Under pressure from the Attorney General of New York, Dynegy Inc. recently became the second power-plant operator to agree to disclose pertinent environmental data and related business risks. As part of their standard SEC financial filings, Dynegy and Xcel Energy Inc. must now publish current and forecasted information on carbon emissions, as well as present and future measures taken to stem these emissions. New York will follow up on these feats by trying to convince a handful of other similar companies to agree to such reporting guidelines.
In addition to information on emissions, the power companies must report their perceived financial risks stemming from four sources: regulations handed down by government agencies, legislative measures, civil lawsuits, and environmental degradation. The disclosures are aimed to help investors stay abreast of the information that plays a role in their investment decisions.
This type of mandatory reporting is significant in a number of ways, both symbolic and material. Reporting emissions and environmental risks as part of SEC filings is a clear sign that environmentalism and sustainability are deeply intertwined with the bottom line. Sound environmental practices are now linked to the corporation’s fiduciary duty to its shareholders in the most critical ways—the ways that affect investors’ wallets. In the wake of the recent macroeconomic financial crisis risk is taken increasingly seriously, a fact which could compound the effects of these reporting guidelines. That is, reporting a risk in 2009 could have more profound implications than it would have had in 2007.
Detailing how an energy company itself would be negatively impacted by the impact its operations have on the environment transcends regulatory matters. Legislation and regulations are subject to change every time Congress, the White House, and State Houses turn over. But no amount of lobbying dollars can solve such environmental harm. If energy companies see and show that environmental damage could, in turn, damage everyone’s bank accounts, then greener practices will rapidly follow suit.
Maintaining a double- or triple-bottom line is laudable and important. But at the end of the day, company executives will always care most about the bottom line. If these reporting guidelines continue to gain traction in the business community, they could mark a significant step in using the business world to affect positive change.