At least half of the 13 companies analyzed face expected negative impacts from environmental issues of at least 5 percent of total shareholder value, while several face expected impacts approaching or exceeding 10 percent. Yet a review of the 10K, 10Q, and 8K statements filed by the companies in 1998 and 1999 revealed that few companies adequately disclosed the financial risks or potential competitive impacts arising from their exposures to known environmental uncertainties. Although the WRI research examined only pulp and paper companies, it is not the only sector in which company reports are incomplete concerning their environmental exposure. This lack of disclosure infringes SEC rules designed to protect investors. The SEC's guidelines and rules require companies to report not only information about current conditions affecting the firm, but also any known risks and uncertainties that are likely to have future significant financial effects.
Few companies do a good job of reporting on environmental liabilities and risks.
Our research shows that companies with significantly different environmental performance and risks are often indistinguishable from each other when evaluated by their annual reports. Corporations' lack of disclosure cannot be explained by a lack of relevant information among companies within the industry. Company representatives participated in identifying important impending environmental trends affecting the industry and in estimating probable outcomes of those issues. Despite explicit statements promising vigorous enforcement of disclosure requirements for financially material environmental risks, the SEC's enforcement efforts in this area have been minimal. Of more than 5,000 administrative proceedings initiated by the SEC over the last 25 years, only 3 are based on alleged insufficient disclosure of environmental risks or liabilities.