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95 Wash. L. Rev. Online 57 (2020)

handle is hein.journals/wlro95 and id is 1 raw text is: ACCOUNTING FOR ENVIRONMENTAL STANDARDS Malori M. McGill* Abstract: A meaningful percentage of the regulation that companies in the United States must follow concerns two distinct topics: accounting and the environment. The values underlying the regulatory framework of securities and the environment are distinct, but they are not wholly opposite. This Comment responds to growing trends of private governance in the area of environmental regulation. Besides federal regulation, a significant portion of environmental regulation touching U.S. companies today remains sourced from and enforced by private standard-setters. Federal accounting regulations are now governed by the Financial Accounting Standards Board (FASB)-a private entity recognized by the Securities and Exchange Commission (SEC)-but almost all federal accounting regulations once found their authority solely in private sources. Mirroring accounting regulation's history, the federal government may choose to outsource environmental standard-setting to one or more of these already-operating private standard-setters in exchange for their expertise, resources, and recognition. Drawing on parallels from the regulatory history of the accounting industry, this Comment cautions that the purposes of environmental regulation demand a more democratic process. Beginning with an overview of government-created and -outsourced corporations, and turning to a dissection of FASB's structure under the federal government, this Comment concludes that private environmental standard-setters will face potential legal issues if the government adopts them in a manner similar to FASB's delegation as the authoritative standard setter. The broad implications of environmental standards and regulations-and the prominent and diverse social values driving them-demand a process more deeply rooted in democracy before they become authoritative law at federal levels. INTRODUCTION Despite broad federal regulation of the environment, scholars suggest that environmental preferences-historically exposed, recognized, and enforced through political processes-are increasingly expressed and derived from private interactions in social settings and the marketplace.' So-called private environmental governance is on the rise,2 meaning environmental objectives and preferences are being addressed through private contract. For example, companies are now commonly subjecting . J.D. Candidate, University of Washington School of Law, Class of 2020. I would like to thank Professor Sanne Knudsen for her incredibly thoughtful guidance and comments, as well as Professors Ryan Cato and Jennifer Fan for offering their expertise. I would also like to thank Professor Kathryn Watts for sparking my initial interest in the constitutional and administrative law topics discussed in this piece. Finally, thank you to the editors at Washington Law Review for the valuable time and efforts they offered in helping me publish. 1. Michael P. Vandenbergh, Private Environmental Governance, 99 CORNELL L. REV. 129, 133 (2013). 2. See, e.g., id. at 135 (noting that U.S. corporations spend more on private environmental investigations than the annual enforcement budget of the EPA). 57

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