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Proposed SEC Sustainability Disclosures Concern Agriculture

05/09/2022

The U.S. Security and Exchange Commission (SEC) has requested comments on a proposed rule entitled The Enhancement and Standardization of Climate Related Disclosures for Investors. The proposal follows standard practice in the E.U. and industrialized and mid-development nations. The climate –reporting rule was approved by the SEC during late March 2022.

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Approximately one hundred agricultural associations representing producer groups requested a three-month extension to November 15th to file comments. In the event on May 9th the SEC granted an extension to June 17th to respond to the proposed rule extending to 500 pages as published in the April 11th edition of the Federal Register.

 

In a letter addressed to Vanessa Countryman, Secretary of the SEC, the agricultural associations noted that the requirements to report greenhouse gas emissions will generate cost and expose companies to liability. The letter, stated, "these include reporting obligations, technical challenges, significant financial and operational disruption and the risk of financially-crippling legal liabilities". The letter implied that complying with the requirements as intended would "have meaningful consequences for our members' ability to produce this Country's food, fuel and fiber as well as for the security of U.S. agricultural supply chains”. An important issue for agriculture will be the disclosure of supply chains that in the case of livestock and crops include numerous farmers.

 

Egg-NewsWhile some form of reporting of sustainability practices and policy is both beneficial and inevitable, the development of regulations and compliance by public-traded companies will require careful evaluation. The purpose is to provide investors with relevant information on which to base financial decisions but at the same time the burden of increased cost and lowered productivity are important potential limitations. Fortunately, there is sufficient guidance from existing regulations and practices followed in other nations that could be studied and adapted to suit U.S. circumstances. It is noted that many companies in diverse segments of the economy are issuing sustainability reports for the guidance of shareholders. The SEC regulation would standardize formats and eliminate “geenwashing”.