SEC’s Proposed Carbon Rules Alarm Farm Groups


SEC’s Proposed Carbon Rules Alarm Farm Groups

The Securities and Exchange Commission (SEC)’s proposed rules requiring climate-related disclosures in corporate reports raised concerns among farming organizations that rules will be almost impossible to implement and punish smaller-scale producers.

The proposed “Enhancement and Standardization of Climate-Related Disclosures for Investors” would require companies to track in annual reports and registration statements all emission sources directly and indirectly related to their supply chain (Scope 3), which includes any grower they may have sourced from.

But producers of commodity crops say compiling greenhouse gas analyses for bulk ag products would be economically unfeasible to administer and drive up prices. The proposed rules will lead to mandatory requirements for uninvolved parties of a supposedly “voluntary” program.

A small farmer’s grain can be traded 10 or more times before it actually ships to its final destination, and a single farmer’s grain could end up with 100 different buyers as a result of bulk storage and liquid cash markets. Inversely, a single major buyer (Cargill, ADM, Bunge) has risk exposure to the vast majority of producers in any principal commodity market (corn, wheat, soy). The proposed program would force small growers to comply with a process that only benefits the largest corporations.

Implementing these new rules could drive consumer prices up because 30-50% of grocery retail prices are tied to logistics and supply-chain costs.

The American Farm Bureau Federation, along with cattle farmers, poultry, dairy and hog producer associations called the proposed rules “wildly burdensome and expensive if not altogether impossible for many small and mid-sized farmers to comply with.”
Should this or similar language pass, independent farmers in America – producers who make up around 43% of the acreagein the US agriculture ecosystem – risk getting squeezed out of the voluntary carbon market.

Compromise Needed

The SEC must optimize opportunity and minimize turmoil for small-to-average farmers.

Compromise can take many forms, but must focus on two areas: First, regenerative practices can be expensive and growers need incentives to safely transition to climate-smart agriculture. 

Second, mandatory reporting in an individual firm’s insetting program serviced by a gargantuan international supply chain must protect smaller farmers,  because it has the potential to be a coercive tool for large agriculture companies against smaller ones. 

In the end, it may take segmenting regulation within agricultural supply chains so that growers are rewarded for their efforts and protected  from the perceived risks of transitioning to regenerative practices.