Leading farm groups are calling on the Securities and Exchange Commission to exempt agriculture from proposed requirements that corporations start disclosing the greenhouse gas emissions in their supply chains.
Comments filed with the SEC and signed by 10 organizations — including the American Farm Bureau Federation, Agricultural Retailers Association and commodity groups representing corn, soybeans, wheat, cotton, beef, pork, poultry and potatoes — say the disclosure requirements would be “wildly burdensome and expensive” for farmers and potentially put small and mid-size farmers out of business.
“When farmers and ranchers cannot afford the overhead required to comply, they will have no choice but to consolidate,” the groups argued.
While asking for an ag exemption, the groups also appealed to the commission to increase the liability protections for emissions data that companies disclose and urged the SEC to drop a requirement that companies provide location data for emissions. The coalition says such data could be used to identify individual farms.
The groups also suggest the rule could violate a provision contained in annual appropriations legislation barring the government from requiring reporting on emissions from manure management systems. The groups say “manure management is a significant part of dairy, meat, poultry and protein production.”
Representatives of the Farm Bureau, NCBA, NPPC and the law firm Sidley Austin, met with SEC staff on May 5 to discuss the disclosure requirements, according to commission records.
It's clear from the comments those and other ag groups have filed with SEC that their concerns extend beyond what the proposed rule specifically would require to what food companies may demand from producers in terms of data as a result of the commission's disclosure plan, as well as the resulting verification and liability issues that would follow.
"The agricultural industry is very concerned that they will ultimately bear the burden of providing the required data," Kristi Boswell, a lawyer with Alston and Bird, told Agri-Pulse. "This will unduly burden farmers, especially small and medium sized farmers, potentially forcing consolidation to meet proposed disclosure requirements."
Several groups, including the National Council of Farmer Cooperatives and the two main dairy industry organizations, the National Milk Producers Federation and International Dairy Foods Association, and the United Egg Producers, filed separate comments raising concerns about the impact of the disclosure requirements on farms.
SEC Commissioner Caroline CrenshawUnder the plan the SEC announced in March, publicly traded corporations would have to start tracking and disclosing emissions in their supply chains, known as Scope 3 emissions, if those emissions would be “material” to investors or if companies have set targets for reducing those emissions.
“We expect that large purchasers of agricultural products, including grocery and other retail chains, will identify the emissions of their value chain as material and, as a result, be required to report Scope 3 emissions data,” NCFC said in its comments.
Similarly, IDFA said “measuring and reporting of GHG emissions would be a prerequisite for doing business with registrants and most retailers under this proposal.” IDFA’s membership includes companies such as Nestlé, Hilmar Cheese, Kraft Heinz and Wal-Mart.
The SEC proposal says companies can use industry averages and the Environmental Protection Agency’s industry estimates in reporting Scope 3 emissions. IDFA expressed support for that provision.
But NCFC warned that if companies “feel that they are required to demand producer-level data, small and medium producers will be hardest hit by the additional recordkeeping and administrative burden and the capital investment required to meet these demands.”
The National Milk Producers Federation also argued that companies are likely to demand emissions data from farms because of the disclosure requirements. And the group argued that could undermine the industry’s progress toward meeting its pledge to be carbon neutral by 2050. A lack of qualified verification services means “unqualified individuals will attempt on-farm assessments, thereby reducing credibility with farmers and resulting in faulty data collection,” the group said.
The National Restaurant Association claims the requirements could force restaurants to move away from sourcing locally produced ingredients.
The proposal “creates a perverse incentive for companies to centralize all supply chain products in the attempt to accurately track data, at a time when less-centralized and more locally driven food is considered to be a way to combat climate change,” NRA said.
The disclosure requirements will make it “easier and cheaper for restaurants to transact with larger, more centralized suppliers who can more easily provide emissions data than it will be to transact with local suppliers and farmers,” the group said.
But supporters of the rule argue the ag sector’s concerns are overblown and that industry emissions estimates will be sufficient to comply with the disclosure rules.
“Some small farmers and businesses have submitted comments indicating their concern that the compliance costs of the rule would reach them. However, large public companies regularly comply with voluntary emissions reporting standards through estimated, rather than measured, supply chain emissions,” according to comments provided by the Environmental Defense Fund and the Institute for Policy Integrity at the New York University School of Law.
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A group of eight Democratic senators, including some representing major farm states, Alex Padilla of California, Tammy Baldwin of Wisconsin and Sherrod Brown of Ohio, filed comments with the SEC emphasizing the importance in their view of including ag emissions.
The commission “should make clear that Scope 3 emissions from the forest, food, and land sectors are material,” the senators wrote.
Sen. Tammy Baldwin, D-Wisc. “These land-intensive industries make significant contributions to global emissions, particularly from land-use change and deforestation driven by tropical commodities. Downstream registrants contributing to tropical commodity-driven deforestation include major food, beverage, and retail companies, and their forest and land-use emissions are currently underreported.”
The issue of potential legal liability for Scope 3 emissions data is a significant concern across the ag sector. The farm groups want the commission to provide greater liability protection by considering the data as “furnished,” rather than “filed” with the SEC. Data that is filed with the SEC is held to a higher legal standard.
The coalition of 10 farm groups said classifying climate-related information with the lower liability standard “would be more appropriate for these types of variable and uncertain disclosures.”
Some environmental groups argued for tightening the liability requirements.
“Obtaining reliable Scope 3 emissions data will become easier over time, especially as the deadlines for the initial Scope 3 disclosures arrive,” according to comments backed by groups including Public Citizen, the Sierra Club, Friends of the Earth, the Union of Concerned Scientists and League of Conservation Voters. The Institute for Agriculture and Trade Policy and National Sustainable Agriculture Coalition also signed the comments.
The coalition of 10 farm groups also warned that the disclosure requirements could backfire by discouraging companies from setting targets for emissions reductions or to retract goals they’ve already set. That, in turn, would reduce the food industry’s interest in climate-related farm practices, the groups said.
If corporations are no longer incentivized to buy “environmentally friendly” commodities, “the farms and ranches that offer these products will economically suffer as a consequence,” the groups said.
The Fertilizer Institute, which represents fertilizer manufacturers, appealed to the commission to extend the compliance dates by a year, noting that large companies would only have until January. “Should the proposal undergo further changes during the rulemaking process, there would be even less time to prepare for compliance,” the group said.
A leading producer of plant-based meat alternatives, Impossible Foods, told the SEC the rule doesn’t go far enough in mandating the reporting of Scope 3 emissions.
”A large percentage of companies in carbon-intensive sectors such as manufacturing, food, beverage, and agriculture industries have been leaving investors in the dark about the extent of the emissions they generate, the climate-related financial risks, and how they are managing and mitigating those emissions and risks,” the company said.
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