Earth in the Balance Sheet

The past few weeks have seen an acceleration in efforts to get publicly traded companies to more accurately disclose and report their environmental liabilities and risks.

Advocacy groups like CERES have been hammering companies on this for years, with some success, but the fundamental problem remains: There is currently no standard for reporting environmental risks. Yet, environmental liabilities -- from hazardous waste contamination to greenhouse gas emissions -- can pose significant financial burdens to companies and their shareholders.

Things may finally be changing.

The Rose Foundation recently released a report, Fooling Investors and Fooling Themselves, which identifies aggressive accounting and asset management tactics that can lead to environmental accounting fraud. The report -- which identifies a dozen or so companies and describes their efforts at “fooling” -- shows how companies keep information about expensive environmental liabilities like toxic pollution, product health hazards, worker exposure, and global warming away from shareholder scrutiny.

Others concur. A new report by the U.S. Government Accountability Office, the investigative arm of Congress, identified similar accounting inconsistencies. As a result of the report, the the Securities and Exchange Commission has agreed to work closer with the U.S. Environmental Protection Agency to systematically track problems involving corporate environmental disclosure, which had only warranted infrequent attention in the past.

GAO also announced that the SEC has agreed to create a searchable online database that will allow investors and analysts to track environmental liabilities, such as clean-up costs, fines and potential risks from pollution and hazardous materials.