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Market-Based Incentives
Public Disclosure of Environmental Liabilities Can Create Incentives for Improved Compliance
Compliance with the Security and Exchange Commission's (SEC's) requirement to disclose environmental legal proceedings is important to EPA because it increases public access to corporate environmental information. Increased corporate environmental disclosure also helps maintain a level playing field for environmentally responsible companies, helps to raise company awareness concerning environmental issues, and enables capital markets to more fully account for environmental matters.
EPA's Actions to Assure the Availability of Environmental Information
EPA Notifies Parties to Enforcement Actions of Securities and Exchange Commission's Environmental Disclosure Requirements
EPA promotes the disclosure of environmental information in accordance with the SEC's mandatory corporate disclosure requirements as a means of promoting improved environmental performance. In order to increase awareness of those requirements EPA is distributing a "Notice of SEC Registrants' Duty to Disclose Environmental Legal Proceedings" to parties to certain EPA-initiated enforcement actions.
EPA does not determine that each recipient of the Notice is necessarily required to make a public disclosure of the environmental legal proceeding at hand, but advises each recipient to consider the applicability of the SEC's requirements.
- EPA's Notice of SEC Registrants' Duty to Disclose Environmental Legal Proceedings (PDF), (January 19, 2001) (1 pg, 15.9K, About PDF) - Describes the SEC's environmental disclosure requirements and advises companies to determine if they should disclose their involvement in an environmental enforcement action.
- EPA Guidance to Enforcement Staff on distribution of Notice (PDF), (January 19, 2001) (7 pp, 169K, About PDF) - Describes the SEC's environmental disclosure requirements and advises EPA staff on when they should distribute the Notice to enforcement action respondents. Includes the Notice as an attachment.
EPA has also published an Enforcement Alert on its activities to educate parties to environmental enforcement actions about the SEC's Environmental Disclosure Requirements. The publication discusses the SEC's Environmental Disclosure requirements and lists additional informational resources.
The Securities and Exchange Commission's Environmental Disclosure Requirements
The United States' federal securities regulatory system relies upon Securities and Exchange Commission (SEC) registrants to fully disclose material information to actual and potential shareholders to ensure they can make informed investments and for proper market functioning. The SEC's regulations do not promote any particular type of investment over another, but facilitate the free flow of information between regulated companies and the public.
The SEC has several regulatory provisions that specifically require registrant companies to publicly disclose environmental information. See 17 CFR - CHAPTER II - PART 229.
Securities and Exchange Commission Regulation S-K, Item 101 - Description of Business- (17 CFR 229.101) Requires SEC registrants to disclose, among other things, the material effects of complying or failing to comply with environmental requirements on the capital expenditures, earnings and competitive position of the registrant and its subsidiaries.
Securities and Exchange Commission Regulation S-K, Item 103 - Legal Proceedings - (17 CFR 229.103) Requires SEC registrants to disclose, on at least a quarterly basis, pending environmental legal proceedings or proceedings known to be contemplated, which meet any of three qualifying conditions: (1) materiality, (2) 10% of current assets, or (3) monetary sanctions.
Securities and Exchange Commission Regulation S-K, Item 303 - Management's Discussion and Analysis of Financial Condition and Results of Operations - (17 CFR 229.303) Requires SEC registrants to disclose environmental contingencies that may reasonably have material impact on net sales, revenue, or income from continuing operations.
SEC Contact for Environmental Disclosure Issues - The SEC's Office of Senior Special Counsel for Disclosure Operations has a phone line dedicated to answering questions related to environmental disclosure issues. Call (202) 942-1888.
Public Resources to Access Environmental and Financial Information
The SEC's Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) is designed to increase the efficiency and fairness of the securities market for the benefit of investors, corporations, and the economy by accelerating the receipt, acceptance, dissemination, and analysis of time-sensitive information filed with the SEC. Through EDGAR the public can access and review quarterly (10-Q) and annual (10-K) and other periodic statements filed electronically by SEC Registrants.
The Securities and Exchange Commission website (www.sec.gov) includes numerous information resources for investors and the public. [EDGAR is directly accessible only through the SEC homepage.]
EPA's Environmental Compliance History Online (ECHO) - a Web-based tool that provides public access to environmental compliance and enforcement information for approximately 800,000 EPA-regulated facilities. ECHO allows users to find permit, inspection, violation, enforcement action, and penalty information covering the past two years. Users can obtain information about one or more facilities and have them plotted on a map. The site includes facilities regulated as Clean Air Act stationary sources, Clean Water Act direct dischargers, and Resource Conservation and Recovery Act hazardous waste generators/handlers. The data in ECHO are updated monthly.
Tips for Users: While SEC organizes disclosed information according to the name of registrant corporations, EPA's records on environmental performance are facility-based. ECHO allows users to search for records according to numerous criteria, including Standard Industrial Classification (SIC) codes to compare information within industry categories. Additionally, ECHO allows users to search for only those facilities that have been involved in formal enforcement actions or against whom penalties have been levied. Use the "Search Compliance Data (All Programs)" interface to access these search features. For a fee, private companies, such as Dunn and Bradstreet and Hoover's Inc. will identify a facility's corporate parent. The SEC website and financial websites, such as Yahoo.com's provide look-up services that are free of charge that indicate whether companies are publicly traded.