Accounting Disclosures of Toxics Release Inventory for 2002

Abstract

The Toxics Release Inventory (TRI), published annually by the U.S. Environmental Protection Agency, contains a rich collection of data about hazardous chemical emissions of American industrial facilities. Mandated by the Emergency Planning and Community Right-to-Know Act of 1986, the TRI is a novel attempt at stimulating pollution control through self-reported disclosure of environmental degradation activities. TRI data are collected and reported at the level of the emitting plant. For each reporting location, information is given by chemical type. This study attempts to determine whether mandated TRI disclosures are carried over to financial reports and other publicly available sources of information about the firm's performance. We examined disclosures of the 200 highest-volume emitters of toxic chemical wastes for 2002 and found no correlation between the level of such releases—as reported in the TRI—and extensiveness of company reporting in non-TRI sources. Separately, we tested for a relationship between the volume of carcinogenic compounds released and financial statement disclosure by these same firms. We found none. Larger companies in our sample (measured by asset size) did appear to be better reporters of their emissions in non-TRI sources than their smaller counterparts in the study. Companies have little motivation to provide an aggregation of the plant-level data they produce for the TRI. The evidence developed in this research is that stakeholders are not supplied with decision-relevant company-wide data regarding TRI-included data. Since firms do not disclose these data, we believe that the usefulness of the TRI would be significantly enhanced if each emitting facility were identified by its highest corporate-level owner.