ENVIRONMENTAL ACCOUNTING DISCLOSURES AND FINANCIAL

PERFORMANCE IN INDIA

Author

DR. ADITI R KHANDELWAL

Sr. Assistant Professor, Dept Of Business Studies, IIS(Deemed To Be University). India

Email: [email protected]

Contact: 9413631300 (Corresponding Author)

Co- Author

DR. ANKITA CHATURVEDI

Associate Professor, Dept Of Accounting And Taxation, IIS (Deemed To Be University).

India

Email: [email protected]

Contact: 9783307028

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Abstract

The current research study aspires to examine the outcome of environmental accounting on
financial performance amongst top 100 companies of Indian origin as per their market-cap in
the year financial year 2018-19. For measuring independent variables in this study
environmental index for environmental disclosure has been used. ROA, EPS, ROE and Profit
Margin are used as the dependent variables for the study to act as the parameter for
measurement of financial performance. No noteworthy relationship was found between TED,
Profit Margin and EPS. The multivariate test shows that Environmental Disclosures have a
significant effect on ROA and ROE. On the basis of the analysis, it is suggested that the
Indian companies need to keep pace with the regulatory framework put in place by the
government and other regulatory bodies. This will ensure that the companies invest in
improving their environmental performance records which in turn would have positive effect
Shareholder’s Net Worth.

KEYWORDS: Environmental Accounting, Financial Performance, Return on Asset (ROA),

Return on Equity(ROE), Earnings per Share (EPS), Net Profit Margin, Environmental
Accounting Disclosures, Total Environmental Disclosures(TED)

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1. INTRODUCTION

In the times when global warming, increasing water levels in seas and oceans, depletion of
ozone layer and many more such problems have engulfed the entire world, it seems important
that mankind and especially the big business houses play their part in conserving and
improving the environment around them. The major reasons for such a grave situation has
been the fast industrialisation and the resultant pollution. So it makes sense that corporate
sector take a front seat for mending the environment too; given the kind of financial and
human capital they have.

Another major reason for such an act is the consumer. Today a consumer not only does a cost
benefit analysis before buying a product, rather he also analyses the actions of the company
offering the product. Indian Judicial system has also started taking the companies to task if
they default in any regulatory specifications issued to them. For example Maggie was banned
by a court order for a long time when it was found that it was not following the guidelines
issued by Food Safety and Standards Authority of India (FSSAI), public at large also
boycotted its use. Coca Cola which is a leading name in beverages industry also defaulted in
compliance and rather it took the guidelines for granted. Its bottling plant in Kala Dera near
Jaipur was shut down after a local campaign was started by Rameshwar Kudi on grounds of
depleting ground water from the area around it. After this Coca Cola has had problems in
running and expanding its work in India. Its’ another plant in Kerela was also shut down and
the plant in Varanasi was stopped in starting its expanded facility. Very recently in the state
of Rajasthan in India were instructed strictly to treat the waste water before disposing it in
any water body the contemplators were sealed and fined. Thereby making it very clear that
the government and judiciary have joined hands to prosecute all the defaulters on charges
especially concerning people at large and environmental concerns top the list. On a positive
noteefforts made by companies towards a sustainable environment converts into better sales
for the product offerings and thus increases profitability and net worth of the company.

1.1 ENVIRONMENTAL ACCOUNTING

Environmental accounting is a term used for the various environmental issues addressed by a
company in its financial statement specifically its Annual report. For the purpose of defining
it one can put it in the following words, ‘Environmental Accounting refers to the
identification, measurement and allocation of environmental costs of a business.’ It involves
integration of these costs into business and helps in communicating such information to the

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companies’ stakeholders. It aims at achieving sustainable development, upholding a
favourable relationship with the community, and following effective and efficient
environmental conservation activities.

“Environmental accounting includes estimation of expenditure done on environmental

concerns, and recognition of liabilities emerging from environment as well as, disclosure of
all environmental liabilities in a definite section of the annual reports of a company. The
modern business approaches like activity-based management costing, Total Quality
Management, business process-reengineering etc. provide a way for incorporating
environmental information into business decisions.”(Chaturvedi, A.)Even International
Organization for Standardization (ISO) has catered to the need of environmental concerns
and has pioneered the ISO 14000 series of standards to include a range of features of
environmental management. ISO 14000 series provided practical tools for corporates and
help them enhance their environmental performance thereby increasing the company’s
productivity and success

1.2 FINANCIAL PERFORMANCE

Financial Performance refers to a subjective measure of how effectively a firm can use its
assets to do its core business and generate revenues. The term is also used as a general
measure of a firm's overall financial health over a given period of time. “It is the process of
measuring the results of a firm's policies and operations in monetary terms. It can also be
used to evaluate similar firms from the same industry or to compare industries or sectors in
collectively.”(Chaturvedi,A.) Here in this study a comparison between firms from different
sectors has been done to find the relationship between environmental disclosures and
financial performance of some of the biggest companies in India. The measures of financial
performance taken here are ROA, ROE, Net Profit Margin and EPS of selected companies.

1.3 LEGAL FRAMEWORK FOR ENVIRONMENTAL ACCOUNTING IN INDIA

In India till now environmental accounting has not been made compulsory but The
Constitution of India (Article 51A) require as one of fundamental duties of every citizen of
India to protect and improve the natural environment; hence this statement imposes
environmental responsibility on the corporate as well. Not only article 51A specifies
environmental responsibility but various other laws have been enacted for environmental
protection such as Water (Prevention and Control of Pollution) Act. 1974, Forest
Conservation Act 1980, Air (Prevention and Control of Pollution) Act 1981, Environment

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Protection Act 1986, Hazardous Waste (Management and Handling) Rules 1989, etc. Indian
Companies Act, 1956 also require a company to include in its Director’s Report all the
environment related issues and policies. Further, in 1996 ISO: 14000 and in 1999 ISO: 14001
series were introduced. These two standards put down the environmental norms which the
industrial units have to follow.

1.4 ENVIRONMENTAL ACCOUNTING PRACTICES IN INDIA

Environmental accounting is at beginning stage in India. Government of India first made a

public announcement about required environmental associated disclosures to be done by
business units on a regular basis in 1991. In 2011, the SEBI released a directive list for
companies to report on Environmental, Social and Governance (ESG) initiatives
accomplished by them, as per the key principles spelled out in the 'National Voluntary
Guidelines on Social, Environmental and Economic Responsibilities of Business. The
Companies Act 2013 reiterates on undertaking corporate social responsibility that makes it
compulsory for certain category of profitable enterprises to spend money on social welfare
initiatives. It is compulsory for companies with net worth of over Rs 500 crore, or turnover
of Rs 1,000 crore to put in place a CSR policy. Also, The Union Ministry of Environment and
Forests has issued a range of commands to construct environment statements. Mainly the
following set of information is disclosed.
• The type of instruments installed to control pollution
• The steps initiated for energy conservation
• Steps taken for most advantageous utilization of resources
• Steps taken for decompose the used water and production process residual
• Steps taken to improvise the quality of product and services, production process etc.

In the light of the above discussion this research paper aims at deliberating and unfolding the
reality between the norms put forward and the actual work done by the corporate sector of
India. Since now India has somewhat progressed from a developing economy to fast
developing economy a lot of changes have come in the mind set of general public and the
professional working in corporate India. All this has raised a concern regarding the
environmental concerns and the environmental rules being followed by big companies. The
policy makers under the pressure of global environmental groups and governing authorities
like UNICEF have created guidelines and signed environmental protection treaties but the
actual work has to be done by the companies, that too; has to start from the biggest of the

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companies in India. This paper has tried to find the gaps and confirmations to the structure
which is created by the laws of corporate governance in India. But this is also true that unless
corporates see their benefit in some manner in environmental activity they would not invest
in any activity, so making a comparison between the adherence to environmental norms and
financial returns of a company can clarify this connection. And once the companies
understand the positive relation they may try a more proactive approach in undertaking such
activities rather than just being a passive follower of norms laid down by the government
which if not adhered to would lead to a penalty .

2. LITERATURE REVIEW

In past a lot of studies have been done on the environmental accounting, some of those
studies were studied to create an understanding for the current topic which are as under -

Aggarwal, P. (2013). It is a review paper which analysed both types of papers in which
positive and negative relationship was concluded between financial performance and
environmental accounting. The paper concluded that factors which lead to positive
relationship are good stakeholder relations; improveded reputation; talent retention of better
qualified employees etc.(Norhasimah Md Nor, 2016) Opine that though environmental
accounting is optional but a lot of companies voluntary engage into undertaking the activities
for saving the environment and also try to be proactive in undertaking such activities. The
study was conducted on Malaysia in the year 2011. It was concluded that be recommended to
use other indicators to measure financial performance to give more favorable findings to the
study.(Vijaya Lakshmi, 2018)Environmental Accounting by corporate revels the amount of
contribution given by environment to them and also the environmental damage caused by the
industrial activities in an economy. In India environmental Accounting is not followed by a
lot of companies so it at just a stage where it has just started being practiced by the corporate
by majorly only by the big companies. Indian companies follow the rules and regulation but
a proactive role is not being played by any company.
(T Moses, GN Ogbonna, 2019) examined the effect of environmental accounting on the
economic development in Nigeria. The study concluded that in Nigeria environmental
accounting practices adopted by the companies did not play an pivotal role in progress of the
economy. Hence, suggested to the government to augment the functioning of environmental
laws in the country to make it more stringent for business organizations to surpass their

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environmental responsibilities.(Eny Lolo, N., & Rum, M, 2019) scrutinize the significance of
amalgamating environmental matter in the financial and decisional economic entity.
Environmental accounting can reap ample advantages for an organization, which include cost
savings and improved management effectiveness in both large and small organizations, in
addition can benefit from getting an environmental audit. Environmental costs have been
documented according to the categories of expenses according to their functions should be
reflected in the costs and expenses of the current accounting period

(Prakash, 2016) Research paper short listed 16 parameters to analyze whether companies
from different sectors in India like oil, textile, shipping etc follow environmental norms or
not. It was concluded that though there are no legal compulsion on the companies to account
and report for the environmental issues but still they are doing it voluntarily as they
understand the importance of environment for long term sustainability. (Khandelwal,A. 2012)
emphasized that though the companies are involved in social activities like environment but
there is a need to regularize it by making it a law, and later on it was included in the policies
for corporate to follow in India. (Alok Kumar Pramanik, 2008) This paper recognises that
environmental accounting and reporting practices should be made mandatory in every
country but this has not happened in most of the countries. The paper proposes that there is an
urgent need to take steps to formulate environmental accounting and disclosure rules
nationally and globally.Makori, D. M., &Jagongo, A. (2013) recommended that government
should make provision for tax credit to organizations which follow environmental laws and
that environmental reporting should be made compulsory in India in order to improve
reporting and compliance.

Pahuja, S. (2009) in the paper which shows relationship between environmental disclosures
and corporate characteristics in manufacturing sector of India has been able to make an
analysis of the companies on 23 items of environmental information to find if certain kind of
companies follow a certain pattern in environmental disclosures. Omnamasivaya, B. (2017)
this paper actually studied the opposite what the current aims at finding but this gave a very
good opportunity for understanding the basic concept in environmental accounting. Here it
was analysed whether a better financial performance has a positive impact on the
environmental accounting disclosure practices of the companies listed on NSE over a period
of 5 years. Variables considered for the study are NPM, ROCE, EPS, DPS, ROA, ROE, P/E,
DPR, ROS and MPS. The study concluded in a positive relationship between the two. Same

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kind of study was also conducted on the companies listed on Bombay Stock Exchange which
also resulted in appositive relationship between 2 variables Omnamasivaya, B. (2016). Nor,
N.M., (2016). The study was done on 100 companies in Malaysia in 2011 and reaped mixed
results between the presence of environmental disclosure practices in Malaysia and resultant financial
performance. The paper suggests that regulators should put down some provisions to be followed by
the companies to make environmental accounting more meaningful which till now is not there.
Malarvizhi, P, (2008). This paper highlights the requirement of environmental disclosures in
the wake of growing awareness towards sustainable development. Khandelwal, A. (2015)
highlights the advantages and disadvantages of disclosure on data by Indian companies on
many aspects including environmental factors. Batra (2013) It was a study done in 3 counties
Singapore, Malaysia and India to inspect the environmental disclosure and management
practices employed by the various corporate enterprises in these countries. The conclusion
was that people have become more aware about environmental concerns in all the countries
under study. Che-Ahmad, A.(2015) concluded that majorly in developing economy
accounting disclosures have been in voluntary parlance only but for effective adherence state
regulation seems unavoidable.

(Mustaruddin Saleh, 2012) The paper deducted that corporate social responsibility has a
positive and significant relation on Financial Performance of a company. Dimensions like
employee relations and community involvement, are positively related to financial
performance. This proves that CSR practices can be considered as effort to improve the
financial performance of PLCs in Malaysia. (Rahman, 2009)This study was conducted to
inspect the relationship between environmental disclosure and financial performance among
the companies in Malaysia, Singapore and Thailand that voluntarily disclose environmental
information in their financial reports. A sample of Two hundred and fifty (250) companies
listed on stock exchanges of Malaysia, Singapore and Thailand. The results suggest that the
performance of the company has no relationship to the environmental disclosure.
(Omnamasivaya, B. A., & Prasad, M. S. V. 2016) conducted a similar study on stocks listed
on Bombay Stock Exchange over period of five years. They calculated Environmental
Accounting Disclosure Index (EADI) for each company for each year and then the five-year
average was considered for final study. The financial variables taken into consideration were
Net Profit Margin (NPM), Return on Capital Employed (ROCE), Earning Per Share (EPS),
Dividend Per Share (DPS), Return on Assets (ROA), Return on Equity (ROE), Price-

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Earnings (P/E) ratio, Dividend Payout Ratio (DPR), Return on Shareholders (ROS), and
Market Price per Share (MPS). (Archana Singh, 2017) The paper recognizes that there is a
increasing concern for Indian industry to comply with the environmental reporting with
regard to environmental protection. This paper proposes a framework to create strategies for
Indian industries environmental legal framework with regard to environmental protection.
Further the paper enlists primary challenges of environmental accounting legal framework is
the absence of standards in identifying all that needs to be measured and the way it can be
measured. (Nasir Zameer Qureshi, 2012)The research paper suggested that for a proper
implementation of environmental accounting in India a large number of researches,
dialogue& discussion, accounting standard and regulatory structure is required along with
creating awareness among the corporate as well as society. But increasing public concern
over environmental issues corporate can be voluntarily forced into including environmental
policy in their overall business policy. Omnamasivaya, B., & Prasad, M. S. V. (2017) The
study was done on NIFTY stock i.e. the companies listed on National Stock Exchange ,
regression was used to analysis the relationship between financial return and environmental
disclosures. A positive relationship was found to exist between both variables.

In the dearth of studies which establish a relationship between Environmental Accounting

Disclosures and Financial Performance in India, it was realised that such an extensive study
would motivate the corporate sector to actively participate in concentrating on environmental
accounting, apart from financial accounting only. The gap was also found in assessing the
reality of environmental accounting parameters being followed by Indian Companies. This
study takes care of both these aspects i.e. actual checking the norms which were followed by
the top 100 Indian companies in the financial year 2018-19 and also analysing whether these
have an impact on the financial performance of the companies or not.

3. RESEARCH METHODOLOGY

The population of this study comprises of the listed companies in BSE. Among these the top
100 companies as per the market capitalization in year 2018-19, has been selected as sample.
The selection of top companies is due to numerous reasons. The large companies undertake
more activities and have larger impact on the society since they are more visible (Hackston
and Milne, 1996) and also large companies are believed to have more information which
allows them to engage more with corporate governance, social and environmental
responsibility (Aerts, Cormier, Gordon, and Magnan, 2006). Other than that, large companies

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have published more information and also provide higher quality disclosure (Buniamin,
2010).

The environmental index for environmental disclosure as based on Razeed (2010) are taken
as Independent Variable for the study. Andfinancial performance is taken as dependent
variable, which has been measured by the four indicators of financial performance i.e. Return
on Assets (ROA), Earnings per Share (EPS), Return on Equity (ROE) and Profit margin of
the firms.

OBJECTIVES OF THE STUDY

The objectives of the study are :

• To observe how much the top listed companies are disclosing about the environmental
indexes.
• To examine the relationship between Environmental disclosure and Financial
Performance of the companies

HYPOTHESIS OF THE STUDY

Ho: There is no significant effect of Environmental disclosure on Financial Performance of

the companies.

This research had already selected group of companies, thus non-probability sampling
techniques would be suitable for this study. Under non-probability sampling there are two
types of sampling techniques which are convenience and purposive sampling. The purposive
sampling is used to group the Top 100 Company of Market Capitalization as the specific
types of respondents that can provide the required information.

The data collected is secondary data in nature, which has been collected by reviewing the
annual report of the top 100 Companies of Market Capitalization of year 2018-19.To check
the relationship between total environmental disclosure (TED) and Financial Performance
correlation is applied. And to check effectof TED on financial performance of the companies
MANOVA is applied.

5. RESULTS AND DISCUSSIONS

TABLE 5.1: ENVIRONMENTAL INDEX

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Index Environmental Index Yes No
S.no
1 Statement/Existence/ Disclosure of Environmental Concern 100 0
2 Steps taken to monitor compliance with policy statement 84 16
3 Environmental Targets/Standards 67 33
4 Performance against environmental targets 67 33
5 Structural and responsibility changes undertaken in the organization to develop
environmental sensitivity 84 16
6 Environmental Awareness Training 82 18
7 Recognition of Government Regulations 93 7
8 Presence of Environmental Department and Personnel 93 7
9 Acknowledgement of impact of activities 98 2
10 Presence of Environmental Management System (EMS) 83 17
11 Environmental programs – Restoration/ Rehabilitation 65 35
12 Involvement with community projects 85 15
13 Environmental audit compliance 63 37
14 Environmental audit EMS 61 39
15 Environmental programs Response to environmental audits 57 43
16 Environmental Accounting Policy 77 23
17 Amount spent on environmental protection 61 39
18 Anticipated pattern of future environmental spend 36 64
19 Assessment of actual/contingent liabilities 33 67
20 Physical unit analysis of materials/energy/waste 58 42
Source :Self made from the collected data.

Table:5.1 shows the extent to which companies are following the environmental disclosure
index. It is observed that the variables that have been disclosed by all the companies is
statement/existence/disclosure of environmental concern(100), followed by
acknowledgement of impact of activities (98) , Recognition of Government Regulations (93)
and Presence of Environmental Department and Personnel (93).The anticipated pattern of
future environmental spending and assessment of actual/contingent liabilities which is index
number 18 and 19 has the least index that had been disclosed in annual reports. Only 36
companies out of 100 have disclosed the index number 18 and only 33 companies have
disclosed the index number 19.

TABLE 5.2: FREQUENCIES OF TOTAL DISCLOSURE

Total Environmental Disclosures. Frequency Percent Cumulative Percent
4 1 1.0 1.0

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 5 1 1.0 2.0
6 3 3.0 5.0
7 4 4.0 9.0
8 6 6.0 15.0
9 2 2.0 17.0
10 2 2.0 19.0
11 4 4.0 23.0
12 8 8.0 31.0
13 7 7.0 38.0
14 7 7.0 45.0
15 4 4.0 49.0
16 7 7.0 56.0
17 10 10.0 66.0
18 10 10.0 76.0
19 13 13.0 89.0
20 11 11.0 100.0
Total 100 100.0
Source :Self made using SPSS Software.

Table:5.2 Reveals the frequencies of Total Environmental Disclosures. The cumulative

percent frequency column shows that there are around 20% of total companies which were
studied, disclosed less than or equal to 10 environmental disclosures out of the 20 variables
which were studied with respect to environmental disclosures done by Indian companies.
This 20% cumulative is made up of small percentages ranging from 1% to 5% companies
which disclosed 4 to 10 environmental disclosures. However the percentage of companies
that disclosed a high number of disclosures are more.

Further we see that a good 10 % of companies disclosed 17 & 18 variables respectively in

their annual reports concerning the environmental disclosures. 19 environmental disclosures
are made by 13 companies out of the 100 companies studied in the research paper. The
highest total disclosure of 20 variables was showed by 11 companies out of 100 companies.
The companies are trying their best to revel the Environmental indexes in their annual reports
but at some point they are not being able to give a full disclosure. The companies should try
to improve the overall environmental accounting and environmental audit facts more in the
annual reports.

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 TABLE5.3: DESCRIPTIVE STATISTICS
N Minimum Maximum Mean Std. Deviation Variance
Total Environmental 4.00 20.00 14.59 4.39 19.29
100
Disclosures (TED)
Return on Assets 100 -7.50 49.30 9.80 8.23 357.48

Return on Equity 100 -90.00 77.00 14.46 18.91 357.48

Earnings Per Share 100 -99.50 2666.50 76.72 278.55 77592.11

Profit Margin 100 -50.00 51.50 11.65 14.29 204.49

Source :Self made using SPSS Software.(Results rounded to 2 decimal points)

The mean value for total environmental disclosure (TED) which is the independent variable
of this study is 14.59. The standard deviation value and variance value of TED is 4.39 and
19.29. The minimum value of TED shows that there are companies which disclosed very
little environmental information as the value stated is 4.00. Besides, the maximum value
shows the highest value that the company disclosed all the 20 environmental indexes used in
this study. The dependent variable used in this study is financial performances as the
financial performance is measured by using ROA, ROE, EPS and Profit Margin. The first
dependent variable is ROA, the mean for the variable is 9.80 whereas the standard deviation
of the variable is 8.23 and the variance shows the value of 67.75. The maximum value shows
the highest ROA between the companies analysed in this study as the highest value recorded
is 49.30 whereas the minimum value which shows the lowest ROA recorded which is -7.50.
The second dependent variable used in this study is ROE, the mean value stated for this
variable is 14.46. The value for standard deviation and variance of this variable is 18.91 and
357.48 respectively. The maximum value of ROE is 77.0 and the minimum value stated for
this variable is at the lowest as the value is negative value which is -90.00. Furthermore, the
third dependent variable used in this study to measure the financial performance is EPS, the
mean value of this variable is 76.72. This variable also shows that the standard deviation of
278.55 whereas the variance of this variable stated at 77592.11. The lowest EPS recorded
among 100 companies used in this study is showed by the minimum value which is -99.50
and the highest value among the companies is determine by the maximum value which is
2666.50. Last but not the least, the fourth variable used is profit margin as the mean value
stated for this variable is 11.65.the standard deviation and the variance stated for this variable

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is 14.29 and 204.49 respectively. The maximum value recorded for this variable is 51.50
whereas the minimum value is stated a negative value of only -50.00.

The standard deviation of Total Environmental Disclosures (TED), Return on Assets, Return
on Equity and Profit margin is low which also shows that data are clustered around the mean .
This displays the data is more reliable. In case of Earning per share, the standard deviation is
too high, which displays the data is widely spread. Variance is the average of the squared
distances from each point to the mean. Variance in Total Environmental Disclosures (TED) is
the lowest ,followed by Profit Margin, Return on Assets and Return on Equity . A smaller
variance indicates low variations in the data set i.e. the data are points are closer to each
other. Where as the variance in Earning per share is very high indicating the data points are
very wide spread from one another.

TABLE 5.4: CORRELATIONS BETWEEN TOTAL ENVIRONMENT DISCLOSURES (TED) AND

FINANCIAL PERFORMANCE
Pearson Correlation N Sig(2 tailed)
ROA 0.328 100 0.001
ROE 0.333 100 0.001
EPS -0.044 100 0.666
Profit Margin 0.160 100 0.112
Source :Self made by using SPSS Software
Before applying Pearson’s correlation, all the assumptions regarding the scale of variables,
the linear relationship between the variables, no outliers in the data, and normality was
checked. Correlation analysis shows that there is a positive moderate correlation between
TED and ROA and ROE. The p < 0.05, which signifies that the relationship is significant.
Whereas an insignificant relationship is found between EPS, Profit Margin and TED as the p
> 0.05.

5.1MULTIVARIATE TESTS

The one-way multivariate analysis of variance (one-way MANOVA) is used to determine

whether there are any differences between independent groups on more than one continuous
dependent variable.

TABLE 5.5 :BOX'S TEST OF EQUALITY OF COVARIANCE

Box's M 394.44
F 3.741

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 df1 80
df2 3990.58
Sig. .000

Source :Self made by using SPSS Software

TheBox's Test of Equality of Covariance Matrices is a parametric test used to compare

variation in multivariate samples. More specifically, it tests if two or more covariance
matrices are equal (homogeneous). Box's M tests the null hypothesis that the observed
covariance matrices of the dependent variables are equal across groups. Table 5 shows the
p-value < 0.05, indicating the heterogeneity of covariances. Therefore, the assumption is
violated and Pillai’s Trace is the appropriate test to use.

TABLE 5.6 : MULTIVARIATE TESTSa

Hypothesis
Effect Value F df Error df Sig.
Intercept Pillai's Trace 0.444 15.961b 4 80 0
Wilks' Lambda 0.556 15.961b 4 80 0
Hotelling's Trace 0.798 15.961b 4 80 0
Roy's Largest Root 0.798 15.961b 4 80 0
TED Pillai's Trace 0.805 1.306 64 332 0.071
Wilks' Lambda 0.395 1.32 64 315.462 0.065
Hotelling's Trace 1.085 1.331 64 314 0.059
Roy's Largest Root 0.5 2.591c 16 83 0.003
a. Design: Intercept + TED
b. Exact statistic
c. The statistic is an upper bound on F that yields a lower bound on the significance level.
d. Computed using alpha = .05
Source :Self made using SPSS Software .

The above is the MANOVA using Pillai’s Trace Test. Pillai's trace is a positive-valued
statistic. Increasing values of the statistic indicate effects that contribute more to the model.
The p value < 0.05, indicates a significant effect of TED on financial performance of the
companies. Therefore, null hypothesis is not accepted.

TABLE 5.7 :LEVENE'S TEST OF EQUALITY OF ERROR VARIANCES

F df1 df2 Sig.

ROA 1.800 16 83 .045
ROE 3.041 16 83 .000

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EPS 2.990 16 83 .001
Profit_Margin 3.398 16 83 .000
Source :Self made using SPSS Software .

Table shows a summary table of Levene’s test of equality of variances for each of the
dependent variables. Levene’s test is showing significant for all dependent variables because
the assumption of homogeneity of variance has not been met.

TABLE5.8 : TESTS OF BETWEEN-SUBJECTS EFFECTS

Partial Obser
Type III Mean Eta ved
Dependent Sum of Squar Squar Noncent. Powe
Source Variable Squares Df e F Sig. ed Parameter re
Corrected ROA 1764.780 110.2
a
.037 .263 29.635 .919
Model 16 99 1.852
ROE 11591.47 724.4
.003 .328 40.425 .984
5b 16 67 2.527
EPS 951628.9 59476
.752 .124 11.736 .452
74c 16 .81 0.734
Profit_Margin 4387.377 274.2
d
.146 .217 22.965 .813
16 11 1.435
Intercept ROA 3242. 54.45
.000 .396 54.454 1.000
3242.795 1 795 4
ROE 4890. 17.05
.000 .170 17.054 .983
4890.175 1 175 4
EPS 208591.8 20859
.113 .030 2.573 .354
22 1 1.8 2.573
Profit_Margin 4703.
.000 .229 24.620 .998
4703.53 1 53 24.62
TED ROA 110.2
.037 .263 29.635 .919
1764.78 16 99 1.852
ROE 11591.47 724.4
.003 .328 40.425 .984
5 16 67 2.527
EPS 951628.9 59476
.752 .124 11.736 .452
74 16 .81 0.734
Profit_Margin 274.2
.146 .217 22.965 .813
4387.377 16 11 1.435
Error ROA 59.55
4942.753 83 1

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 ROE 23799.47 286.7
7 83 41
EPS 6729989. 81084
907 83 .22
Profit_Margin 15856.76 191.0
9 83 45
Total ROA 16317.80
5 100
ROE 56285.65
4 100
EPS 8270157.
949 100
Profit_Margin 33807.77
6 100
Corrected ROA 6707.532 99
Total ROE 35390.95
2 99
EPS 7681618.
88 99
Profit_Margin 20244.14
6 99
a. R Squared = .263 (Adjusted R Squared = .121)
b. R Squared = .328 (Adjusted R Squared = .198)
c. R Squared = .124 (Adjusted R Squared = -.045)
d. R Squared = .217 (Adjusted R Squared = .066)

Source :Self made by using SPSS Software.

Because the MANOVA was significant we will now examine the univariate ANOVA results.
To determine how the dependent variable, differ for the independent variable, Test of
Between- Subjects effect is checked. The row labelled TED shows the ANOVA summary for
ROA, ROE, EPS and Profit Margin. It is observed that TED has a statistically significant
effect on ROA and ROE as p value < 0.05 whereas TED has an insignificant effect on EPS
and profit Margin.

6. CONCLUSION

This study examines the relationship between environmental disclosures done by the top 100
companies listed on the Indian Stock Marketand their financial performance in the financial

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year 2018-19. The companies highlight the disclosure of their contribution in the
environmental activities so as to attract the investors and to fulfil the demand of stakeholder
groups. It also provides data that contains the contribution of natural resources to economic
wellbeing as well as the costs imposed by environmental pollution and resource degradation.

The finding of this study resulted in showing that there is a significant relationship between
total environmental disclosure and ROA and ROE. However, the findings for other two
variables which are profit Margin and EPS showed no significant relationship between total
environmental disclosures. The multivariate test shows a significant effect of Environmental
Disclosures on financial performance. Further, when the test of between- subjects is checked,
it is observed that Environmental Disclosures have a significant effect on ROA and ROE. In
general, the environmental disclosure in India is on the growth stage as most on Indian
companies are aware about the environmental concerns and regulation put forward by the
government. The companies need to keep pace with the regulatory framework put in place by
government and other regulatory bodies. This will ensure that the Companies invest in
improving their environmental performance records. This study adds in the literature review
on the corporate governance area particularly on the environmental disclosure that will help
the authority body to come out with an exhaustive structure or guideline on the admission of
the environmental disclosure in the annual report.
There are some boundaries to this study which are explained here after. Annual reports were
used as research instrument for collecting required data but it fell short with respect to some
companies under consideration as they disclosed their environmental information in separate
statement in place of annual report. In addition, the data of this study is considered only top
100 public listed companies for market capitalization 2019 and one year (2018-19) due to
limited time frame. Hence, it would be suggested to supplement the research by making use
of other group in order to generalize the analysis as the companies studied in this research
already specified without considering small company. Further, it is recommended to
undertake a year on year study on yearly basis as it may help to draw the movement of
environmental disclosure. In addition, we have analyzed annual report for the financial year
ending 2019 as the data for the year 2020 was unavailable at the time the research was
conducted. Thus, it is suggested to make use of the annual report of financial year 2020 as to
gauge the updated and current trend of environmental disclosure for these companies. Apart
from that, the environmental index of this research is specified to only 20 indexes as adapted

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and adopted from Razeed (2010). It is suggested for future research to use other index that is
more comprehensive as to improve the future research to be more effective and efficient.
Moreover, current study has considered four variables for tapping financial performance
namely return on asset (ROA), return on equity (ROE), earnings per share (EPS) and profit
margin. Thus, it would be suggested to make use of other indicators also to gauge financial
performance like cash flow and operating profit to give more insights to the study.

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APPENDIX -I

2018-19

TOTAL
PROFIT ENVIRONMENT
COMPANY ROA ROE EPS MARGIN AL

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 DISCLOSURES

RELIANCE 5.6 10.3 62.8 7 20

HUL 32.7 77 28 15.4 19

ITC 21.7 32.5 10.5 26.5 19

MARUTI SUZUKI 12.1 16.2 253.3 8.9 17

L&T 4.3 16.4 72.8 7.2 20

ONGC 8 15.5 26.9 7.5 12

WIPRO 11.8 16 14.9 15.4 20

ASIAN PAINTS 14.4 23.2 23.1 11.4 19

NTPC 7 15.3 17 17.6 19

ADANI PORTS 10.9 17.5 17.8 32.6 17

IOC 6.6 15.4 18.3 3.3 18

ULTRATECH 6 8.4 81 7.1 10

POWERGRID 8.7 21.5 24.3 36.2 9

SUNPHARMA 5.8 7.8 13.4 11 8

HIND ZINC 22.3 25.8 22 42 19

BPCL 7.5 22 43.4 2.9 17

BAJAJ AUTO 17.1 21.2 170.3 16.3 8

DABUR 16.2 23.8 7.7 17.6 18

PIDILITE 16.1 22.4 18.3 13.1 15

BRITANIA 19.5 29.5 83.6 10.1 19

BERGER PAINTS 12.3 21 4.7 8.9 16

TATA MOTORS -7.5 -47.7 -99.5 -9.5 7

LUPIN 3.3 4.4 13.4 3.6 18

SHREE CEMENT 8.2 10.5 291.3 7.9 12

GODREJ
CONSUMER(GDCN) 12.9 26.1 24 16.6 15

GAIL 8.3 11.5 21.3 8.8 16

BHARTI INFRATEL (BHIL) 14.9 17.2 13.5 36.5 17

DR. REDDY LAB (RADY) 9.1 13.9 117.4 12.6 17

EICHER MOTOR (ECHM) 22.9 31 799.6 24.4 18

UNITED SPIRITS(MCDL) 10.3 26.9 44.9 7.6 17

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DIVIS LAB 12.9 14.8 33 22.5 20
UNITED
PHOSPOROUS(UPL) 12.2 22.1 39.9 11.7 14

SIEMENS(SIEM) 8.7 14.7 31.8 10.3 20

HINDALCO (HALC) 6.1 9.6 24.7 4.2 9

TATA STEEL(TISCO) 14.4 30.9 8.4 6.1 19

HPCL 7 22 43.9 2.4 15

PETRONET LNG 14.4 21.5 23 6.9 19

PIRAMAL ENTERPRISES
(NCHP) 6.9 5.4 79.7 11.1 19
AUROBINDO PHARMA
(AUBD) 11.8 20.7 41.4 14.7 16
UNITED
BREWERIES(UDBS) 9.4 14.7 14.9 7 19

GSK PHARMA (GLXO) 11.4 20.8 26.3 14.2 18

P & G (HIEGINE) 26.7 46.5 115.4 15.3 19

BIOCON(BICN) 5.2 8.7 7.6 11 14

TORRENT PHARMA 6.9 14.7 40.1 11.3 19

COLGATE 26.3 44.2 24.8 16.1 20

AMBHJU CEMENT 8.4 13.3 15 11.4 16

CONTAINER
CORP..(CCORP) 9.8 11.4 43.6 16.1 15
ACC 10 14.4 80.5 10.3 14

MRF LTD. 7.6 10.4 2,666.50 7 12

GRASIM 2 5 42.2 3.8 18

TCS 27.6 35.3 84.1 21.5 17
HDFC BANK 1.7 14.5 82 21.2 7
INFOSYS 18.2 23.7 35.5 18.6 20
KOTAK MAHINDRA 1.8 12.4 37.7 24.1 12
ICICI 0.3 3.7 6.6 5.9 12
BAJAJ FINANCE 8.4 16.2 232.5 19.9 6
SBI 0.1 1 2.6 0.9 13
BAJAJ FIN SERV 4.6 13.2 172.3 20.2 7
AXIS BANK 0.6 7.4 19.6 9 14

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HCL TECH 17.3 24.5 74.6 16.7 12
NESTLE 21.3 43.7 166.7 14.2 18
TITAN COMPANY 12.1 21.6 12.4 6.8 16
INDUSIND BANK 1.2 12.4 54.8 14.8 14
TECH MAHINDRA 13.2 21.1 48.3 12.3 20
INTERGLOBE AVI 2.7 2.3 4.1 0.6 18
BANDHAN BANK 3.5 17.4 16.4 29.4 4
BANK OF BARODA 0.1 2.2 4.1 2.1 6
PIRAMAL ENTERP 6.9 5.4 79.7 11.1 20
INFO EDGE 18.6 23.3 48.5 51.5 18
PNB -1.3 -22 -21.8 -19.2 13
MUTHDOOT FINANCE 5.2 22.7 44.6 27 17
KANSAI NEROLAC 10.1 13.1 8.3 8.3 19
ENDURANCE TECH 10.77 16.19 19.3 6.61 20
QUESS CORP 5.25 9.41 15.83 4.12 12
MRPL 8.4 17.3 10.1 3.6 17
APOLLO TYRES 4.4 7.4 12.7 4.9 16
THE RAMCO CEMENT 6.9 11.3 21.7 9.9 20
BHARAT ELECTRONICS 9.1 20.5 77.4 15.5 8
OIL INDIA 6.8 9.4 36.1 25.6 14
VODAFONE IDEA 0.7 -15.3 -9.6 -14.7 8
SAIL 2.2 -0.8 -0.7 -0.5 18
GUJARAT STATE PETRONET 7.9 13.2 11.9 50.2 11
CANARA BANK 0.1 1.6 8 1.3 12
ALLAHABAD BANK -3.4 -90 -40.3 -50 11
NATCO PHARMA 19.1 22.6 188.3 31.8 17
IDFC FIRST BANK -1.1 -10.5 -4 -15.6 10
GLENMARK PHARMA 9.5 16.5 32.8 9.4 6
NHPC 4.9 6.8 2 26.3 13
SRF 7 13 80.4 8.3 13
RAJESH EXPORTS 7.7 17.6 42.9 0.7 7
BATA INDIA 13.4 18.9 25.6 11.2 13
BALKRISHNA INDUSTRIES 12.8 18 38.1 16.5 13

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INDRAPRASTHA GAS 14.2 19.8 10.3 15.7 14
HEXAWARE TECHNOLOGIES 18.6 24.4 19.6 12.6 13
CHOLAMANDALAM INVEST. 8.3 18.9 62.4 17.7 11
TATA POWER 8 15.3 9.5 8.7 8
GRAPHITE INDIA 49.3 63.5 173.8 43.2 8
IDBI -2.3 -37.1 -26.4 -35.3 5
V- GUARD INDUSTRIES 12.4 18.7 3.9 6.5 16
CROMPTON & GREAVES -1.9 -14.5 -6.3 -6.4 11

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