WASHINGTON—Big agricultural groups say a proposal from the Securities and Exchange Commission requiring companies to report their carbon footprint could drive small farmers out of business.

Skeptics say it is more likely to be a boon for the consulting business.

The proposal, unveiled by the SEC in March and not yet finalized, would require publicly traded companies to disclose their greenhouse-gas emissions, as well as the risks their business faces from climate change. Most controversially, some large companies would also have to provide an estimate of the emissions from their suppliers and consumers.

Agriculture companies and farm groups have said the burden of generating those estimates would get passed on to small private farmers and drive up food costs. Supporters say those claims are misleading, and that large public companies will likely rely on consultants to crunch the numbers.

The SEC proposal is backed by environmentalists and some fund managers who hope more transparency about climate data will help people make more informed investment decisions.

The agriculture industry’s pushback aligns it with some other sectors opposed to the SEC proposal, including auto manufacturers and oil producers. Other industries with a smaller carbon footprint and more liberal-leaning workforce, including the tech and financial industries, have been broadly supportive of the proposal.

Meat processor

Tyson Foods Inc.

said the proposal could have a chilling effect on innovation, and wants any rule to include stronger legal protections for larger companies with sprawling supply chains where calculating emission estimates is difficult.

Seed and pesticide maker

Corteva Inc.

said the requirement would ultimately result in higher prices at the grocery store.

“If Corteva were required to impose emission tracking requirements on our distributors or consumers, we could effectively drive small and midsize farmers out of business,” the company said in a letter to regulators.

David Haase,

a fourth-generation corn and soybean farmer 90 miles south of Chicago, said he isn’t sure how companies will broadly track carbon-emissions data at the farm level. Mr. Haase said he expected that companies would either have to pay farmers for the management tools to record the necessary information or it would be an extra expense to the farmer.

The SEC proposal would require publicly traded companies to disclose their greenhouse-gas emissions and the risks their business faces from climate change.



Photo:

Ting Shen for the Wall Street Journal

“I would assume farmers will absorb a big part of that cost,” he said.

Supporters of the proposed rule said that big food and agricultural companies are hiding behind politically sympathetic small farmers. They note that only publicly held companies would be responsible for the new requirements and that many already collect similar data voluntarily.

“The publicly traded companies are shedding crocodile tears right now for small farmers, when they are really trying to protect themselves from disclosing all of the information, which is readily available and ascertainable for the large companies to obtain,” said Sen.

Ed Markey

(D., Mass.). He said agribusiness was “the loudest” opponent to the rule.

Under the proposal, large companies would be required in certain cases to report not just their own emissions, but also those generated by suppliers and customers—known as scope 3 emissions. Scope 1 emissions are those generated directly by the company, and scope 2 covers emissions from purchased energy.

Regulators say they intend to require an estimate of emissions from suppliers and customers only if they are considered “material,” or significant to investors, or if the company has outlined specific targets for them. The SEC proposes some legal protection for companies around the estimates, but some businesses are pushing to beef them up.

The SEC is considering narrowing the proposal in the face of anticipated legal challenges from business groups and isn’t expected to vote on it until next year, according to an SEC official.

Meanwhile, trade groups including American Farm Bureau Federation and the National Corn Growers Association are rallying their members against the rule. They say requiring companies to calculate such emissions is a daunting task given the nature of farming.

“A farm isn’t a smokestack,” said Mary-Thomas Hart, chief counsel at the National Cattlemen’s Beef Association. “You can’t put a monitor in and get steady emissions data.”

SEC Commissioner Gary Gensler told lawmakers that it isn’t the SEC’s intent to force public companies to demand more information from farmers as a condition of doing business with them.



Photo:

Kevin Dietsch/Getty Images

Supporters of the rule point out that the SEC would simply require companies to generate estimates and would allow companies to use standard models or industry averages when making their estimates.

“This is a very workable rule,” said Steve Suppan, senior policy analyst at the Institute for Agriculture and Trade Policy. “Agribusinesses have basically gone to farm organizations, which have panicked their members into thinking this rule will apply to them.”

SEC Commissioner

Gary Gensler

told lawmakers last month that it isn’t the SEC’s intent to force public companies to demand more information from farmers as a condition of doing business with them.

If Republicans take back control of the House in November, lawmakers said they would give priority to trying to block parts of the SEC proposal.

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“My effort is to protect those folks at the beginning of the supply chain who potentially will have all this pushed down on them to meet someone else’s corporate compliance requirements,” said Rep.

Frank Lucas

(R., Okla.).

Mr. Lucas is leading legislation backed by more than 100 House Republicans that would prohibit the SEC from requiring publicly traded companies to disclose greenhouse-gas emissions from scope 3 emissions coming from farms and ranches.

The debate over disclosing broad emissions data arises as agriculture comes under increased environmental scrutiny. A study published in Nature Food in March 2021 estimated that emissions tied to the food system make up about one-third of total global greenhouse-gas emissions.

Cattle, for example, are a big source of methane, an especially potent greenhouse gas.

Minnesota farmer co-op

CHS Inc.,

a farm cooperative and major grain shipper and retailer of seeds and chemicals, said it has begun committing resources and formulating how it will partner with its customers and suppliers to meet the SEC’s rules when they are completed.

Ethanol producer

Green Plains Inc.

has started planning for how it would work with the corn growers who supply it by giving them the measurement tools needed to assess what their emissions might be, said Chief Executive

Todd Becker.

Many businesses have already started collecting data on their environmental impact and new companies have popped up to help them do so.

Strong Roots, a plant-based frozen foods company based in both New York and Ireland, puts the amount of carbon per kilogram that each product requires on the front of each package. Strong Roots tracks its annual carbon usage, currently 908 metric tons, with the help of CarbonCloud, a Swedish firm that helps food companies calculate their carbon footprint.

Write to Kristina Peterson at kristina.peterson@wsj.com and Patrick Thomas at Patrick.Thomas@wsj.com

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