A group of environmental organizations have voiced their support for the SEC's proposed climate disclosure rule but are requesting the final rule add clarifications to assuage complaints about its impact on small businesses.
"We are concerned that certain members of Congress and groups representing a handful of SEC registrants may be spreading misinformation about the rule's contents and applicability," the organizations wrote in a letter to SEC Chairman Gary Gensler Wednesday.
The organizations — which include As You Sow, a non-profit promoting environmental and social corporate responsibility, and Earthjustice, a non-profit environmental law organization — specifically call for more clarification concerning the rule's requirement for public companies to disclose the greenhouse gas emissions generated from their supply chain, known as Scope 3 emissions. Scope 3 emissions would only need to be reported if material, the rule states, and smaller companies would be exempt.
Since the SEC released their climate disclosure proposal in March 2022, the requirement for Scope 3 emissions has received the most attention and debate, as evidenced by the proposal's comment period, which ended in June. While Republicans vehemently oppose the proposal altogether, more than 50 congressional Democrats sent a letter to Mr. Gensler March 5 urging him to finalize the rule and include the Scope 3 requirements.
"A recent study of 100 major food companies found that 51 already disclose Scope 3 emissions from suppliers," the organizations wrote in their letter Wednesday. "Despite this, some food and agriculture companies and trade associations are claiming that the proposed rule would result in new burdens for farmers."
The letter also argues that disclosing Scope 3 emissions would help small farmers and ranchers attract new customers and new investments.
Ultimately, the organizations ask the SEC to include three clarifications in the final rule's preamble to alleviate concerns. They say the SEC should clarify that: only SEC registrants are responsible for disclosing Scope 3 emissions; registrants' suppliers and downstream value chain partners are not required to aggregate, estimate or report their data; and smaller companies will generally be exempt from the requirement.
"Further, the preamble and the rule text itself should reflect the many ways that disclosure of climate-related opportunities are part and parcel of risk management, decision-useful information for investors, and should be incorporated into financial reporting," the letter states.
The organizations assert that these additions to the rule "would not only improve its implementation once adopted but would also help alleviate unnecessary concerns about potential burdens on small businesses."
The SEC is aiming to finalize the rule by the end of April, according to the agency's regulatory agenda.
