The Impact of Green Accounting on SME Profitability in Nigeria: A Case Study of SMEs in Abuja
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Background of the Study
Green accounting is an accounting practice that includes environmental costs in business decision-making and financial reporting. This form of accounting helps SMEs measure and manage the environmental impact of their operations, including energy consumption, waste production, and resource depletion. SMEs in Abuja, the capital city of Nigeria, are increasingly recognizing the importance of adopting green accounting practices to enhance profitability, comply with environmental regulations, and improve their corporate image (Agboola & Fadeyi, 2024).
In Abuja, SMEs face pressure from both government policies and consumer demand to adopt more sustainable business practices. However, the integration of green accounting into SMEs’ financial systems is still limited due to factors such as lack of awareness, high implementation costs, and inadequate knowledge of its potential benefits. This study explores the impact of green accounting on the profitability of SMEs in Abuja and aims to identify the benefits and challenges associated with its implementation (Olayemi & Durojaiye, 2025).
Statement of the Problem
Despite the growing importance of green accounting for sustainable business practices, many SMEs in Abuja still face significant challenges in adopting it. These challenges stem from a lack of awareness, the complexity of integrating green accounting into existing financial systems, and the perceived high costs of implementation. This study aims to examine how green accounting practices influence the profitability of SMEs in Abuja and propose strategies to encourage its wider adoption.
Objectives of the Study
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To investigate the impact of green accounting on the profitability of SMEs in Abuja.
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To identify the challenges SMEs face in adopting green accounting practices.
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To propose strategies to promote the adoption of green accounting among SMEs in Abuja.
Research Questions
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How does green accounting affect the profitability of SMEs in Abuja?
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What challenges do SMEs face in implementing green accounting practices?
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What strategies can be employed to promote green accounting practices among SMEs in Abuja?
Research Hypotheses
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H₀: Green accounting does not significantly impact the profitability of SMEs in Abuja.
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H₀: Challenges in adopting green accounting practices do not significantly affect SME profitability.
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H₀: Strategies to promote green accounting practices do not significantly enhance SME profitability in Abuja.
Scope and Limitations of the Study
This study focuses on SMEs in Abuja and their use of green accounting. It excludes SMEs in other regions and sectors. Limitations include potential biases in participants' self-reports of environmental practices and the variation in green accounting approaches across industries.
Definitions of Terms
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Green Accounting: Accounting practices that incorporate environmental costs and impacts in business decision-making and financial reporting.
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SME Profitability: The financial success of a small or medium-sized enterprise, typically measured by profit margins and return on investment.
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Abuja: The capital city of Nigeria, home to a growing number of SMEs and a hub for political and business activities.
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