Small Businesses Plead With SEC to Show Restraint on Climate Rules

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While large companies gave mixed reviews to the SEC’s climate proposal, comment letters from smaller business groups had a tone closer to existential fear.

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“Small and independent businesses cannot afford the experts, accountants and lawyers required to comply with complex government reporting regimes,” the National Federation of Independent Business said in a comment paper filed with the SEC.

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The agency on Friday closed the period during which it sought public comment on its proposed rule, which would require public companies to report on their emissions and their risks from climate change.
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The regulator received about 3,400 letters, which is much higher than normal, including from businesses, trade unions, politicians, churches and individual citizens.

The SEC generally considers such feedback in deciding whether to change its proposals. The regulator did not respond to a request for comment.

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While large companies gave the climate proposal a mixed review, with some welcoming it and others focusing on technical barriers to compliance, the responses from small businesses had a tone closer to existential fear.

The National Association of Egg Farmers said in its letter to the SEC, family-owned egg farms can be disqualified from doing business with large companies, and the rules “keep small and medium-sized farmers out of business.” could”.

Like many critics, Farmers came up with a proposed requirement for public companies to disclose what are known as Scope 3 emissions, which are related to the company’s activities but outside its operational control. Emissions associated with the supply chain of a publicly traded company, for example, how much carbon is emitted by farmers supplying a food manufacturer’s grain or emissions associated with a smaller manufacturer that makes parts for a larger company, All can be included in Scope 3.

The National Restaurant Association said in its letter that the proposed rule would impose “unrealistic, unreasonable and costly liability” on restaurants at a time when the industry is “already troubled”. In what the association described as a perverse potential outcome, publicly traded restaurant chains could source their inventories by moving away from local farmers and suppliers to catalog their emissions from larger companies with the resources to stockpile their inventories.

Gas stations, most of which are owned and operated as small businesses, may be required to report their emissions to publicly traded suppliers such as oil companies and beverage companies, as those suppliers use their products. Let’s try to work on the associated emissions. The National Association of Convenience Stores said. Coming up with that information could be a huge burden for the low-margin industry, the group said.

Like the restaurant association, the convenience-store group said that if the rule is adopted, large, publicly traded companies with more resources to track emissions data would be able to build their own business by doing business with other larger entities. Compliance may be motivated to simplify.

“The loss of business will be difficult for smaller firms,” ​​the convenience-store group said.

The National Association of Home Builders, a trade group whose average member employs five people, said the Scope 3 requirements would give the SEC real regulatory authority over businesses it could not otherwise touch.

SEC rules are not final, and they are almost certain to face legal challenge.

The National Association of Manufacturers, which has voiced opposition to the climate disclosure rule, sued the rule mandated by the 2010 Dodd-Frank Act, which required manufacturers to declare that their minerals were “conflict-free”, Those that were not tied to the civil war in the Democratic Republic of the Congo.

An appeals court held that requiring a company to “confess blood on its hands” violated its rights, and the SEC, whose leadership passed into Republican hands while litigation was underway, held back from enacting the rule in 2017. Gone away.

Jay Timmons, chief executive of the National Association of Manufacturers, said smaller manufacturers who are a member of his organization “simply cannot take on” the regulatory costs they may face.

The SEC can also propose changes that blunt some of the more controversial implications of its proposal. The National Federation of Independent Business in its letter pleaded for that kind of regulatory restraint.

“Please keep small and independent businesses out of your mind and out of your grasp,” it said.

write to Richard Vanderford at [email protected]

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