risdiction of various accounting standards due to the materiality of the event. How-
ever, the past few years have seen the introduction of mandatory reporting require-
ments in a number of countries. The following is a brief description of mandatory en-
vironmental reporting requirements in a selection of countries.
(i) United States. Registrants to the U.S. Securities and Exchange Commission
(SEC) are required to disclose material information to actual and potential share-
holders related to environmental performance, compliance and liabilities. In this con-
text, the SEC Regulation S-K Item 101, Item 103, and Item 303 require disclosure of
material information on environmental performance. Regulation S-K Item 101 (De-
scription of Business) requires registrants to disclose the material effects of comply-
ing or failing to comply with environmental requirements on capital expenditures,
earning and competitive position. Regulation S-K Item 103 requires that SEC regis-
trants disclose, on at least a quarterly basis, pending procedures or proceedings
known to be contemplated by a governmental authority such as the Environmental
Protection Agency (EPA). Such disclosure is qualified by the concept of materiality.
Regulation S-K Item 303 (Management Discussion and Analysis of Financial Con-
dition and Results of Operations) requires the disclosure of environmental contin-
gencies that may reasonably have a material impact on net sales, revenue or income
from continuing operations.^1
(ii) Australia. In 1998, Australia introduced the requirement that companies manda-
torily disclose their environmental performance. The initial introduction of
s.299(1)(f) of the Corporations Act was controversial due to its introduction requir-
ing broad consultation, and hence was subject to a government inquiry after enact-
ment. Despite considerable opposition from corporations and associated legal and ac-
counting firms, the provision remains. Section 299(1)(f) of the Australian
Corporations Actstates:
- Annual Directors’ Report—General Information
(1) General information about operations and activities:
The Directors’ Report for a financial year must:
...
(f ) if the entity’s operations are subject to any particular and significant environmental
regulation under a law of the Commonwealth or of a State or Territory—details of the
entity’s performance in relation to environmental regulation.
The key to disclosure under s.299(1)(f) is that it relates to significant regulation,
which was not defined in the Corporations Act. The Australian Securities and Invest-
ment Commission (ASIC) have determined that significant does not necessarily
mean material (which is the basis of the SEC’s regulations). However, ASIC also did
not provide a definition of significant. This has resulted in companies recognizing
and listing the regulations by which they must abide. Prior research^2 has indicated
that the introduction of s.299(1)(f) has resulted in a significant increase in the level
23 • 2 CORPORATE ENVIRONMENTAL AND SOCIAL REPORTING(^1) Environmental Protection Agency, 2001.
(^2) Frost, 2001.