The Securities and Exchange Commission’s pending climate disclosure rule would place an enormous, untenable burden on manufacturers — and impose a disproportionate hardship on small businesses, the National Association of Manufacturers says.
NAM Vice President of Domestic Policy Charles Crain gave testimony on Thursday before the House Financial Services Subcommittee on Oversight and Investigations on the damaging effects of the SEC’s proposed climate rule, which would require businesses to reveal large amounts of convoluted (and often sensitive) climate-related data.
The plan would force disclosure of so-called “Scope 3” emissions — those that come from companies’ supply chains — and institute new climate-related accounting requirements, among other mandates. If finalized, the proposed SEC rule would divert funds from manufacturing growth, including at small manufacturers.
“Manufacturing pioneers groundbreaking technologies, including the innovations necessary to combat climate change,” Crain said. “The rule would impose tremendous costs on manufacturers of all sizes — while overwhelming investors with immaterial information. And the SEC hasn’t done the work to show that the rule’s benefits outweigh its costs, or that the rule is even within the SEC’s legal authority.”
A recent landmark study released by NAM found manufacturers face an average of $29,100 per employee per year in regulatory costs — a figure that rises to $50,100 for smaller manufacturers. According to the SEC’s own analysis, the proposed rule would add to this burden, costing large companies at least $530,000 per year and small companies $420,000 per year.
Crain told lawmakers that the SEC’s analysis likely understates the true costs of the rule, in part because the agency did not consider the impacts on private businesses.
“For the larger companies subject to [the Scope 3] requirement, the SEC has admitted that it cannot ‘fully and accurately quantify’ the costs,” Crain said. “But for the small businesses that are swept into large companies’ Scope 3 efforts, the SEC hasn’t even tried. The SEC’s proposal does not include any discussion of the Scope 3 costs that will fall on small and private businesses.”
Crain warned lawmakers that these compliance costs would represent a “huge resource diversion” for small manufacturers.