Jun. 19, 2022
June 19, 2022 The Construction Demolition Recycling Association (CDRA) is a national organization that promotes the recycling and recovery of the EPA-estimated 600 million tons of construction material waste generated every year. Our members are largely the companies the accept CD waste and process it into useful end products. Hence, it should be obvious the members of the construction material recycling industry can provide great benefits to the environment that will positively affect climate impact. By recovering and reusing materials including concrete, asphalt, wood, drywall, shingles, metals and other building materials, we reduce the need for new, virgin materials to be used. Any requirements on reporting climate impacts will likely include CD recyclers. We routinely support innovative climate actions and take pride in the beneficial uses that our industry provides. In this light we feel obliged to comment on the recent SEC proposed climate rule and its potential implications and impediments for our industry. Almost all of the companies involved in construction material recycling are privately held, so our members will be affected through Scope 3. Even though the implementation of that will be a year later than scopes 1 and 2, likely will have to provide climate impact information right from the start because we receive material from publicly held companies, and also sell processed end products to other publicly held companies. That will probably be true for most privately held companies in any industry. The proposed rule suggests extending the TCFD (Task Force on Climate Decisions) reporting framework. Those guidelines do not explicitly define the boundaries of Scope 3 emissions, instead effectively leaving it to the reporting firm to define how far they want to go with the catch all upstream and downstream emissions profiles. All goods and products used by the reporting company must be accounted for, but where does one reporting entity stop and the other begin? If our members truck material to a partner company, those emissions must be included in reporting, but do we also include emissions from our process handling operations onsite? Where does it end? This uncertainty will bias any emission sums higher than they should be, likely resulting in future control conditions levied by state agencies that are more stringent than necessary. Just focusing on the trucking example as a hypothetical, our members will have to keep track of all shipments to partner companies including weight and composition of shipment, type and age of truck used, miles traveled, engine rating, and maintenance history (FOR EACH TRUCK). Maintenance history would be attested via a scale to guide the appropriate emissions rating. Generally, top ratings are not allowed once a vehicle surpasses a certain age. GHG reporting is required for CO2 and CO2e (equivalents) using impact factors for all CO2e. The SEC should do whatever possible to simplify this process by allowing fleet averaging, clear guidance on Scope 3 to set guideposts for where one emissions bucket starts and the other ends, and in general issuing sector or process-specific Scope 3 guidance. Burden on our members We keep extensive records on most of this data, but uncertainty and lack of uniformity will lead to wasted time in transferring the data to the reporting companies. Some standardization would be useful. Again, our members would not benefit from the extra year that the rule touts for Scope 3 reporters since most would be pulled in via their partners who will be reporting Scopes 1 and 2. Materiality The proposed rule states that the definition of materiality used by a registrant should be consistent with the Supreme Courts definition that is, a matter is material if there is a substantial likelihood that a reasonable investor would consider it important when determining whether to buy or sell securities or how to vote. The proposed rule emphasizes that materiality is based on facts and circumstances and takes into account qualitative and quantitative factors as well as the probability and magnitude of future events. As a best practice, the industry has defined materiality as more than de minimis levels of emissions, more than 1-2% of average annual reportable emissions from the reporting company. We expect the commission to give us clarity on the issue. Thank you, and please contact us with any questions. William Turley Executive Director CD Recycling Association