By environmental liability, we mean a balance sheet negativity generated by items concerning the environmental aspects.
In many cases, companies that carry out significantly impactful production processes stipulate that a portion (even a large portion) of their balance sheet be allocated to actions such as the remediation or reclamation of areas compromised by their activities; the removal of existing pollution situations, in surface and deep waters or in the land they own; and the disposal of waste and other hazardous materials generated by past activities.
The costs associated with such actions are generally reported in the Corporate Financial Statements under names similar to “Environmental Risk Fund,” or “Provision for Environmental Liabilities and Charges.”
It is worth noting that when buying and selling industrial land, the clean-up costs that may be required to bring the site back within the margins of legality (as well as, hopefully, within the canons of environmental friendliness) are intimately linked to the assets in question, of which they constitute precisely an environmental liability, which can be duly verified through an Environmental Liabilities Assessment before the negotiation is concluded.