The House Financial Services Committee Oversight and Investigations Subcommittee heard from Kalamazoo County Farm Bureau member Bill Schultz on Jan. 18 as he detailed the crushing effects a proposed climate disclosure rule from the Securities and Exchange Commission (SEC) would have on his family farm — and countless others across the nation.
The 510-page Enhancement and Standardization of Climate-Related Disclosures for Investors would require public companies to report on emissions — including Scope 3 greenhouse gas emissions — which are the result of activities from assets not owned or controlled by a publicly traded company but contribute to its value chain, which is how the rule impacts farmers.
“Congress created the SEC to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation — not to advance a progressive climate agenda,” said subcommitee Chairman Rep. Bill Huizenga (R-MI), who is also a small business owner in the sand and gravel industry.
“While the SEC asserts that the proposed climate disclosure rule would cost current reporting companies roughly $10 billion a year, a recent study puts that number at closer to $25 billion, with little analysis on how proposed scope 2 and scope 3 requirements will impact small businesses who frankly can’t afford a compliance department.”
Those rules are worrisome for Schultz, vice president of Fruitridge Farms, and other farmers who wouldn’t be required to report directly to the SEC, but collectively provide almost every raw product that goes into the food supply chain.
“I expect most family farms in America will be impacted by this proposal as it’s currently written because these farm products end up in the value chains of public companies — whether it’s a grocery store, a fertilizer company, a packer, or any of the other public companies with which we regularly do business — and are therefore included under Scope 3,” Schultz said.
“It is clear that the SEC did not account for the complexities and nuances of farms when writing this proposed rule.”
Noting that public companies which buy food will likely favor larger farms that have the resources to compile and provide information, Shultz said small- and medium-sized farms — like his — cannot easily absorb those added costs and most cannot pass the costs on.
Schultz told the committee about how his grandparents purchased an 80-acre farm after his grandfather’s service as a P-51 pilot in World War II. Today, that farm has innovated and expanded to include fresh fruits, vegetables, jams, honey, baked goods, meat, and hard ciders.
“As a farmer, we are used to doing business with the USDA, but — up to now — we’ve never considered the SEC would have a role in the work of our family farm,” Schultz said. “Our focus is on growing the food, fuel and fiber this country needs, and being subjected to regulations intended for Wall Street does nothing to advance that work.”
Michigan Farm Bureau has taken an active role in educating lawmakers about the negative impacts the SEC proposal would have on U.S. agriculture, including submitting comments to the SEC in June 2022 encouraging the commission to make changes to the climate reporting standards.
“Without changes and clarifications, the Proposed Rules would be wildly burdensome and expensive if not altogether impossible for many small and mid-sized farmers to comply with, as they require reporting of climate data at the local level,” MFB’s letter stated.
Instead of overreaching, mandatory rules, MFB said it strongly believes that voluntary, market-based incentives and programs are best at helping farmers achieve additional positive environmental impacts.
Huizenga thanked Schultz, a graduate of MFB’s Academy for Political Leadership, for articulating the “challenges and the potential dangers” of the rule as it’s currently written.
“What we’re trying to do is make sure that we have a full vetting of all of the … intended and unintended consequences that could be coming from this,” Huizenga said.
“There’s real debate about whether the SEC is exceeding its authority, a real debate about whether it even has that authority that they’re trying to do, and so I think this was a good, healthy, robust debate.”
Watch Schultz’s full testimony below.
