The Security and Exchange Commission’s (SEC) proposed rule to require climate disclosures by public companies could severely impact family farms and ranches and intensify the already concerning rate of consolidation in agriculture. American Farm Bureau Federation economists discuss potential impacts of “The Enhancement and Standardization of Climate Related Disclosures for Investors” proposed rule in the latest Market Intel.
The proposed rule requires extensive requirements for public companies to report on Scope 3 emissions, which are the result of activities from assets not owned or controlled by an organization 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 supply chain. AFBF economists anticipate reporting requirements for farms “could create several substantial costs and liabilities, such as reporting obligations, technical challenges, significant financial and operational disruption and the risk of financially crippling legal liabilities.”
“Farmers have never been subjected to regulations intended for Wall Street,” said AFBF President Zippy Duvall. “This proposed rule is an example of overreach by the SEC, whose primary purpose is to protect investors from unscrupulous business practices. Unlike large corporations currently regulated by the SEC, farmers don’t have a team of compliance officers or attorneys dedicated to handling SEC compliance issues. This proposal could keep small farms from doing business with public companies at a time when all farms are needed to ensure food security here and abroad.”
AFBF economists expect the proposed SEC rule to impact farmers and ranchers through:
- Increased costs due to compliance concerns. Farmers could be required to track and disclose information on day-to-day activities;
- Potentially requiring private and personally identifiable data. Unlike public companies and corporations, farmers work and raise families in their place of business;
- Consolidation, as small farms lack the resources to comply with burdensome reporting requirements;
- Increased liability because the timeline given to comply with Scope 3 emissions is unattainable.
The SEC proposed rule is 510 pages long, with 1,068 technical footnotes and 750 direct questions, but the SEC has only given farmers 39 days for review, with public comments due May 20.
“This appears to be an example of overreach by the Securities and Exchange Commission,” said Duvall. “Farmers and ranchers are already heavily regulated by multiple agencies at the local, state and the federal level. New SEC reporting requirements will no doubt make an already complicated patchwork of regulations even more cumbersome.