By Christine Souza, Assistant Editor, Ag Alert
Reprinted with permission from the California Farm Bureau Federation
California is the first state in the U.S. to pass laws that eventually require large corporations to publicly disclose greenhouse gas emissions and their climate risks.
The U.S. Securities and Exchange Commission followed suit last week. But it approved a weakened federal regulation that drops a proposed requirement for companies to report emissions from their supply chains and customer use of their products.
Since the federal rule was first proposed two years ago, the American Farm Bureau Federation, California Farm Bureau, businesses groups, companies and others opposed the Scope 3 emissions reporting requirements. Scope 3 are indirect emissions that occur in the value chain, including upstream and downstream emissions.
Opponents argued that compliance cost and difficulty providing the data would be a burden, especially for farmers, who provide most raw products that go into the food supply chain.
AFBF said in a statement the onerous reporting requirements could disqualify small, family-owned farms from doing business with public companies, putting those farms at risk of going out of business. The organization said, “Regulations intended for Wall Street should not extend to America’s family farms.”
“Farmers are committed to protecting the natural resources they’ve been entrusted with, and they continue to advance climate-smart agriculture, but they cannot afford to hire compliance officers just to handle SEC reporting requirements,” AFBF President Zippy Duvall said. “This is especially true for small farms that would have likely been squeezed out of the supply chain.”
In addition to relaxing reporting of Scope 3 emissions, the federal rule reduces reporting requirements for Scope 1, or direct emissions, and Scope 2, indirect emissions from the production of energy a company acquires for use in its operations. Companies are given discretion to report such emissions that they believe are significant.
SEC Chair Gary Gensler said in a statement the federal rule is specific on what companies must disclose and requires climate-risk disclosures to be included in a company’s SEC filings, such as annual reports.
“These final rules build on past requirements by mandating material climate risk disclosures by public companies and in public offerings,” Gensler said. “The rules will provide investors with consistent, comparable and decision-useful information, and issuers with clear reporting requirements.”
With the approval of the federal rule, attention turns to California.
Last fall, Gov. Gavin Newsom signed Senate Bill 253, the Climate Corporate Data Accountability Act, which applies to businesses with total annual revenues exceeding $1 billion. The law requires the California Air Resources Board to develop and adopt the nation’s first requirements for large corporations to publicly disclose their greenhouse gas emissions, carbon in supply chains and climate risks by Jan. 1, 2025.
In his Oct. 7, 2023, signing statement, Newsom called the deadline for implementation “infeasible,” and stated the reporting protocol could result in inconsistent reporting.
“I am concerned about the overall financial impact of this bill on businesses, so I am instructing CARB to closely monitor the cost impact as it implements this new bill and to make recommendations to streamline the program,” Newsom stated.
Newsom also signed Senate Bill 261, the Climate‐Related Financial Risk Act, which requires companies doing business in California with more than $500 million in annual revenue to submit reports that divulge how climate change threatens their business starting in 2026.
The governor’s initial 2024-25 budget proposal pauses spending for implementation of the two climate laws.
“Farmers and ranchers are committed to addressing the challenges of climate change,” said Christopher Reardon, director of governmental affairs for the California Farm Bureau. “But these regulations only increase the burdens to those who grow food and fiber in this state.”
California Farm Bureau expressed early opposition to SB 253 and SB 261, and shared its concerns with authors of the bills, Reardon said. In comments related to SB 253, the organization said the Scope 3 emissions reporting requirements would increase costs and potentially hurt small- and medium-sized farm employers. In submitted comments, the Farm Bureau stated SB 261 was premature pending release of the federal rule.
“The governor indicated he is concerned about impacts to California businesses from climate-risk disclosure requirements,” Reardon said. “With the adoption of the federal decision, which dropped Scope 3 reporting requirements, California should remove these requirements.”
Many California food and agriculture organizations joined a California Chamber of Commerce-led campaign to “Stop SB 253.” The coalition claimed that the disclosure requirements would act as a “hidden tax on small businesses.”
In addition, AFBF, the U.S. Chamber of Commerce and others are suing California in U.S. District Court for the Central District of California, Western Division. Plaintiffs in the Jan. 30 lawsuit claim the two bills are unconstitutional and violate the interstate commerce clause and the First Amendment.
After the federal rule was approved last week, AFBF urged California to follow the SEC’s lead by withdrawing its Scope 3 reporting requirements for any company doing business in the state.
