Log in to view your state's edition
You are not logged in
Free Special Reports
Get Your FREE Special Report. Download Any One Of These FREE Special Reports, Instantly!
Featured Special Report
Claim Your Free Copy of 2018 EHS Salary Guide

This report will help you evaluate if you are being paid a fair amount for the responsibilities you are shouldering.

In addition, EHS managers can find the information to keep their departments competitive and efficient—an easy way to guarantee you are paying the right amount to retain hard-to-fill positions but not overpaying on others.

Download Now!
Bookmark and Share
September 08, 2020
Changes to SEC requirements impact environmental disclosures

On August 26, 2020, the U.S. Securities and Exchange Commission (SEC) announced amendments to “modernize disclosures of business, legal proceedings and risk factors under Regulation S-K” for publicly traded companies. These are the first significant amendments to these disclosure requirements in more than 30 years.

As an EHS professional, it’s hard to tell if you are being paid competitively, and as an employer, it’s hard to tell if you are offering salaries that are competitive and efficient. For a Limited Time we’re offering a FREE copy of the 2018 EHS Salary Guide! Download Now

SEC Chairman Jay Clayton said, “Today we modernized our public company business disclosure rules.… Building on our time-tested, principles-based disclosure framework, the rules we adopt today are rooted in materiality and seek to elicit information that will allow today's investors to make more informed investment decisions. I am particularly supportive of the increased focus on human capital disclosures, which for various industries and companies can be an important driver of long-term value.”

Of significant importance to companies dealing with environmental factors are the changes to Items 103 and 105.

Legal Proceedings (Item 103)

Public companies’ requirements to disclose legal proceedings have been streamlined by allowing the cross-referencing and inclusions of hyperlinks within their disclosure statements to avoid duplicative disclosures.

Companies were previously required to report environmental fines and proceedings at a threshold of $100,000. That material threshold for disclosure has been increased to $300,000; this amount can be higher based on certain conditions. Those conditions take into consideration the value of the company and increase the material value of the environmental proceedings reported not to exceed the lesser of $1 million or 1 percent of the company’s current assets.

Risk Factors (Item 105)

Another streamlining measure is a change in requiring only the disclosure of “material risk factors” instead of “significant risk factors.”

Modifications were also made to the organization and length requirements for Item 105. The existing requirements for a 10-point font size remain in place. Now, when the risk factors disclosure statements exceed 15 pages, a summary of those risks must be provided that cannot exceed 2 pages in length. Many companies have historically provided section headings voluntarily. These headings are now required.

Description of Business (Item 101)

The amendments require companies to report “disclosure of information material to an understanding of the general development of the business” during the previous 5 years (or for a shorter time frame if the company has not been in business for 5 years). For smaller public companies, the time frame is 3 years.

The amendment includes a list of four nonexclusive topics on which public companies are required to report if these disclosures impact the general growth and development of the business. These topics are:

  1. Any material changes to a previously disclosed business strategy;
  2. The nature and effects of any material bankruptcy, receivership, or similar proceeding with respect to the company or any of its significant subsidiaries;
  3. The nature and effects of any material reclassification, merger, or consolidation of the company or any of its significant subsidiaries; and
  4. The acquisition or disposition of any material number of assets other than in the ordinary course of business.

Companies are still required to report information relevant to the understanding of the companies’ development even if this information falls outside of the four topics listed.

The final amendments include identifying “various human capital measures and objectives that address the attraction, development and retention of personnel as non-exclusive examples of subjects that may be material, depending on the nature of the company’s business and workforce,” according to The National Law Review.

The SEC’s emphasis is that each company’s disclosures must be “tailored to its unique business, workforce, and facts and circumstances.”

Additionally, the scope of regulatory disclosures is expanded beyond environmental laws to include all government regulations that materially impact the company.

Businesses subject to these disclosure requirements are advised to carefully review these changed requirements.

Featured Special Report:
2018 EHS Salary Guide
Twitter   Facebook   Linked In
Follow Us