Regulatory Update from NAM: Why the SEC’s Climate Rule Won’t Work

As part of an effort to bring more information about the regulatory and legal environment facing American manufacturers, NFPA is monitoring the newsfeed of the National Association of Manufacturers (NAM) and will be bringing important updates like this to the attention of NFPA members.

Next on our list of misguided, burdensome regulations is a Securities and Exchange Commission misstep: climate rules that would force manufacturers to meet impossible deadlines and disclose sensitive information, without doing anything to protect investors.

The background: Last year, the SEC proposed a new rule that would require companies to disclose a massive amount of information, much of it impractical to collect or immaterial to investors.

  • First, the proposed rule requires qualitative descriptions of companies’ climate-related risks and any efforts to respond to those risks, including internal metrics and confidential strategies.
  • Second, it mandates quantitative reporting of companies’ greenhouse gas emissions, while compelling companies to conduct quantitative climate impact analyses within their consolidated financial statements.

The result? An unworkable framework that imposes uniform mandates that do not align with manufacturers’ efforts to respond to climate change—but do impose an enormous burden on manufacturers across the country.

The response: The NAM has laid out a series of necessary changes that the SEC must make to reduce compliance costs and limit liability risks associated with the rule’s requirements. Specifically, the NAM is calling on the SEC to do the following:

  • Strike disclosure of Scope 3 emissions, which requires companies to track emissions data from suppliers and customers throughout the supply chain. While some manufacturers are already working to understand these emissions, the data collection, estimation and reporting methodologies are still evolving—and the proposed mandate could have a disproportionate impact on small businesses swept into the reporting regime.
  • Rescind accounting changes that would require climate impact analyses of companies’ consolidated financial statements on a line-by-line basis.
  • Delay annual GHG emissions reporting, granting manufacturers more time to collect and verify data.
  • Adjust the climate-related risk disclosures and Scope 1 and Scope 2 emissions reporting requirements to make the provisions less prescriptive and more aligned with existing company practices.
  • Fine-tune the guidelines for reporting on climate-related goals to avoid penalizing companies that set ambitious targets.
  • Remove requirements that companies disclose competitively sensitive information about the internal tools they use to understand and plan for climate risks, scenarios and activities.

NAM in action: Since the SEC first unveiled this attempt at regulatory overreach, the NAM has been on the move.

  • The NAM led more than 50 other manufacturing associations in a letter calling on Congress to insist that the SEC develop a more workable version of the rule.
  • The NAM also urged Congress to exercise stricter oversight of the SEC, push back against the agency’s regulatory onslaught and ensure the SEC’s rules remain within the agency’s statutory authority.
  • NAM President and CEO Jay Timmons made revising the climate rule a focal point of the NAM’s corporate finance agenda.
  • And last, NAM Managing Vice President of Policy Chris Netram testified about the harms to small manufacturers that would result from the climate rule at a House Financial Services Committee hearing.

The last word: “Manufacturers are leaders in responding to climate change and in informing investors about this critical work, but the SEC’s climate rule is simply unworkable,” said NAM Vice President of Domestic Policy Charles Crain. “Given the complex nature of manufacturing supply chains, the rule’s costly mandates will have a disproportionate impact on our industry—and particularly on small manufacturers. The SEC must rescind, or at a minimum significantly revise, its overreaching and impractical proposal.” 


The NAM, members of the NAM’s Council of Manufacturing Associations and Conference of State Manufacturers Associations recently launched Manufacturers for Sensible Regulations, a coalition addressing the impact of the current regulatory onslaught coming from federal agencies. To learn more, and get involved, go here.

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