The Securities and Exchange Commission is seeking to enact a regulation that could have serious impacts for farmers, including no-tillers.
Under the proposed rule change, companies that report to the SEC would be required to report climate impact data. However, the manner in which the rule change impacts industry is different than past practices, and could potentially require farmers to account for their greenhouse gas emissions in a standardized way.
"We are concerned that the existing disclosures of climate-related risks do not adequately protect investors," regulators wrote. "For this reason, we believe that additional disclosure requirements may be necessary or appropriate to elicit climate-related disclosures and to improve the consistency, comparability, and reliability of climate-related disclosures."
Numerous voluntary frameworks for reporting climate impact data exist. The SEC, in its rule change, is seeking to adapt the Greenhouse Gas Protocol, or GHG Protocol, to make the information associated with climate risks more easily understandable by investors.
The GHG Protocol is a standard method of measuring seven greenhouse gasses identified for reduction by the Kyoto protocols of 1997. The three gasses usually associated with agriculture are carbon dioxide (CO2), methane, and nitrous oxide. CO2 and nitrous oxide are the chief concerns to growers.
The GHG protocol divides the sources of those gasses into three categories, which it refers to as "Scopes." They are:
- Scope 1 emissions, which come directly from the assets owned by the company. If you own a cereal company, these would be generated by the machine that makes the cereal, or company delivery trucks.
- Scope 2 emissions, which come from the electricity purchased to run assets owned by the company.
- Scope 3 emissions, which come from sources controlled by other companies that the company interacts with. That means if you buy corn or wheat to make your cereal, you have to account for the greenhouse gasses associated with its production.
That means farmers, according to the American Farm Bureau Federation.
"While farmers and ranchers would not be required to report directly to the SEC, they provide almost every raw product that goes into the supply chain," the Federation wrote, in a statement.
Complying with SEC-mandated requirements would impose undue burdens on farmers, who have not been subjected to the same regulations as Wall Street, the Federation wrote. Farmers would be required to report on day-to-day farm activities, the Federation argues. They could also potentially be forced to disclose private information, because families can live on farms. The implementation could also accelerate the pace of farm consolidation, because larger business-run farms are better positioned to comply, according to the Federation.
No-tillers could be out in front on some of these issues. As a relatively recent development in agriculture, most no-tillers — even those who have considered but ultimately decided against no-till methods — have already tracked and examined data like fertilizer use (nitrous oxide) and fuel consumption (CO2) as part of the decision-making process. It also seems unlikely that the SEC's rigor would exceed that of the IRS, so receipts are likely readily available.
Those who adopted no-till early primarily did so remain economically competitive in the late 20th Century, when scale was already crowding out smaller family-run outfits. They already have the means to meet or exceed the regulatory requirements, even if they might not realize it. I know I wouldn't bet against a no-tiller's ability to know their bottom line in painstaking detail, and to tell me about it.
Concerns about privacy are valid, up to a point. Most owned property is tracked at the county level, and numerous counties maintain internet-accessible property records. If the disclosure for Scope 3 emissions matches the rigor applied to the Scope 1 and Scope 2 emissions, a zip code is the most specific geographic unit that would be reported. Depending on the zip code, that could be like finding a needle in a haystack, or several haystacks.
It might also be reasonable to suggest that some companies, having profited by farmers for so long, might be willing or able to help with the process.
It seems like the pushback is offered in defense of an idealized family farmer, more than small-scale farming as it exists today, especially on the Excel-powered GPS-enabled data-driven farm of the 21st Century.
Enabling the rule change will come at a cost, even if we're talking just about postage stamps and photocopies. That's unavoidable. However, if investors are shooting in the dark about climate, that comes with a cost, too.
Whether you pay with postage or with environmental impacts, the bill always comes due.
If you want to comment on the SEC's rule change, instructions are available online. The SEC has also extended the comment period to June 17.