Marley Schultz is a Gary Marx Journalism Fund intern.
Estimates vary on how much greenhouse gas agriculture emits into the air. The Environmental Protection Agency puts it at 11% of all U.S. greenhouse gas emissions. But that doesn’t include a whole host of other emissions associated with the industry.
The percentage could be higher. Last year, the United Nations estimated the food and agriculture value chain contributed 31% of the world’s greenhouse gas emissions. Further muddying the picture is that major agribusinesses aren’t required to report emissions that happen outside their main enterprise, such as warehousing, storage and sales, which is termed their value chain.
A new proposal from the Securities and Exchange Commission — expected to be ruled on in October — would change that. It would require public corporations to collect and disclose emissions data up and down their value chain in an effort to increase transparency and accountability for corporations that have an outsized effect on the environment.
“Large corporations clearly contribute to climate change,” said Gilbert Michaud, assistant professor of environmental policy at Loyola University Chicago. “So the public ought to be able to better understand current levels of emissions, especially as governments continue to develop policies to reduce pollutants such as greenhouse gasses.”
Tracking greenhouse gas emissions along the value chain, which are known as Scope 3 emissions, is important because they can account for large amounts of a business’s carbon footprint — possibly up to 90%, according to research from Carbon Trust.
The proposed rule would unnecessarily burden small farms and ranches who sell to major, publicly traded agricultural corporations, Farm Bureau spokesman Sam Kieffer said in an email. It could lead to their ruin, he said.
“The proposed rule may create substantial costs and legal liabilities,” he said. “Onerous reporting requirements could disqualify small, family-owned farms from doing business with companies, which could lead to more consolidation in agriculture.”
Some farmers report emissions data when they participate in carbon capture programs, for instance, but the format can vary.
Having a consistent way to measure emissions would provide a much better idea of how much greenhouse gas agriculture corporations are pumping into the air, Michaud said.
“Using industry-wide averages can be problematic when there are outliers or related characteristics that might make emissions data misleading,” he said. “Though there may be logistical hurdles to farmers collecting their own emissions data, if done correctly, it would be easier to compare across different sectors, as well as assess changes over time.”
The proposal would require the reporting of three kinds of emissions. “Scope 1” emissions are produced by a business’s daily operations, according to Successful Farming. “Scope 2” is the energy and electricity the company uses. “Scope 3” includes all emissions produced by businesses or other operations in the company’s value chain.
Illustration created with Canva
When it was considering the proposal, the SEC took into account how important the data is in making business decisions.
“Greenhouse gas emissions data are increasingly being used as a quantitative metric to assess a company’s exposure to—and the potential financial effects of—climate-related transition risks,” SEC Chair Gary Gensler said in a statement after issuing the proposal.
To be sure, data on greenhouse gas emissions from companies and farmers are reported in various forms, but there is no consistent framework to compare companies.
For example, Tyson Foods, one of America’s largest meatpacking companies, discloses its annual Scope 1 and 2 greenhouse gas emissions in its yearly sustainability report. But it does not report Scope 3 data.
Tyson has stated its goal is to achieve net zero emissions, including all three scopes, by 2050.
When asked to comment, Tyson Foods spokesman Derek Burleson said to contact the North American Meat Institute or National Chicken Council, organizations that represent the meat and poultry processing industry. Neither returned requests for comment.
Similarly, Smithfield Foods, another major meat processing company, said it will start reporting Scope 3 emissions this year after completing development on an all-inclusive data collection model. Cargill, a major food company and one of America’s largest private companies, reports emissions as a total, not broken down by scope.
Some farmers also already report emissions data through carbon contracts and other initiatives that offer incentives like cash or credits for implementing climate-friendly practices like no-till farming, according to Successful Farming.
But it’s not consistently tallied, the Farm Bureau’s Kieffer said.
“Farmers are not monolithic and farms are vastly different from one region to another if not one county to another,” he said. “The data being collected by farmers is equally wide ranging.”
Carbon reporting programs are offered at federal and state levels through departments of agriculture and natural resources, but are also sponsored by third-parties like Nori and IndigoAg and have a market-based structure.
Companies like Nori and IndigoAg have created investment platforms for individuals, businesses and the environment to work together by allowing corporations to buy carbon credits that are equivalent to one ton of carbon sequestered by farmers through sustainable agriculture practices.
Those credits are then used to negate a carbon footprint and bring companies closer to their net-zero emissions goals.
Additionally, enrollment in state or federal programs does not prevent enrollment in carbon markets, according to the Illinois Sustainable Ag Partnership.
Importance of Scope 3
Disclosure of Scope 3 emissions might be the most important aspect of the SEC’s new proposal.
Scope 3 emissions represent a wide array of greenhouse gas releases, according to the EPA. The overall amount for a particular company is usually difficult to accurately quantify, but Scope 3 often makes up the majority of an organization’s emissions.
Voluntary programs for reporting emissions, such as WRI’s Greenhouse Gas Protocol, do exist. WRI suggests companies try to collect primary data specific to their value chain.
The SEC’s proposal, while requiring and standardizing disclosures related to Scopes 1 and 2, would also require public corporations to start openly documenting Scope 3 data, which previously may not have been available to investors.
Smaller companies that do not already voluntarily report Scope 3 emissions, possibly due to lack of resources as well as not being able to effectively verify the accuracy of data from third parties in their value chains, may encounter difficulty when complying with these regulations.
The SEC plans to include some exceptions to the rule for registrants in that position and a safe-harbor clause to ease certain liabilities, according to the proposal.
For example, smaller reporting companies, or those who have less than $250 million worth of shares held by the public or bring in less than $100 million in annual revenue, would be exempt from reporting Scope 3 emissions data.
There also would be a delayed compliance date taking effect in 2024, 2025, and 2026 based on the size of the company filing in order to give them time to implement certain data collection and disclosure methods.
Top image: In 2019, the Archer Daniels Midland plant at 4666 Faries Parkway in Decatur, Illinois, emitted 4.4 million metric tons of CO2e. photo by Ignacio Calderon, Investigate Midwest