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Commentary: Climate disclosure mandate would burden farmers

Issue Date: May 25, 2022
By Shelby Myers
Shelby Myers
A Securities and Exchange Commission climate proposal, aimed at public companies, could nonetheless subject family farms to costly expenses for data they can’t provide.

The Securities and Exchange Commission is proposing to mandate extensive climate disclosures by public companies, including measured impacts for their entire supply chain. For many of the farmers and ranchers who feed, fuel and clothe America and much of the world, the impact of the rule could be severe.

The agriculture sector provides nearly every raw product that goes into the supply chain, with a valued contribution of over $1 trillion to the U.S. gross domestic product in 2020 and employing over 21 million people. While farmers and ranchers are not public companies required to report directly to the SEC, their obligations through their regulated customers could be enormous.

The proposed rule is the "Enhancement and Standardization of Climate Related Disclosures for Investors." Its reporting requirements for greenhouse gas emissions directly affect farmers' and ranchers' operations and could create substantial costs and liabilities. Ultimately, the rule could have consequences for their ability to produce food, fuel and fiber, and put in jeopardy the stability of the U.S. supply chain.

Most notably for agriculture, the rule proposed by the SEC on March 21 would require disclosure of the greenhouse gas emissions across the entire value chain.The SEC claims that this requirement for greenhouse gas emissions disclosures would "provide investors with information useful in decision-making as an investor assesses a registrant's exposure to, and management of, climate-related risks, and in particular transition risks."

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. The proposed rule would require public companies to disclose the emissions for each significant category of their value chain, expressed in metric tons of carbon dioxide.

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. Unlike large corporations currently regulated by the SEC, farmers do not have teams of compliance officers or attorneys dedicated to handling SEC compliance issues.

This could force farmers of all sizes, but particularly those with small and medium-sized operations, to report data they may be unable to provide, which would result in a costly additional expense or a loss of business to larger farms.

This SEC rule, as proposed, has the potential to require very detailed information from each farm that is not captured anywhere else, down to how many gallons of fuel are put into each piece of machinery and each machine's emissions.

In addition to the massive amount of business data this SEC rule could potentially ask of farmers and ranchers, there is also the issue of data privacy, particularly personal identifying information. Unlike public companies and corporations, farmers work and raise families in their place of business. There are many questions about how their privacy will be protected.

The concern of onerous reporting requirements is not only an issue in regard to disclosing private data and having to find ways to comply with burdensome reporting. It could also disqualify small, family-owned farms from doing business with companies that procure the products grown on that farm. This could lead to more consolidation in agriculture.

This search for supply could push small and medium-sized farmers out of business and force companies to look for products outside of the U.S., adding additional costs to food and limiting food availability.

Farmers and ranchers already comply with expansive legislative and regulatory directives that exist at the local, state and federal levels. The SEC's proposed rule seeks to further extend regulatory burdens on farmers and ranchers, all while lacking appropriate statutory authority. In fact, Congress has been very clear that agencies may not require mandatory reporting of greenhouse gas emissions from livestock.

This rule would move the SEC well beyond its traditional regulatory authority by mandating climate change reporting requirements that will not only regulate publicly traded companies, but will impact every company in the value chain. More importantly, this rule could require public companies to force farmers and ranchers to report personal information and business-related data, raising serious privacy concerns. In this capacity, the SEC would be granted unprecedented jurisdiction over America's farms and ranches, potentially creating onerous compliance requirements for even small farms and ranches with few or no employees.

Farmers and ranchers have been on the forefront of climate mitigation efforts from the very beginning, working on conservation, stewardship efforts and decreasing their greenhouse gas emissions through voluntary efforts. This rule could undermine that progress and force mandates that could eliminate many farms and ranches.

(Shelby Myers is an economist for the American Farm Bureau Federation. She may be contacted at This article was adapted from a Farm Bureau Market Intel report, which can be found at overreach-of-sec-proposed-climate-rule-could-hurt-agriculture.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.

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