Environmental Protection Efforts of Small Businesses in Nigeria and Ghana for Sustainable Development

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By EFOBI, Uchenna; TANANKEM, Belmondo; ORKOH, Emmanuel; ATATA Scholastica; AKINYEMI, Opeyemi; BEECROFT, Ibukun

Why Environmental Protection is Important
Many developing countries face the challenge of growing industrial activities with little, inefficient or poor enforcement of environmental protection laws. While there are some agencies in these countries to pursue environmental protection efforts, like the Environmental Protection Agency in Ghana, and the National Environmental Standards and Regulations Enforcement Agency (NESREA) for Nigeria. Despite these agencies and their well-spanned responsibility towards protecting the environment, there is a rapid increase in some metrics of environmental pollution. For instance, Nigeria is ranked among the top carbon emitters in Africa, with annual carbon emissions being in excess of 10 metric tons in 2013, and in the case of Ghana, such emission (metric tons per capita) have almost doubled from 0.33 metric tons per capita in 2000 to 0.56 in 2013. Likewise, there has been a sporadic increase in the extent of pollution since the formation of these environmental protection agencies (See Figure 1), which further shows the inefficiency of these agencies in reducing pollution in these countries, especially Nigeria.

Figure 1: Trend of CO2 Emission (kt) in Ghana and Nigeria

Source: Authors’ Computation from World Development Indicators (2018)

In this context, firms have to be part of the process in environmental protection through conscious effort in ensuring that their operations does not have an adverse effect on both human, plant, and the environment. Very little evidence is available so far on the participation of firms in environmental protection drive in many low-income countries, including Nigeria and Ghana.

This paper fills this gap by presenting and analyzing the participatory response of firms in environmental protection across small and medium enterprises in Nigeria and Ghana. Participation in environmental protection is narrowly defined as firms’ response on having policies that puts them in the path of reducing environmental pollution – including solid, liquid, and gaseous waste. We also consider the amount the firm pays on power generation liquid fuel, which we used to mirror combustion and carbon emission.

Role of Small Businesses in this Drive
Small businesses, which are those enterprises with at least 10 employees (for instance), are becoming increasingly active in these countries. The number of small businesses in Nigeria is 72,838 in 2013, which is predicted to be 96 percent of the entire Nigerian businesses. Similarly, the Ghanaian business environment has also seen a sporadic increase in the number of small businesses that are operational. For instance, in Ghana, more than 85 percent of the enterprises are small and medium (International trade Centre, 2016). These statistics shows the importance of these firms in Nigeria and Ghana, and emphasizes their economic advantage in these countries in terms of job creation, poverty alleviation, value chain creation and efficiency, backward and forward linkages, to mention a few.

These firms, however, are likely to be burdened (pecuniary and socially) with the need to pursue environmental protection policies. This is because of the high cost of such policies, coupled with the poor infrastructure and harsh business environment, which may likely dissuade them from this path. Despite, the firm level-survey, which we base this paper on, depicts an encouraging effort on the part of these firms to pursue such internal policy. But first, do small businesses actually care about the environment?

Small Businesses and Attitude Towards the Environment
To understand small businesses’ attitude towards the environment in Nigeria and Ghana, it is important to first appreciate their pollution against the deciles of firm size to answer the question: do smaller businesses care more about the environment?

Figure 2: Pollution and Firm Size

The result from Figure 2 shows evidence of a consistent rising increase in firm pollution with the size of such firm: while small and medium sized firms pollute less, the largest firms pollute more – in terms of carbon emission – in both countries. This association between size and pollution is relatively large in magnitude and statistically significant, even when the relationship is subjected to other relevant firm-level observable characteristics.

It is natural to expect this relationship considering the argument that the larger sized firms will be more engaged with production and operation activities, which make them more likely to pollute than the smaller, and medium sized counterparts. However, the next figure shows that indeed, larger firms in Nigeria and Ghana care less about the environment than the small and medium sized ones. For instance, a whooping 47 and 50 percent small businesses and about 34 percent medium sized businesses in the both countries are considering initiating policies on environmental pollution. This is compared to less than 20 percent of large firms in the two countries. On the one hand, small firms may not have the capacity and resources to fully exploit the regulatory agencies and officers and therefore, they are obliged to comply with environmental regulations. This is likely due to high social and economic costs of non-compliance, which larger firms may not be confronted with due to their financial capacity to exploit the system. In fact, firms in this category do not agree that government regulation had a major influence on their decision to pursue such policy. Second, since these small and medium sized firms are closely knit with the society they are located in, the tendency for them to be more environmentally conscious will be higher because there is a direct accountability to the community. Although these interpretations are somewhat speculative, it is supported by available data and by our knowledge of the Nigerian and Ghanaian Business Environment in dealing with different sizes of firms.

Figure 3: Consideration of Initiating Environmental Pollution policy

Priorities are on Solid and Gaseous Pollution
Furthermore, the survey shows that on average the small and medium businesses declare that the priorities for the future policy will focus on reducing their solid and gaseous pollution. Fewer proportions declare their interest in liquid and other forms of pollution. For the larger firms, their interest is mostly on gaseous and liquid pollution. These figures, taken together, suggest that more of these businesses are interested in reducing gaseous pollution from their operations. This situation is common in both Nigeria and Ghana.

 What Can Policy Makers Do?
The most important element emerging from this paper is the relatively high potential for small and medium scale businesses to pursue environmental protection policies. For the big firms, they have lax interest in environment protection efforts. We argue that this is largely the result of their ability to influence public policy to their advantage, making them unaccountable to the society they affect. Policymakers can address this issue by first addressing the institutional crisis – corruption, after which the agencies driving environmental protection can be more effective in regulating firm’ activities. Also, for these small and medium sized firms that engage in environmental protection policies there will definitely be need for incentivizing them. Such incentives will reduce the pecuniary burden that comes with such policy actions.

Reference
International trade Centre – ITC (2016), SME Competitiveness in Ghana: Alliances for Action – 2016, ITC: Ghana

Further Reading
Efobi, U., Tanankem, B., Orkoh, E., Atata, S., Akinyemi, O., Beecroft, I., (2018), Tanzania: Institute of African Leadership for Sustainable Development (UONGOZI Institute).