Increased Scrutiny of Environmental Reporting Systems Warrants Carefully Calculated Response

Originally published June 2004

For nearly two years now, rules implementing the Sarbanes-Oxley Act of 2002 have required CEOs and CFOs of public companies to certify both the contents of their companies’ SEC reports and the financial and disclosure controls and processes that produce these reports. The certification process has put a bright spotlight on how environmental health and safety (EHS) managers and in-house counsel identify, estimate, internally report and prepare public disclosures of potential environmental costs and loss contingencies. During that same period, auditors have more frequently asked for documentation showing what procedures EHS managers follow in gathering and gauging information concerning the existence of potential costs and liabilities and the likelihood of their occurrence. That trend is likely to increase with the approaching effective date of SEC and Public Company Accounting Oversight Board rules requiring management evaluations and certifications