May. 09, 2022
SECURITIES AND EXCHANGE COMMISSION 17 CFR 210, 229, 232, 239, and 249 [File No. S7-10-22] The Enhancement and Standardization of Climate-Related Disclosures for Investors May 9, 2022 The National Association of Egg Farmers, representing approximately two hundred small and medium sized family egg farmers, appreciates this opportunity to comment on the Securities and Exchange Commission proposed regulation titled “The Enhancement and Standardization of Climate Related Disclosures for Investors.” The SEC proposed regulation for reporting requirements is not only an issue regarding disclosing private data and having to find ways to comply with burdensome reporting. It could also disqualify small, family-owned egg farms from doing business with companies that procure the eggs and egg products produced on that farm. This could lead to more consolidation in the egg industry. If an egg farmer is not able to provide the necessary data and information required by the SEC registrant who now must disclose their Scope 3 emissions, this registrant could be forced to look elsewhere to purchase its raw inputs from an entity that has that information. This search for supply could push small and medium-sized farmers out of business. In these comments, we ask the Security and Exchange Commission remove the reporting of greenhouse gas emissions from any egg farms providing raw products in the registrant’s value chain. This SEC would require registrants to provide certain climate-related information in their registration statements and annual reports, including certain information about climate-related financial risks and climate-related financial metrics in their financial statements. SEC’s proposed rule would expand reporting requirements for greenhouse gas emissions (GHG) by not just the 63,485 companies listed on the SEC website but suppliers of raw agricultural products to companies registered in the SEC. For egg farmers to stay compliant with the companies that purchase their products, this could mean egg farmers will need to track and disclose on-farm data regarding individual operations and day-to-day activities. Unlike large corporations currently regulated by the SEC, egg farmers do not have teams of compliance officers or attorneys dedicated to handling SEC compliance issues. This could force egg farmers of all sizes, but particularly those with small and medium-sized operations, to report data they may be unable to provide, which would result in a costly additional expense or a loss of business to larger farms. Specifically, the proposed SEC rule requires a registrant to disclose greenhouse gas emissions from upstream and downstream activities in its value chain (Scope 3). SEC requires companies to disclose important financial information with an accurate picture of the company’s present and potential performance. The companies that are registered with the SEC, each company is classified with a specific industry title and assigned a standard industrial classification (SIC) code that indicates the company’s type of business. Notably, none of the registrants listed on the SEC’s website has an SIC code corresponding to agricultural production. That is, for the SIC codes titled “Agricultural Production-Livestock & Animal Specialties,” there are no reporting companies that disclose to the SEC. However, the egg farmers produce raw products used by publicly traded companies and is, therefore, part of the value chain of that publicly traded company (i.e., Scope 3). The timing of this proposed SEC rule is problematic. Today’s egg farmers are experiencing a repeat of the 2015 devastating impact from highly pathogenic avian influenza (bird flu) wherein 12% of the flock was destroyed and prices skyrocketing in retail establishments nationwide. The timing of this proposed rule during a bird flu pandemic could have meaningful consequences for egg farmers’ ability to produce eggs for the U.S. and puts in jeopardy the stability of the U.S. supply chain. On May 6th, the U.S. Department of Agriculture (USDA) Animal & Plant Health Inspection Service (APHIS) has reported on May 6th that 285 flocks of poultry have been confirmed with highly pathogenic avian influenza requiring the destruction of 37.47 million birds. The Ag Secretary Tom Vilsack reported to the Agriculture Appropriations Committee that 585 personnel are working to contain this infectious disease with the expenditures of $146 million and a request for $263 million more from Commodity Credit Corporation funds. The USDA Agricultural Marketing Service reported in its Egg Markets Overview Report “Consumer demand for shell eggs was well below average as outbreaks of highly pathogenic avian influenza (HPAI) continue to impact the table egg industry, especially in the egg products sector where three-fourths of outbreaks have occurred. This has led to concerns over product availability and many retailers are taking a cautious stance by limiting features for shell eggs, focusing on specialty types if they do, or not featuring shell eggs altogether. For the first time since 2005 when USDA began reporting retail feature prices, no average ad price for caged, white, large shell eggs was recorded. Grocer ads are increasingly turning to specialty types, especially cage-free eggs to maintain some semblance of normalcy in the dairy case.” The burdens of compliance for small and medium sized egg farms coupled with the bird flu pandemic are reasons for the National Association of Egg Farmers to request the Security and Exchange Commission remove the reporting of greenhouse gas emissions from any egg farms providing raw products in the registrant’s value chain. Sincerely, Ken Klippen, President National Association of Egg Farmers www.eggfarmers.org