Lawmakers call to fight SEC rule devastating to small farms
By Theresa Opeka
The North Carolina House recently voted 78-31 in favor of a resolution urging Congress to oppose a proposed Securities and Exchange rule that could potentially hurt small farms.
“I am not coming here today to argue climate change,” said Rep. Jeffrey McNeely, R-Iredell, sponsor of House Resolution 1174. “I am coming here today to discuss and ask you to vote for this resolution to give agriculture a chance. You may not realize how difficult it is right now in agriculture, but it is unbelievable.”
The SEC’s proposed rule would require public companies to disclose their Scope 3 greenhouse gas emissions, which are the emissions of assets not owned or controlled by the reporting organizations. As the EPA defines it, “Scope 3 emission sources include emissions both upstream and downstream of the organization’s activities.”
While small farms are not publicly traded companies, they do work with larger corporate farms and supply them with much of their product. Lawmakers say the rule would require small farms to report their greenhouse gas emissions as well, something that they are not equipped for as they do not have large compliance departments or equipment to do so.
According to the resolution, 98% of the 46,000 farms in North Carolina are family-owned and operated, with nearly 80% having revenues of $50,000 or less.
McNeely, who grew up on a farm and is the owner of a feed milling company, said now is definitely not the time for such a measure as the state could lose 10-20% of its farms in the next year because of rising costs due to inflation and other factors.
“This is going to affect their credit score, this is going to also affect their participation in government loans, grants, and government programs, and we just can’t take this right now in agriculture,” he said. “The red tape, the regulations of burdensome requirements. It’s going to be impossible to fill the scope they want and enact the things that you should do to get a good ESG (Environmental Social and Governance) score.”
“The truth of the matter is, particularly in livestock agriculture, it is almost 100% family farms, even if the integrator happens to be an integrator of some size and proportion,” said Rep. Jimmy Dixon, R, Duplin, also in favor of the resolution. “That integrator’s organization is made up of small family farmers.”
“These SEC regulations have no impact on our small farms,” Rep. Wesley Harris, D-Mecklenburg countered. “They don’t have to file SEC reports. SEC reports are filed by publicly traded companies, and they are only submitted by large publicly traded companies with $100 million in revenue. It won’t affect small family farms.”
Harris said the SEC regulations will allow investors to understand what large corporate farms are doing to combat not just climate change, but large weather events like drought, floods, and hurricanes.
“We should do everything we can to support our small farms, but these SEC regulations are not a threat to that, they actually help,” he said. “If you are a small farmer, it helps you compete with large farms because you don’t have to do those regulations, they do.”
McNeely asked Harris if he thought the proposed rule would affect large co-ops or large integrators who employ small family farms. Harris said no because those who qualify have legal teams that file 10K’s, a comprehensive report on a publicly-traded company’s financial performance, and already have plans for such a ruling.
McNeely stressed again that although companies like Smithfield may have feed mills, the farms that house their hogs are individual farms, much like the chickens owned by Perdue Farms, which are raised in chicken houses on smaller farms.
While regulations will be put on the larger companies to get a better ESG score, MCNeely worries that the large companies will push those rules down to their producers and put the regulations on them. It could force the smaller farms to either make changes they cannot afford or be forced to get out of farming altogether.
“The sad part thing is, with this ESG score, nobody is going to pay me any more money with efforts and money I spend,” McNeely said. “You are going to make me lose more money, cut my profits, and put me out of business. This is going to hit the little farms. If you don’t think this is going to hit them, you don’t know how economics work in agriculture.”
The resolution follows a letter sent by 118 U.S. House members on both sides of the aisle to SEC last month opposing the proposed measure.