July 11, 2003
Members of Congress Consider Social and Environmental Disclosure in SEC Filings
by William Baue
A group of Senators and Representatives summoned a symposium on the need for social and
environmental disclosure by companies in their SEC filings.
Yesterday at the U.S. Capitol, Senator Jon Corzine (D-NJ) convened a Congressional symposium to
consider the current state of public company disclosure of environmental and social risks in
Securities and Exchange Commission (SEC) filings. Symposium co-sponsors specifically placed the
event in the context of the broad corporate and securities reforms currently underway in response
to recent notorious accounting scandals.
"The socially responsible investment (SRI)
community has long believed that superior corporate social and environmental performance is good
not only for sustainability, but for long-term shareholder value," said Michelle Chan-Fishel. She
moderated part of the symposium in her capacity as chair of the Corporate
Sunshine Working Group, which helped
organize the event. The Corporate Sunshine Working Group is an alliance of investors,
environmental organizations, unions, and public interest groups working to enforce and expand SEC
corporate social and environmental disclosure requirements.
Ms. Chan-Fishel, who also
coordinates the green investments program for Friends
of the Earth (FoE), wrote a 2002 report that found only 15 percent of U.S. companies from
carbon-intensive sectors discussed climate change risks in their 2001 SEC filings. Another report,
issued just this week by the Coalition for
Environmentally Responsible Economies (CERES) and written by the Investor Responsibility Research Center, drew similar conclusions.
"All the symposium co-sponsors and speakers have the same belief: that corporate social
responsibility (CSR) issues are material--and if they are material, they should be disclosed," she
Co-sponsors of the event included Senators James Jeffords (I-VT),
Joe Lieberman (D-CT) and John McCain (R-AZ), as well as Representatives Lloyd Doggett, Henry Waxman
(D-CA), and Barbara Lee (D-CA), among others. Speakers included Commissioner Harvey Goldschmid of
the SEC, Doug Cogan, IRRC's deputy director of social issues and author of the CERES report, and
Treasurer Denise Nappier of the state of Connecticut.
"In my view, we cannot let the
legacy of Enron be limited to reforms in financial accounting, disclosure, and conflicts of
interest," said Treasurer Nappier, who is the principal fiduciary of Connecticut's $18 billion public pension fund. "Half a loaf
of reform is not enough."
"Corporate transparency, accountability and an honest assessment
of risk and liabilities on social and environmental issues will reveal the off-balance sheet
liabilities that could threaten to undermine shareholder value--just as surely as accounting
manipulation and the absence of disclosure undermined Enron shareholders, the workers, the
community, as well as the integrity of our financial markets."
After Treasurer Nappier's
statement, Peter Lehner, assistant attorney general-in-charge of the environmental protection
bureau of the office of New York State
Attorney General Eliot Spitzer, spoke. He invoked the oft-cited 1998 Environmental Protection
Agency (EPA) report that found 74 percent of companies underdisclosed their material environmental
"In other words, even with relatively well-known risks, such as the cost of
cleaning up a Superfund site or the cost of complying with existing clean air or clean water rules,
most companies did not disclose in a manner that EPA believed compliant with the Securities and
Exchange Commission and accounting requirements," said Mr. Lehner.
The symposium ended
with proposals for better social and environmental disclosure. Speakers included Thomas Palley of
George Soros' Open Society Institute,
Jill Ratner, president of the Rose Foundation for
Communities and the Environment, and William Patterson, director of the AFL-CIO's office of
investment. The Corporate Sunshine Working Group posted its own proposals on its website.
In her statement earlier in the event, Treasurer Nappier called for the SEC to create a Blue
Ribbon Task Force to formally review and recommend changes to its existing disclosure rules and
enforcement policies related to social and environmental issues. She specifically suggested that
the task force consider how to revise existing rules to address climate change, and how to convert
the standardized social and environmental protocols of the Global Reporting Initiative (GRI) into
financial reporting mechanisms.
Commissioner Goldschmid expressed "keen interest" in
reading the transcript, which the Corporate Sunshine Working Group will post on its website next
week, and so "with his leadership, the SEC may take some action," according to Ms. Chan-Fishel.
"One thing Commissioner Goldschmid said was that the Supreme Court's definition of
materiality--what a reasonable investor would need to know about a company to making financial or
voting decisions--won't change," Ms. Chan-Fishel reported. "But what reasonable investors and the
public at large finds important over time does change-so issues like global warming, genetic
engineering, human rights, etc...can be included in the purview of what's 'material.'"