Context

Corporations are required to make appropriate financial disclosure on environmental matters. To many, disclosure requirements seem complex and worrisome. Partial disclosure—or disclosure gestures—may result. But if knowledgeable, appropriate disclosure is being delayed, so is full confidence.

Failure to disclose appropriately could bring enforcement actions from the SEC, with potential penalties. Information that may be incomplete or misleading is potentially illegal, and is certainly unsatisfactory to shareholders and investors. Knowledgeable, appropriate disclosure is evidence that management knows and is managing its environmental liabilities. The collecting and evaluating of potential liability-related information as part of disclosure decision-making can engage employees, whose constructive involvement is key in a company's effective liability management.

Regulations for determining corporate environmental liabilities are complex. So are the disclosure requirements for those liabilities. Terms for disclosure may seem technical and unfamiliar. For example, what exactly is an asset retirement obligation? How does it differ from a loss contingency? Which cost methods are used? How and when are costs accrued? What is disclosed? What representation is required of management? It may seem intimidating. No wonder appropriate disclosure can become inappropriately postponed.

Enactment of Sarbanes-Oxley has established with no uncertainty that top executives of corporations are accountable, including personally, for disclosure information and decisions. Top executives must certify disclosure controls and procedures and internal control over financial reporting. Criminal penalties for a financial statement “that does not comport” may bring fines and imprisonment. Recent resolution of some SEC enforcement actions has shown how costly improper environmental disclosure can be to former executives.

Go to disclosure Services of Rose Environmental »