Some stakeholders who use companies’ filings, such as investors and  researchers, believe that the existing environmental disclosure  requirements allow too much flexibility and are too narrow in scope to  capture important environmental information. Other stakeholders,  primarily those who prepare or file reports with SEC, hold the opposite  view, and said that the scope of the current requirements and guidance is  adequate and that companies need flexibility to accommodate their  individual circumstances. Little Is Known about the Extent to Which Companies Are Disclosing Environmental Information in SEC Filings

Determining what companies should be disclosing in SEC filings is  extremely challenging without having access to company records and  considering the flexibility in the disclosure requirements. Some of the studies provide tentative insights about the  amount of environmental information companies are disclosing but not the  adequacy. One of the consequences of disclosure requirements that are subject to  interpretation—and of not having direct access to company records—is the  difficulty of determining with any certainty whether a low level of  disclosure indicates that the company does not have existing or potential  environmental liabilities, has determined that such liabilities are not  material, or is not adequately complying with disclosure requirements. Eleven of the studies found variations in the amount of information specific  companies were disclosing in their filings with SEC. Adequacy of SEC’s Efforts to Monitor and Enforce Compliance with Environmental Disclosure Requirements Cannot Be Determined

Without better information on the extent of environmental disclosure and  results of SEC’s reviews of companies’ filings, the adequacy of SEC’s efforts  to monitor and enforce compliance with environmental disclosure  requirements cannot be determined. Over the  years, SEC and EPA have made sporadic efforts to coordinate on improving  environmental disclosure. Currently, EPA periodically shares limited  information on specific, environment-related legal proceedings, such as  those involving monetary sanctions. SEC Does Not Systematically Track or Analyze the Results of Its Oversight Efforts

SEC’s primary means to monitor and enforce requirements for the  disclosure of material information—including environmental matters—are  the review of companies’ filings and the issuance of comment letters to  obtain additional information, as appropriate. If a reviewer questions the accuracy or  completeness of the filing and believes that further disclosures may be  warranted, SEC issues a comment letter requesting additional  information. Experts Suggest Changes to Requirements and Guidance, Increased Oversight, and Nonregulatory Actions to Increase and Improve Environmental Disclosure

The experts that we surveyed generally concur with the concerns identified  by stakeholders and offered a variety of suggestions for improving  disclosure or, in some instances, comments about why particular proposals  are unnecessary or unworkable. The suggestions  we obtained fell into three broad categories: modifying disclosure  requirements and guidance, increasing oversight and enforcement, and  adopting nonregulatory approaches to improving disclosure. Among other  things, SEC should consider organizing the information so that agency  officials can systematically determine the most frequently identified  problem areas, analyze trends over time or within particular industries,  and assess the need for additional guidance in certain areas. Scope and Methodology

To determine key stakeholders’ views on how well SEC has defined the  requirements for environmental disclosure, we first identified what  environmental information companies are required to disclose. To obtain suggestions on actions for increasing and improving  environmental disclosure, we conducted a Web-based survey of 30 experts  on environmental disclosure issues. Securities and Exchange Commission, Staff Accounting Bulletin No. Objective: To examine the extent to which companies  disclosed environmental information in their annual  reports to shareholders.
Why GAO Did This Study

To help investors make informed decisions, the Securities and Exchange Commission (SEC) enforces federal securities laws requiring companies to disclose all information that would be considered important or "material" to a reasonable investor, including information on environmental risks and liabilities, in reports filed with SEC. To monitor companies' disclosures, SEC reviews their filings and issues comment letters requesting revisions or additional information, if needed. This report addresses (1) key stakeholders' views on how well SEC has defined the requirements for environmental disclosure, (2) the extent to which companies are disclosing such information in their SEC filings, (3) the adequacy of SEC's efforts to monitor and enforce compliance with disclosure requirements, and (4) experts' suggestions for increasing and improving environmental disclosure.

What GAO Found

Key stakeholders disagree about how well SEC has defined the disclosure requirements for environmental information. Some stakeholders who use companies' filings, such as investor organizations and researchers, maintained that the requirements allow too much flexibility and are too narrow in scope to capture important environmental information. Other stakeholders, primarily those who prepare or file reports with SEC, said that the scope of the current requirements and guidance is adequate and that companies need flexibility to accommodate their individual circumstances. Little is known about the extent to which companies are disclosing environmental information in their filings with SEC. Determining what companies should be disclosing is extremely challenging without access to company records, considering the flexibility in the disclosure requirements. Despite strong methodological limitations, some studies provide tentative insights about the amount of environmental information companies are disclosing and the variation in disclosure among companies. However, the problem in evaluating the adequacy of disclosure is that one cannot determine whether a low level of disclosure means that a company does not have existing or potential environmental liabilities, has determined that such liabilities are not material, or is not adequately complying with disclosure requirements. The adequacy of SEC's efforts to monitor and enforce compliance with environmental disclosure requirements cannot be determined without better information on the extent of environmental disclosure. In addition, SEC does not systematically track the issues raised in its reviews of companies' filings and thus, does not have the information it needs to analyze the frequency of problems involving environmental disclosure, compared with other types of disclosure problems; identify trends over time or within particular industries; or identify areas in which additional guidance may be warranted. Over the years, SEC and EPA have made sporadic efforts to coordinate on improving environmental disclosure; currently, EPA periodically shares limited information on specific, environment-related legal proceedings, such as those involving monetary sanctions. Using a Web-based survey of 30 experts that use disclosure information, including investor organizations and financial analysts among others, GAO obtained suggestions for increasing and improving environmental disclosure in three broad categories: modifying disclosure requirements and guidance, increasing oversight and enforcement, and adopting nonregulatory approaches to improving disclosure. Some of the experts offered comments about why particular proposals are unnecessary or unworkable. GAO also sought the views of representatives of companies that file reports with SEC, who questioned the value and feasibility of some suggestions.