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Feeling The Heat

It's time that U.S.-listed companies take the lead in applying risk mitigation tactics, honed by Sarbanes-oxley, to climate change risks

By Douglas G. Cogan | Updated on February 01, 2007

Climate change was far from the minds of those who drafted the Sarbanes-Oxley Act–as it is for those who criticize the law today as going too far. Yet the legislation’s emphasis on internal controls to manage forward-looking risks makes climate change a vital test of how companies intend to honor SarbOx going forward–and like-wise, how well the law helps companies stem the risks from global warming.

As U.S. Treasury Secretary Henry Paulson remarked in a recent address on SarbOx, “The threshold question [companies should ask] is, ‘Is this right?’ not ‘Do the rules allow us to do this?’” Under Paulson’s interpretation, companies must focus less on the minutiae of making legally compliant financial statements and more on the long-term operational, competitive and reputational risks facing their enterprises.

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