Beefy Emissions Baseline for JBS
On February 28, New York Attorney General Letitia James accused JBS of civil fraud: ‘greenwashing’ to be more specific.
On March 6, the SEC announced the details of its long awaited climate-risk disclosure
On April 5 - just four weeks later - the SEC withdrew the rule in the face of mounting legal challenges.?
Companies respond to customer and investor incentives
JBS is the world’s largest meat producer, so when it comes to environmental impact, some would put them in the same category as ‘big oil.’ In 2021, JBS made a public commitment to achieve net zero emissions
Letitia James, Attorney General of the state of New York, doesn’t think JBS can pull it off. Not with 16 years ahead of them. Not given how publicly they made the commitment. And not considering the regulations they will be subject to if they are successful in their effort to be listed on the New York Stock Exchange in 2024.
To read more about JBS’s current environmental impact, the challenges they will have to overcome in order to reduce emissions, and the legal hurdle that has been added to their path, read or listen to Net Zero in New York? JBS Accused of Greenwashing on Art of Procurement.
Polluting the NYSE?
It is entirely possible that JBS would not have attracted the attention of AG James if they were not pursuing a listing on the NYSE. The AG’s office isn’t the only one speaking out against them, either. A bipartisan group of senators wrote a letter to the SEC in January, cautioning against allowing JBS onto the exchange. Environmental activist groups and advertising oversight groups have done the same.
Everyone seems to be concerned that JBS will pollute the NYSE, so it seems fair to ask how ‘clean’ the exchange is today.
I pulled a list of the top 25 carbon emitting companies in the United States from Statista. 18 of that top 25 are already listed on the NYSE. Based on 2021 data, JBS would rank in fifth place with 71 million metric tons of?carbon dioxide equivalent. Interestingly, this would put them just two spots above the U.S. Government, which obviously isn’t listed on the NYSE but is the sixth top emitter of carbon dioxide in the country.
Baseline or Bust
A key part of the New York AG’s case is that JBS cannot commit to specific future emissions reductions because they have not calculated a baseline. But JBS is not the only company struggling with that task.
Even the SEC can’t seem to find a way to require emissions reporting that everyone agrees upon… years in advance of having to do so.
Two years ago, the SEC announced a plan to establish a climate-risk disclosure rule for all publicly traded companies - including those listed on the NYSE.?
The first draft of the rule included scope 3 emissions, but when the rule was rolled out, it was confined to scope 1 and 2.
Quick explanation of Scope 1, 2, and 3 emissions…
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On March 6th, the SEC rolled out their climate-risk disclosure rule spelling out the reporting requirements companies would have to meet. It was just about a week after JBS received the complaint from the state of New York. The rule was challenged swiftly, even though the reporting requirements won’t take effect until 2026.
According to Deloitte, scope 3 emissions typically account for 70 percent of emissions, so leaving them out of the rule constrains its impact without making it workable.
On April 5th, the SEC paused implementation of the rule so companies are assured they won’t be held accountable while the legal challenges are resolved. They made it about 4 weeks. Now the rule is pending review in a Federal Appeals court, and who knows how long that will take.
Our Own Worst Enemy
JBS wants to be listed on the NYSE. Attorney General Letitia James says their claim to have a long term plan to achieve net zero is not feasible… and if it were feasible, it would be too expensive… and since they did not establish an emissions baseline, how can they make any kind of commitment??
At the same time, the SEC can’t establish scope 1 and 2 reporting requirements that companies feel they can meet two years from now. And the NYSE is already loaded with heavy carbon emitting companies. In short, what a mess.
I’ll add two additional things to this story…
The McDonald’s Precedent
Earlier this year, I covered Byron Allen’s lawsuit against McDonald’s over their commitment to spend 10 percent of their national media dollars with black owned media companies by the end of 2024. A California judge ruled in February that McDonald’s can’t be proven guilty of fraud until the clock runs out on this year and dismissed the case.
Granted that was California and this is New York, so the laws may be different, but it seems reasonable to think the same principle would apply here.
JBS has a lot of work to do - including the calculation of a baseline - but they have 16 years in which to do it. Can AG James prove that they are greenwashing before 2040??
Perverse Incentives
Everyone wants companies to be responsible with regard to the environment. The complaint filed by the state of New York makes achieving net zero emissions sound impossible at worst and exorbitantly expensive at best.
Would JBS have been better off not making any emissions commitment at all?
The whole point of transparency is understanding and accountability. Yes, being listed on the NYSE would give JBS access to investment dollars, but it would also set them up to be subject to the SEC’s climate-risk disclosure rule, whenever that finally passes.?
How companies are expected to prove that they are reducing their emissions
This feels like an example of perfect being the enemy of good. I guess it all depends on what we’re really trying to achieve.
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11 个月That last sentence is the key to this whole mess... What are we really trying to achieve... Are we trying to reduce the overall emissions? Or reduce the overall emissions associated with companies listed in the NYSE? Seems to me the former is more important than the latter... And if the NYSE simply implements GHG reporting/disclosure rules, then we'll be further ahead than we are today. Investors, consumers, partners, etc will have better information with which to make decisions. Great article as always Kelly.