On June 17, 2022, Mountain States Legal Foundation filed a comment against a proposed Securities Exchange Commission rule titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” At its core, the rule would require public companies to report supply chain greenhouse gas emissions. This means the supply chain ― including farmers and ranchers ― must track and report their greenhouse gas emissions. Instead of focusing on the good and hard work of growing the world’s food, the SEC would make the agricultural industry into a proxy for another costly tentacle of the environmental regulatory regime.
Mountain States offers two basic arguments. First, the SEC has no statutory authority to impose such a requirement. While the SEC may argue it has “broad authority to promulgate disclosure requirements that are necessary or appropriate in the public interest or for the protection of investors,” Congress has never given the SEC the authority to regulate the agricultural industry. In fact, if we look closely at what Congress has said about agriculture, we find that it explicitly forbade the Department of the Interior, Environmental Protection Agency, and other related agencies from implementing rules requiring greenhouse gas emissions reporting in agricultural areas. Any reviewing court would have the grounds to strike down the SEC rule for exceeding Congress’ grant of authority to the commission.
Second, we argue that the SEC rule would violate the free speech clause of the First Amendment. Under the Supreme Court’s precedent, any regulation that would restrict or compel speech based on content is, if not intrinsically unconstitutional, subject to strict scrutiny, meaning the Court would presume the regulation unconstitutional until proven otherwise. The regulation targets a specific content area. Additionally, while farmers and ranchers operate within a commercial sphere, the speech the SEC seeks to regulate is not exempt from First Amendment protection, or subject to some lower standard of scrutiny. In order for commercial speech to be subject to government regulation, and thus not as protected as political speech, it must be factual and noncontroversial. As anyone who reads the news can tell, greenhouse gas emissions and climate change are anything but noncontroversial. The proposed SEC rule compels speech on a hotly contested political topic in a speculative manner. Simply, requiring farmers and ranchers to guess how their supply chain affects the environment would violate their right to free speech.
MSLF will monitor the SEC’s proposed rule as it develops over the next few months. We are committed to fighting against bureaucratic overreach and will continue the work of protecting Americans’ rights.
