Is Sunshine the Best Disinfectant? the Promise and Problems of Environmental Disclosure

By Graham, Mary | Brookings Review, Spring 2002 | Go to article overview

Is Sunshine the Best Disinfectant? the Promise and Problems of Environmental Disclosure


Graham, Mary, Brookings Review


Last year the U.S. Environmental Protection Agency reported the continuation of a remarkable trend. Releases of toxic chemicals into the environment had declined by 46 percent from 1988 to 1999 even as the economy was growing rapidly. The decline was attributed not to new federal rules and strict penalties, however, but to a newly prominent form of environmental regulation: government-required disclosure of information about environmental risks.

In 1986 Congress passed a new law requiring manufacturers to reveal to the public their toxic releases in standardized form, chemical by chemical and factory by factory. By 1997, the EPA was referring to that disclosure system as one of the most effective environmental requirements ever. During the late 1980s and 1990s, Congress and state legislatures added dozens of other disclosure requirements aimed at improving environmental protection. Traditionally viewed as an underpinning for government standard-setting or enforcement actions, information itself became a regulatory mechanism.

Reducing Risk by Requiring Disclosure

The idea that government-required disclosure can reduce risks is not new in American public policy. In 1933 and 1934, newly elected President Franklin D. Roosevelt championed the approval of the Securities and Exchange Acts, which required companies that sold securities to the public to reveal earnings, obligations, and other data to reduce financial risks to investors. Over time, those disclosure requirements formed the basis for public confidence in the nation's securities markets.

Many parallels exist between those laws and newer systems of environmental disclosure. Both rely on mandatory disclosure of factual information, standardized reporting at regular intervals, and identification of companies, facilities, or products that are the sources of risks. Both are based on the premise that public access to information will strengthen market incentives or political pressures for organizations to minimize risks. Both draw on the idea of Louis D. Brandeis, known as the "people's attorney" for his battles against predatory practices of big business, that "[p]ublicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants."

Now in the wake of the bankruptcy of Enron, Inc., Congress, regulators, and investors are taking a closer look at how financial disclosure works in practice. Mounting evidence suggests that rules can become outdated and managers can manipulate information to deceive rather than inform the investing public. A closer look at the nation's newly prominent systems of environmental disclosure also raises cause for concern. Like other forms of regulation, it turns out, disclosure systems can employ flawed metrics, provide a partial picture of reality, or lack the resources for effective enforcement.

Reducing Environmental Risks

In recent years, Congress and state legislatures have constructed disclosure systems to reduce some of the environmental risks the public fears most, often in response to highly publicized incidents. Congress required manufacturers to reveal their toxic releases after a disastrous chemical leak at a pesticide plant in Bhopal, India, in 1984 killed more than 2,000 people. New Jersey, Massachusetts, California, and other states created even broader systems of disclosure. Congress required local water authorities to send their customers annual accounts of detectable contaminants in drinking water after cryptosporidium invaded Milwaukee's water supply in 1993 and sent 4,400 people to the hospital. Congress required standardized labeling of organic produce amid persistent public concern about pesticide residues in food. Other environmental disclosure systems responded to public fears by providing buyers and renters access to information about hazards from lead-based paint and giving employees access to data about health and safety risks on the job. …

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Is Sunshine the Best Disinfectant? the Promise and Problems of Environmental Disclosure
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