May 10, 2022
The Securities and Exchange Commission announced it will extend the comment period to June 17 on its reporting requirements proposal on climate change-related information from publicly-traded companies and their customers, suppliers and distributors.
In late March, the SEC voted 3-1 to advance the climate-reporting rule, publishing the more than 500-page proposal in the April 11 Federal Register, with a comment period set to end May 20. A total of 119 agricultural organizations sent a letter to the SEC asking for additional time to review and comment on the proposed regulation, noting that farmers were not normally regulated by the SEC and needed to fully understand the implications of the rule.
The proposed regulation would mandate publicly-traded companies to report on their carbon emissions and other climate-related information, providing risk analyses, goals, and other potentially sensitive company data, as well as similar information from any companies with which they do business.
The proposal would require public companies to report on Scope 3 emissions, which are the result of activities from assets not owned or controlled by a publicly traded company but contribute to its value chain. “While farmers and ranchers would not be required to report directly to the SEC, they provide almost every raw product that goes into the food supply chain,” explains Zippy Duvall, president of the American Farm Bureau Federation.
“We have deep concerns that the SEC is proposing a rule that will subject farmers to regulations that are intended for Wall Street. Unlike large corporations currently regulated by the SEC, farmers don’t have teams of compliance officers and attorneys dedicated to handling SEC compliance issues,” Duvall says. “Increased costs, legal liabilities and privacy concerns could create obstacles to ensuring food security at a time when the world is increasingly looking to America’s farmers for help. We urge the SEC to avoid enacting regulations that will keep farmers and ranchers from focusing on growing the food, fuel and fiber this country needs.”
In a recent Market Intel analysis of the proposed rule written by AFBF Economist Shelby Myers, she explains for agriculture, food and forestry manufacturing alone, there are nearly 2,400 companies registered with the SEC that would be subject to reporting Scope 3 emissions from its farm suppliers. For farmers to stay compliant with the companies that purchase their products downstream, this could mean producers will need to track and disclose on-farm data regarding individual operations and day-to-day activities, Myers writes.
The analysis adds the proposed SEC climate rule could potentially add liability to farmers and ranchers in which their activities could be considered material in a reporting company’s financial disclosures. “The additional issue of this, too, is that the quantification of Scope 3 emissions, and agricultural emissions at that, lack accuracy and consistency. Not to mention the time period proposed in the rule to comply with Scope 3 emissions reporting, within the next three years, is effectively unattainable,” Myers says.
One of the few ways to quantify Scope 3 emissions is through modeling, which can be “wildly unreliable and varies across academic and scientific institutions. The other possibility for monitoring Scope 3 emissions would be through direct monitoring and third-party auditors, which brings another layer of liability to on-farm activities in regard to privacy or the potential liability of injury,” the analysis explains.
Myers says, “As farmers and ranchers already comply with an expansive regulatory regime, these audits would be yet another layer of mandated regulation that potentially includes more regulators coming to farms and ranches to monitor day-to-day activities.”
National Pork Producers Council Chief Executive Officer Bryan Humphreys, one of the signatories on the letter seeking additional time, thanked SEC Chairman Gary Gensler and the SEC for recognizing the concerns of farmers and the challenges they face in understanding and commenting on the commission’s lengthy Climate Disclosures rule.
“Pork producers have a powerful story to tell and are proud of their extensive record of environmental stewardship and the industry’s leading-edge efforts to achieve carbon neutrality,” Humphreys says. “The additional time provided by the SEC allows farmers to provide more valuable information to the Commission as it continues to work on developing its disclosure rule.”
NPPC says it will continue to work with its partners and the SEC to provide industry sustainability information. AFBF also has a form letter for farmers to send to the SEC to provide their input on the proposed rule.
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