The U.S. Securities Exchange Commission (SEC) has voted to finalize a new climate reporting rule that omits the previously proposed requirement for U.S.-listed companies to disclose Scope 3 greenhouse gas emissions. This decision follows extensive industry feedback and concerns raised by organizations such as the National Grain and Feed Association (NGFA).
In response to the SEC's decision, the NGFA expressed appreciation for the recognition of the complexities involved in calculating Scope 3 emissions. The association highlighted the significant personnel, resources, expertise, and data management required for such calculations, pointing out that the proposed Scope 3 rule would have transferred the reporting burden and associated costs to participants in the agricultural value chain, many of whom lack the necessary resources and expertise. The NGFA emphasized that the final rule mitigates the disproportionate impact on smaller value chain participants and supports a shared approach to achieving market-driven goals for reducing greenhouse gas emissions.
The SEC initially proposed a rule in March 2022, requiring publicly traded companies to disclose certain climate-related information, including "emissions from upstream and downstream activities in the value chain" – referred to as "Scope 3" emissions. However, in June 2022, the NGFA, along with the American Feed Industry Association and the North American Millers Association, submitted comments outlining the burdens that the proposed requirements would impose on the agricultural value chain.
Following these submissions, the final rule approved by the SEC has narrowed the disclosure requirement to Scope 1 and Scope 2 emissions, encompassing emissions directly produced by a company and those associated with its energy consumption. This decision reflects the SEC's consideration of industry concerns and the complexity of measuring and reporting Scope 3 emissions within the agricultural sector.
The SEC's action is a response to the evolving landscape of climate reporting and aims to strike a balance between transparency and practicality for U.S.-listed companies. As the industry continues to navigate climate-related disclosure requirements, the decision to exclude Scope 3 emissions from the final rule has been welcomed by various stakeholders in the agricultural value chain.
