The state of the environment.

• Author: Rotbart, Dean
• Position: Managing corporate environmental liabilities

After decades of warring between corporations and the government over who will fund the cleanup of polluted sites, now the seas are calmer - or are they?

Financial executives throughout the United States, at companies large and small, are beginning to feel more confident about their ability to cope with the awesome technical, legal, managerial and financial problems associated with environmental liabilities.

The turnaround has been rapid, especially for a problem that has its roots in America's industrial revolution and whose final resolution won't come until well into the next century, if then.

For decades, America churned out cars, chemicals, steel, weapons, oil, you name it, on the road to becoming a global economic and military superpower. For much of that period, environmental protection was neither a priority nor a requirement.

Then came the public and regulatory awakening, with the Clean Air and Water Acts, the creation of the Environmental Protection Agency, the Resource Conservation and Recovery Act, and finally the Superfund law.

By 1989, the SEC began to agitate for fuller disclosure of environmental liabilities to shareholders and the public. It subsequently teamed with the EPA to exchange information on those companies that are the worst environmental violators and continues to this day to press for the fullest possible enforcement.

Financial executives are now charged with finding the resources to clean up polluted sites - some of which may have decades' worth of contaminants. Simultaneously, they have to come up with a way to remain solvent in the face of enormous environmental liabilities that are hard to pinpoint, long term in nature, magnets for litigation and mired in public controversy. To make matters worse, the price of failure includes the possibility of civil and criminal penalties.

Initially, the consensus was singularly pessimistic. With hundreds of billions of dollars in estimated remediation costs to come, there wouldn't be enough technical expertise, money, defense attorneys and spin doctors in all of Corporate America to beat back this threat. The forecast: massive shareholder lawsuits, steep regulatory fines, prolonged and rancorous public protests and ultimately dozens if not hundreds of household-name companies left with no choice but to watch environmental liabilities gobble up their entire net worth.

It promised to be an epic business disaster story if there ever was one.

The quiet heroes of this real-life drama, most of whom continue to engage the problem month in and month out, comprise a multidisciplinary army of financial executives, risk managers, accountants, engineers, government regulators, insurance industry executives, lawyers and even environmentalists. Over the past decade, these players overcame their many differences and varying agendas to forge an approach that has made the once unmanageable task of recognizing and...