Small Business Victory in Climate Change Reporting Requirement

Date: March 19, 2024

Small businesses benefit from Scope 3 climate disclosure requirement removal

The Securities and Exchange Commission (SEC) recently removed Scope 3 small business climate disclosure requirements from its final rule. NFIB opposed the proposed rule and considers this a victory for small businesses.

The proposed rule, known as Scope 3, would have required public companies to calculate and report the greenhouse gas emissions of the private companies with which they do business. This would have created significant burdens on small businesses.

“Small businesses can breathe a sigh of relief that the SEC followed NFIB’s recommendation and removed the Scope 3 requirements from its final rule,” said Elizabeth Milito, Executive Director of the NFIB Small Business Legal Center. “The Scope 3 requirements would have compelled SEC-regulated companies to track indirect carbon emissions and force many small business owners into a costly, time-consuming reporting regime.”

NFIB brought attention to a few main concerns with the Scope 3 requirements:

  • Small businesses are not equipped to calculate this information.
  • Small businesses may have to contract with consultants to provide accurate estimates or risk losing business.
  • Larger businesses could voluntarily require similar ESG reporting by small businesses without a government mandate.
  • Not every small business would be able to afford these services, and this requirement could act as a new market barrier for small businesses.

“In addition, the requirement went far beyond the authority granted to the SEC by Congress,” explained Milito. “The SEC was wise to follow NFIB’s advice and drop this unconstitutional provision from the final rule. This is a victory for NFIB members and small businesses everywhere.”

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