The new millennium seems to be all about corporate disclosure. From executive benefits packages to goodwill valuation, shareholders, investors and the public are demanding that companies be more forthcoming with information.
Environmental disclosure is one area where manufacturers will see significant changes.
“The SEC was approached by stockholders and numerous investment firms,” says Nick Zingale, president of Affinity Consultants, an environmental and safety consulting firm. “They are asking the SEC to force companies to disclose environmental information to report these environmental exposure issues more aggressively.”
Previously, it was very much a “don’t ask, don’t tell” mentality. Even during a merger or acquisition, businesses were not required to reveal possible or pending EPA violations to investors and stockholders
“(The company) knows what it is facing, but because there is no formal litigation, it is not disclosed to the stockholders before a formal settlement,” says Zingale.
With recent pressure, potential environmental liabilities must be disclosed on Item 303 of Regulation S-K, the form that requires companies to disclose known risks and uncertainties that are likely to affect future financial performance. This includes everything from having the proper air permits to pending fines for stream run-off or Superfund cleanup.
But Zingale points out that disclosing that information to shareholders, potential investors and/or partners is just the tip of the iceberg. The real potentially problematic issues come with disclosure to the public.
“The bigger issue is how the company is going to handle the public disclosure and the outrage related to the issue,” says Zingale.
Zingale stresses there is an emotional side to any large environmental problem, and businesses have to be prepared to deal with that as well as with the technical issues. He suggests that any company facing these issues keep some things in mind.
“First, stake out the middle ground and not the extreme,” says Zingale. “Just come out and say you did it.”
Take a cue from Exxon and the Valdez crisis — don’t try to lay blame where is doesn’t belong. Also, “the more often you apologize, the sooner people will want to move on … the public gets conditioned.
“Share control and be accountable,” Zingale says.
If you allow regulators, activists and neighbors to share in controlling the situation, then they take on some of the accountability. How to reach: Affinity Consultants, (330) 854-9066.
