‘We’ve Been Warned’: American Farmers Threatened by Proposed New Federal Climate Change Mandate

Echoing conflicts from Sri Lanka to Canada to the Netherlands, tensions between farmers and green-minded government policymakers are building in the United States, where producers are squaring off against a costly proposed federal mandate for greenhouse-gas reporting from corporate supply chains.

The U.S. Securities and Exchange Commission in March proposed requiring large corporations, including agribusinesses and food companies, to report greenhouse gas emissions down to the lowest rungs of their supply chains as a means of combating climate change, which environmental campaigners contend imperils the planet and life on it.

Reporting such indirect, “scope 3” emissions would require corporations to demand data on the use of fuel, fertilizer, pesticides, and other chemicals from small-scale farmers who say they lack the personnel and resources to comply. The challenge has been led by the powerful American Farm Bureau Federation and its state affiliates, whose representatives have met with SEC officials and organized their lobbyists in Washington.

“The farmers we represent are already heavily regulated at the state, local, and federal level but have never been subject to things concerned with Wall Street,” said Lauren Lurkins, director of environmental policy at the Illinois Farm Bureau. “Our farmers do not have a team of compliance officers or attorneys, and they don’t have a network of people to help them understand this. They really want to make sure they are growing crops and raising livestock and that [they] take care of the food supply.”

Farmer protests worldwide, including tractor blockades, come at a time of heightened global food insecurity created by Russia’s invasion of Ukraine, a major wheat exporter, and other supply-chain disruptions from the pandemic. The restiveness darkens global economic prospects with recession a foregone conclusion to many as the Federal Reserve and other central banks tighten credit to tame high inflation.

The most dramatic consequences of a governmental push for sharp limits on farming occurred in Sri Lanka, where a 2021 fertilizer ban led to a massive reduction in crop yields, sparking starvation that helped bring down the government in July.

In the United States, the last major farmer protest was in 1979, when thousands of farmers — some on tractors — came to the Capitol in Washington to pressure the Carter administration to prioritize the lagging agricultural sector.

“If we start going down this path where regulators literally put farmers out of business as in Sri Lanka and the European Union with these climate decisions, you could see something like that,” said Jordan Dux, a lobbyist for the Nebraska Farm Bureau.

The downstream data reporting is required, the SEC claims, to determine larger, publicly traded companies’ green score, called an ESG, or environmental, social, and governance rating. The greenhouse gas measurements would be made at least partly in accordance with a set of standards developed in 2011 by an international consortium of environmental groups and corporations.

While the SEC released its first climate-related disclosure guidance in 2010, the new requirements are driven by the “elevation of climate issues,” Erik Gerding, the SEC’s deputy director of legal and regulatory policy in its division of corporation finance, said in a May webinar put on by the Task Force on Climate-Related Financial Disclosures, an international group formed to increase reporting by companies of climate-related information.

The proposed rule is not driven by the average individual investor, but rather investment giants managing large portfolios.

“Several institutional investors who have collectively trillions of dollars and investments under management have demanded climate-related information … because of the investor assessment of how climate change poses a risk to their portfolio,” Gerding said.

Most shareholders in the U.S. prioritize traditional corporate performance over environmental and other social welfare concerns, according to a Gallup study released in February. The poll queried its Gallup Panel with $10,000 or more in equities or bonds.

In another survey, investment professionals in the National Investor Relations Institute ranked an ESG score fourth in risk to a company behind performance, crisis and management troubles.

Agriculture industry supporters contend the pending SEC rule will hinder an already struggling food supply chain, driving up prices while harming small communities reliant on agriculture, and forcing many small and mid-sized operations across the U.S. to close.

Gary Gensler, the Biden-nominated chairman of the SEC and a long time progressive, said in announcing the plan that “it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions.”

But the plan drew “an extraordinarily high” number of substantive comments to the agency – around 14,000 – during the 60-day requisite comment period, according to Ropes & Gray, a law firm that compiled a report on public comments submitted to the SEC on the climate disclosure proposal. Because of that, the comment period was extended an extra 30 days and closed on June 17.

Agribusiness represented 20 percent of the total comments received by the SEC, mostly opposing the rule. The SEC was scheduled to adopt the plan in October, but it is expected to finalize the rule later due to the volume of comments and pleas for reconsideration.

Among the comments was the promise of litigation from a group of 24 Republican state attorneys general, which cited this year’s U.S. Supreme Court decision in West Virginia v. EPA that a federal agency does not have the authority to regulate greenhouse gases.

“If the Commission insists on taking the same inappropriate course, we will be ready to act once again,” the letter stated. “We urge you to save everyone years of strife by abandoning the Proposed Rule.”

SEC spokesman Scott Schneider did not respond to an interview request.

In a Senate hearing earlier this month, Gensler sought to assuage concern over the proposed rule voiced by Democrat Jon Tester, Montana’s senior senator and a lifelong rancher.

“If the public company says, ‘Hey, we need you … to tell us how much fuel you used, how much fertilizer you used, what your inputs were,’ and all that, it becomes an issue, especially for the little guy…” Tester said.

Gensler responded: “That’s not the intent of what we did … that’s the benefit of public comment.”

Notable in an analysis of the submitted comments is a dearth of input from the publicly traded companies that would have to comply.

“We met with a major company and had this conversation with them,” Mark McHargue, a farmer who is also president of the Nebraska Farm Bureau, told RealClearInvestigations. “We asked them to push back on the SEC and they said ‘Well, we’re looking into it,’ but they are a global company and there is some fear that if they say something, there would be pushback that they don’t care about the climate, even if that’s not true.”

Walmart is the lone ranger among large corporations stepping into the fray, stating in public comments to the SEC that it could not correctly determine the emissions footprint, for example, from a T-shirt.

“To accurately calculate those emissions requires information from multiple parties about the agricultural practices of the cotton fields providing raw materials, the energy used in the fabric mills and sewing facilities that assemble the garment, the fuel sources of the vehicles used at each stage of transportation, and the choices a customer made regarding how to wash and dry the item over the product’s lifecycle,” the company wrote in a 10-page comments letter, signed by three corporate officers.

Few food and ag-related groups now report scope 3 emissions, although Archer-Daniels-Midland and Campbell Soup Co. do so. China-owned Smithfield Foods promises that it will report them in its annual report starting this year.

Archer-Daniels-Midland and Smithfield, which produce annual individual “sustainability” reports along with their yearly financial summaries, did not respond to interview requests.

A Campbell spokeswoman in an email said that “Campbell began reporting itemized Scope 3 emissions earlier this year. We also announced science-based targets at the same time that include reductions in Scope 3 emissions from purchased goods and services, including agricultural ingredients we buy from producers and suppliers.”

The proposed SEC rule is one of many from the Biden administration in its pursuit of “carbon-free electricity” by 2035, according to a 2021 executive order from the White House.

The Biden White House’s green crusade has taken aim at entities who do not conduct themselves in line with the belief that climate change is the “number one issue facing humanity.”

Advocates for scope 3 emissions disclosure claim that the protests from the smaller farmers are baseless, and that even if approved, “there is no reason to believe that publicly traded companies would voluntarily initiate a massive reporting system for agriculture because of the SEC’s rule,” Alexandra Thornton, senior director of tax policy at the progressive Center for American Progress, wrote on the group’s website.

“The far greater threat to farms and ranches is climate change itself,” she wrote. Thornton, who met in July with SEC representatives on behalf of American Progress, did not respond to an interview request.

A network of activist companies like Ceres with large private equity and financiers on board are working to “transform” the economy over climate concerns, according to Ceres’ self-description.

In adherence, farmers will have to recreate their business model.

“Addressing these emissions will require a shift in agricultural production to more sustainable and regenerative methods …” Kate Monahan, director of shareholder advocacy at Trillium Asset Management, said in an interview this month with ESG Clarity, a website trafficking in ESG news directed at the financial sector. “It’s imperative that food companies keep improving measurement of their Scope 3 emissions’ sources to be able to prioritize actions that reduce their emissions hotspots.”

The percentage of surveyed farmers expecting onerous environmental regulations doubled upon the election of President Biden in November 2020, to 83 percent from the month preceding the election, according to a Purdue University survey of producers.

The proposed SEC rule appears to confirm such fears. And the agriculture sector expects more problems down the line.

“I could see the day when there are restrictions on who we lend money to based on what their environmental practices might be,” Chris Gavin, president of Midwest Bank in the ag belt town of Monmouth, Illinois, told a farming panel on a local radio station in September. “We’ve been warned that it’s coming to the banks, it’s the path we seem to be on. And the outcome is going to be dependent on who is governing our country.”

A version of this article appeared first at RealClearInvestigations.

This article appeared originally on The Western Journal.