September 2009 – Push for Disclosure of Environmental Risks Expected to Lead to New SEC Requirements

The pending Climate Change regulations and government initiatives have encouraged the Securities and Exchanges Commission (SEC) to consider requiring additional disclosure of environmental risks.


  • The SEC is being petitioned to issue interpretative guidance that specifically stipulates that climate change has an opportunity to be classified as a material risk under existing SEC Regulation S-K.
  • This change would require companies to report environmental risks through regular filings just as other types of material risks are regularly reported
  • Traditionally, the SEC has defined “material risk” as an item that represents an uncertainty that could affect a company’s earnings by 5-10 percent or more
  • The proposed rule by the EPA to require fossil fuel suppliers, industrial gas suppliers, and direct greenhouse gas emitters that emit more than 25,000 tons of carbon dioxide or carbon dioxide-equivalent greenhouse gases annually to report their greenhouse gas emission combined with the carbon cap and trade language of H.R. 2454 would increase the necessity of environmental disclosures on SEC filings because the emissions could then be quantitatively judged to be a material risk


  • Under SEC Regulation S-K, companies may need to reference environmental trends, uncertainties, and financial conditions that may affect operations on certain SEC filings to inform the investing public of issues facing the company.
  • The requirements that are expected to be issued will provide guidance on current disclosure requirements relating to the materiality of risks posed by climate change including:
  • Enforcing existing disclosure requirements for material environmental risks;
  • Permitting shareholders to submit resolutions at corporate meetings related to climate change; and
  • Requiring disclosure of material environmental risks based on the Global Reporting Initiative, an existing standard used by more than 1,000 companies to measure and report their economic, environmental, and social performances, including measurements of greenhouse gas emissions, labor standards, and human rights.


  • Create a task force within your organization to track legislation and regulatory developments; Watch for EHS Support Alerts to keep informed on updates
  • Although the framework and measurement criteria for reporting have not been finalized, EHS Support recommends you take a proactive approach to these probable regulatory requirements including notification of senior management and a structured approach to defining these liabilities in- side your company that supports consistent, comparable, and reliable assessment, measurement, and reporting.

For more information about SEC requirements or determining how the pending Climate Change regulations may impact your business or accrual process, contact Andy Patz at or 412-215-7703.



Related Posts