The management of Clean Corporation is concerned about the growing demand on the part of investors and the public in general for environmental disclosures in annual reports. In reviewing a number of foreign competitors’ annual reports you observe a number of environmental disclosures including; actual and contingent liabilities for the cost of environmental clean-up, corporate programs and policies to protect the environment, and self-assessment reports of internal goals reached with respect to its environmental protection measures. You also notices that some companies include environmental disclosures in their annual reports while others prepare a separate report. The management of Clean is agonizing over the extent and type of environmental disclosures to provide in the company’s next annual report. They have hired a consultant to work along with you to help them establish environmental reporting policies.
a. In your opinion are environmental disclosures in company annual reports necessary? Explain.
b. What specific environmental disclosures should companies provide? Why?