the world oil and gas is owned by state owned corporations. In Saudi Arabia, Saudi Aramco is one of the world largest oil and gas producing company which is state owned (Saudi Aramco, 2016). The firm has no foreign production. This makes the firm social and environmental records to have less scrutiny from civil groups. In most cases, there is little known of their environmental impact. Oil and gas production have a lot of potential negative impacts to the environment. This includes the oil spills, natural gas emissions and land clearance (Frynas, 2009). With the rise of environmental awareness since the 1970s, the scope of voluntary environmental initiatives have increased and broadened to include issues such as climate change and biodiversity. Oil companies are expected to produce extensive environmental and social reports (Kamla, 2007). A large number of oil and gas companies utilises third party verification on their CSR and environmental reports compared with other companies. The western firms have a tendency to provide substantial quality of CSR and environmental accounting data. This is in great contrast to companies in other parts of globe especially the developing countries (Eljayash, James and Kong, 2012). Environmental accounting involves stakeholder, legitimacy and positive accounting theories reports (Yakhou & Dorweiler, 2004). Through stakeholders’ theory, disclosure of the information is an obligation and a right for the stakeholders. According to the legitimacy theory, an organisation is supposed to seek congruence between the social values and the norms of accepted behaviours in areas where their activities are part of. To defend legitimacy, firms are supposed to satisfy the stakeholders’ interests as well as their responsibility to the community. There is needed to be a link between legitimacy and resources (Behram, 2015). The positive accounting theory, the reason for voluntary disclosures is explained. The evidence of political cost hypothesis explains the firm social disclosures (Roberts, 1992). Investors have been pressing firms to increase their level of voluntary disclosures in their annual reports (Yakhou & Dorweiler, 2004). Saudi Arabia has some of the strongest industries in the oil and gas sector. Though the corporate social responsibility and environmental accounting is relatively new to the Saudi business, it has grown to be of prominence in the present years. This is largely due to fact that it’s natural in Islamic practice to give back to the society. Increased CSR and environmental awareness has prompted the oil firms to start making significant contributions to the society and environmental reporting. In Saudi Arabia, CSR is voluntary but the demand to disclose has been growing over the years. Environmental accounting has grown over the years with an increase in the environmental activities and issues (Al-Janadi, Rahman and Omar, 2013). The study is to be carried out in Saudi Arabia which is one of the largest oil and gas producers. Research aims and objectives To determine the level of Corporate Social Responsibility (CSR) and environmental accounting of the oil and gas industry in the Kingdom of Saudi Arabia. To analyse the quality and quantity of CSR and environmental accounting disclosure in oil and gas industry in the kingdom of Saudi Arabia. To determine what influences the level of disclosure in CSR and environmental accounting of the oil and gas industry in the Kingdom of Saudi Arabia. Research questions The research will help in answering the following questions. Are there adequate CSR and environmental accounting of the oil and gas industry in the Kingdom of Saudi Arabia? What is the quality and quantity of CSR and environmental accounting disclosure in oil and gas industry in the kingdom of Saudi Arabia? What influences the level of disclosure in CSR and environmental accounting of the oil and gas industry in the Kingdom of Saudi Arabia? Significance of the study Most of the research on the CSR and environmental accounting disclosure in the oil and gas industry has mainly focused in developed countries with less studies being done in Arab region. Most of the Arab region has major oil and gas operators. Also, most of the oil and gas firms operating in Arab countries are subsidiaries of firms from developed countries. This study explores the CSR and environmental accounting disclosure in the Saudi Arabia oil and gas industry. The evidence of comprehensive research on the Arab region CSR and environmental accounting disclosure is rare. This research will help in filling the gap left in researching CSR and environmental accounting disclosure in developing countries based on Saudi Arabia context. Research methodology and methods This study analyses and investigates the content of CSR and environmental disclosure from the annual reports of the Saudi Arabia oil and gas corporations. Through use of content analysis, sentences are used to measure the quantity and quantity of the environmental disclosure in the Saudi Arabian oil corporations (Milne and Adler, 1999). The environmental disclosure index will be used in measuring the quality of environmental and CSR disclosure contained on the annual reports from 2010 to 2015. These methods have been used by various researchers when examining disclosure. Campbell (2004) supported the use of words as a measurement unit since it gave a highly detailed description. Use of environmental disclosure index has been derived from content analysis. This is a technique that has been adopted by a lot of studies. The highest environmental disclosure is given a score of 48 while the lowest is zero (Campbell, 2004). The data used in this study is gained from the annual reports from the Saudi Arabia companies. The target period for this research is from 2010 to 2015. Data collection methods The data will be collected from the corporate citizenship annual reports from the Aramco, Saudi Arabian Chevron, Arabian American Oil Company, BP international and Exxon Saudi Arabia websites (Gulf oil and Gas, 2016). The numbers of sentences in each annual report are counted based on content analysis method. This is through basing the data collection on the CSR and environmental disclosures area. Each of the report will be studied separately and the data extracted on the relevant sections. The data will then be recorded in a table which will include the company name, category and the number of sentences. The data collected will then be analysed for each and every company. Each of the company will have its own data entry table. Company name Categories Disclosure General environmental disclosure Sustainability materials water Biodiversity Products and services CSR Others Content analysis A lot of researchers in accounting has utilised content analysis as a method in their studies (Elo and Kyngäs, 2008). Content analysis is seen from two extreme views; quantitative and qualitative methods. Based on the quantitative analysis view, the researcher is expected to use objective and systematic counting and recording to come up with a numerical description of the context. On the other hand, qualitative or interpretive content analysis involves the researcher studying the content as cultural objective that is able to communicate social meaning. Content analysis is thus used in both quantitative and qualitative methods (Milne and Adler, 1999). Content analysis acts as a very important tool in studying annual reports. It is a leading method in studying the field of environmental accounting (Krippendorff, 2012). The method is also used in investigating the motive behind the level of disclosure in a firm. In this research, interpretive content analysis will be used in determining the level of CSR and environmental accounting disclosure of the oil and gas industry in Saudi Arabia (Elo and Kyngäs, 2008). The main areas will be looking at the CSR disclosures and the environmental impacts of oil and gas in Australia. These impacts include; greenhouse gas emissions, pollution and energy consumption among other areas. Before using content analysis in this research, there are steps which have to be followed. The first step is segmentation or identification of the unit of analysis. The second step is creating a coding frame and identifying the categories as well as subcategories (Milne and Adler, 1999). Unit of analysis In this case, words and sentences will be used as the unit of analysis. The number of words will be counted as well as sentences in the areas of CSR and environmental analysis disclosure. Use of words as unit of analysis has some drawbacks. This includes the fact that words cannot convey meaning without a sentence especially in the environmental disclosure section (Krippendorff, 2012). According to Duriau, Reger and Pfarrer (2007), sentence is a main unit in writing and speech. Sentence as a unit of analysis will be used in environmental disclosure section since it provides a complete and reliable data for analysis (Guthrie and Abeysekera, 2006). This is in relation to categories and subcategories analysed using the annual reports. Coding frame This involves how the researcher structures the data material. According to Duriau, Reger and Pfarrer (2007), the way a researcher defines the categories and sub categories is an art. There will be main categories and subcategories for every main category. Sustainability reporting guidelines will be used in this case. The main categories used are: General environmental disclosure Sustainability Environmental pollution Wastewater Materials Biodiversity and land. Main Subcategories are Environmental policies concerns and any mention of environment or climate change compliance environmental awards energy consumption and savings environmental impact studies Sustainability greenhouse gas waste disposal recycling and reuse Mitigation land reclamation Reforestation Disclosure measurement After coding, the last step will be disclosure measurement for the Saudi Arabia oil and gas industry. Use of volumetric analysis for each subcategory will be carried out. This is a significant step in analysing the content through measuring of volume in each category (Krippendorff, 2012). Volumetric measurement based on each category will help in category disclosure of the Saudi Arabia oil and gas industry. The amount of disclosure will be counted for each company in every subcategory, category and then total. This can be carried out through use of words or sentences. In this case, sentences will be used due to their appropriateness in providing accurate, complete and reliable data (Duriau, Reger and Pfarrer, 2007). Timeline Event 1 2 3 4 5 6 7 Introduction Literature review Methodology Data collection Analysis and discussion Conclusion Writing up References Aldosari, A. and Atkins, J. 2015, A study of corporate social responsibility disclosure practices in Saudi Arabia. In: British Accounting and Finance Association Conference, 23 -25 March 2015, Manchester. Retrieved 14th February 2016 from, http://centaur.reading.ac.uk/40093/ Al-Janadi, Y., Rahman, R.A. and Omar, N.H., 2013. Corporate governance mechanisms and voluntary disclosure in Saudi Arabia. Corporate Governance, 4(4). http://s3.amazonaws.com/academia.edu.documents/31072527/Corporate_Governance_M echanisms_and_Voluntary_Disclosure_in_Saudi_Arabia.pdf?AWSAccessKeyId=AKIAJ 56TQJRTWSMTNPEA&Expires=1455564216&Signature=B1tZFwsLXZN2zl1oO47jP GH%2BlBY%3D&response-content disposition=inline%3B%20filename%3DInternational_Journals_Call_for_papers.pdf Behram, N.K., 2015. A cross-sectoral analysis of environmental disclosures in a legitimacy theory context. Journal of Management and Sustainability, 5(1), p.20. http://www.ccsenet.org/journal/index.php/jms/article/download/45663/24662 Campbell, D.J. 2004, “A longitudinal and cross-sectional analysis of environmental disclosure in UK companies a research note”, British Accounting Review, vol. 36, no. 1, pp. 107-117. https://www.researchgate.net/profile/David_Campbell23/publication/222427513_A_Lon gitudinal_and_CrossSectional_Analysis_of_Environmental_Disclosure_in_UK_Compani es_A_Research_Note/links/550c1d130cf206379939be40.pdf Duriau, V.J., Reger, R.K. and Pfarrer, M.D., 2007. A content analysis of the content analysis literature in organization studies: Research themes, data sources, and methodological refinements. Organizational research methods, 10(1), pp.5-34. http://media.terry.uga.edu/socrates/publications/2011/07/A20Content20Analysis20of20th e20Content20Analysis20Literature2028ORM20200729_1.pdf Eljayash, K.M., James, K. and Kong, E., 2012. The quantity and quality of environmental disclosure in annual report of national oil and gas companies in Middle East and North Africa. International Journal of Economics and Finance, 4(10), p.p201. http://www.ccsenet.org/journal/index.php/ijef/article/viewFile/20698/13652 Elo, S. and Kyngäs, H., 2008. The qualitative content analysis process. Journal of advanced nursing, 62(1), pp.107-115. https://student.cc.uoc.gr/uploadFiles/192%CE%A3%CE%A0%CE%95%CE%9D407/CO NTENT%20ANALYSIS.pdf Frynas, Jedrzej George, 2009, “Corporate social responsibility in the oil and gas sector,” Journal of World Energy Law and Business, 2 (3). pp.178-195. ISSN 1754-9957. Retrieved 14th February 2016 from, http://dx.doi.org/10.1093/jwelb/jwp012 Gulf oil and Gas, 2016, Oil & Gas Companies in Saudi Arabia ,retrieved 15th February 2016 from, http://www.gulfoilandgas.com/webpro1/prod1/suplista.asp?id=327&yx1=SA Guthrie, J. and Abeysekera, I. 2006, “Content analysis of social, environmental reporting: what is new?”, Journal of Human Resource Costing & Accounting, vol. 10, no. 2, pp. 114-126, http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1589&context=commpapers https://books.google.co.ke/books?hl=en&lr=&id=07GYCgAAQBAJ&oi=fnd&pg=PP1& dq=Tina+M aschi+-+2015+- +%E2%80%8EContent+analysis+%28Communication%29&ots=nnULVdVZaD&sig=O- Y5f714V5gRMGD-2fwjXWpRXrI&redir_esc=y#v=onepage&q=Tina%20Maschi%20- %202015%20- %20%E2%80%8EContent%20analysis%20%28Communication%29&f=false Kamla, R., 2007. Critically Appreciating Social Accounting and Reporting in the Arab Middle East: A Postcolonial Perspective. Advances in International Accounting, 20, pp.105-177. http://english.360elib.com/datu/G/EM061204.pdf#page=118 Krippendorff, K., 2012. Content analysis: An introduction to its methodology. Sage. http://repository.upenn.edu/cgi/viewcontent.cgi?article=1232&context=asc_papers Milne, M.J. and Adler, R.W., 1999. Exploring the reliability of social and environmental disclosures content analysis. Accounting, Auditing & Accountability Journal, 12(2), pp.237-256. http://www.apira2013.org/past/apira1998/archives/htmls/07.html Roberts, R.W., 1992. Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting, Organizations and Society, 17(6), pp.595-612. http://repository.binus.ac.id/2009-1/content/f0122/f012243637.pdf Saudi Aramco, 2016, Corporate reports, retrieved 15th February 2016 from, http://www.saudiaramco.com/en/home/news-media/publications/corporate-reports.html Yakhou, M. & Dorweiler, V.P. 2004, “Environmental accounting: an essential component of business strategy”, Business Strategy and the Environment, vol. 13, no. 2, p. 65-77. http://www.greeneconomics.net/accounting1.pdf Read More