Agricultural groups are continuing their efforts to exempt farmers and ranchers from any requirements to track and report emissions under a rule proposed by the Securities and Exchange Commission.

In April 2022, the SEC proposed a rule to require registrants to provide information about climate-related risks likely to impact their business or financial condition.

The rule, called the Enhancement and Standardization of Climate-Related Disclosures for Investors, would require companies to report:

• Direct emissions, called Scope 1.

• Emissions primarily resulting from the generation of electricity they consume, called Scope 2.

• All other indirect emissions, called Scope 3.

Farm groups say Scope 3 would include emissions from the vast majority of farms and ranches, as they provide almost every raw product that goes into the food supply chain.

In a letter to the SEC, the American Farm Bureau Federation and six other agricultural organizations said tracking emissions “will be extremely expensive, invasive and burdensome for farmers and ranchers, at the cost of improved production practices that generate actual environmental gains.”

Family farms, particularly smaller ones, will be hardest hit, with the rule driving greater consolidation and reducing the number of family farms, they said.

“The easiest path for registrants will be to source their inputs from larger corporate operations with greater resources and more sophisticated data-gathering and reporting systems,” the groups said. “Alternatively, registrants may simply vertically integrate their supply chains, leading to further consolidation.”

SEC Chairman Gary Gensler has publicly stated several times that the intent of the commission is to not force nonregistrants — and farmers in particular — to carry the compliance costs or otherwise be burdened by the rule, they said.

“Importantly, he has stated that the intent is not to have public companies ask farmers for their emissions,” they said.

Gensler has also acknowledged that the SEC’s purview is over public companies, not farmers. He has acknowledged that Scope 3 data is not as well developed as Scope 1 and 2. The groups said they greatly appreciate the chairman’s commitment to ensure that farmers and ranchers do not carry the burden of the rule.

“However, as we have seen with countless regulatory regimes over the years, an agency’s benign intent concerning farmers and ranchers is meaningless without an explicit exclusion in the regulatory text,” they said.

This is all the more important for rules of such broad scope, when it becomes impossible to predict all of the indirect effects, particularly to those entities outside the SEC’s jurisdiction, they said.

The only way to ensure that farmers and ranchers are not forced to bear the cost of Scope 3 is to either eliminate it or explicitly exclude agricultural production from its reporting requirements, they said.

The groups pointed out the SEC has ample legal authority to fulfill its intent that farmers and ranchers not bear the costs of the rule.

The letter provided the SEC with a legal analysis and laid out a path for the agency to utilize to exempt agriculture from any obligation to report under the proposed rule.

Also signing the letter were the Agricultural Retailers Association, American Soybean Association, National Cattlemen’s Beef Association, National Corn Growers Association, National Pork Producers Council and North American Meat Institute.