Regulatory and Legal Reform

An aggressive climate-disclosure rule proposed by the Securities and Exchange Commission hasn’t yet become law, but many companies are already adopting climate-disclosure practices and methodologies, according to The Wall Street Journal (subscription).

• Companies’ efforts to adopt climate strategies appropriate for their businesses, as well as the evolving methodologies for such reporting, are clear indications that the SEC’s costly and overly restrictive climate-reporting mandate is not necessary, said NAM Senior Director of Tax and Domestic Economic Policy Charles Crain.

What’s going on: “The Securities and Exchange Commission’s rule—which would require public companies to report climate-related risks and emissions data, including so-called Scope 3 emissions that come from a company’s supply chain—is expected to be brought in soon. … [But] [s]ome businesses have for years pursued carbon-related goals without the government forcing their hand,” according to the Journal.

• Manufacturers have led the move toward sustainability, with many having already begun to track and curb their emissions and work with their suppliers to do the same.

Why it’s important: “[G]roups from private manufacturers to egg farmers have balked at the cost and complexity of complying with a Scope 3 mandate from the SEC. The regulator has estimated its plan will raise the cost to businesses of complying with its overall disclosure rules to $10.2 billion from $3.9 billion, an additional cost of about $530,000 a year for a bigger business.”

• Manufacturers have urged the SEC to drop the Scope 3 reporting mandate. Some say it unfairly “creates a risk of double counting, because the supply-chain emissions of one company are the in-house emissions of another,” according to the Journal.
• While SEC Chair Gary Gensler told the House Committee on Financial Services earlier this month that the rule is not intended to burden private companies, “[m]andatory Scope 3 reporting would represent a costly, uncertain and ultimately infeasible standard for public issuers as well as the small and privately held businesses within their supply chains,” NAM Managing Vice President of Tax and Domestic Economic Policy Chris Netram told the same committee.

The last word: “Manufacturers [are] leaders in combatting climate change and making the necessary disclosures about this important work,” said Crain.

• “The SEC’s attempt to mandate a top-down, uniform approach to this evolving field would dramatically increase costs and legal liability for manufacturers—without improving information availability for investors or helping companies achieve their sustainability goals.”                          

The Federal Trade Commission is proposing to ban noncompete agreements, but doing so would disrupt the operations of most manufacturers, according to the findings of a recent NAM poll.

What’s going on: In February, the NAM polled manufacturing leaders to learn their thoughts on the impact of the FTC’s proposed rule, which would prohibit employers from imposing noncompete agreements on employees. Among the poll’s key takeaways:

• Approximately 70% of respondent manufacturers use noncompete agreements.
• The ban would cause a disruption for approximately 66% of manufacturers.
• The majority of manufacturers—about 89%—said they use noncompetes that last from six months to two years.
• Approximately half of manufacturers polled said a ban would have a negative impact on their investment in training and related programs.

Why it’s important: “Manufacturers use noncompete agreements only for select workers handling their most sensitive information, which cannot be allowed to fall into competitors’ hands,” said NAM Vice President of Infrastructure, Innovation and Human Resources Policy Robyn Boerstling.

• “These agreements are critical for protecting intellectual property. Banning them would force companies to completely change the way they operate and the way teams work together—disrupting workplaces, jeopardizing their ability to develop important new products and ultimately hurting customers.”

What should be done: If the FTC insists on moving forward with a noncompete rule, it should withdraw its current proposal and put forth a more tailored version “with exemptions clearly articulated and justified for the public’s consideration,” NAM Director of Labor and Employment Policy Brian Walsh told the agency.

The future of the Biden administration’s too-stringent rule governing the “waters of the United States” remains unclear following the president’s veto of legislation that would have overturned it, according to E&E News’ GREENWIRE (subscription).

What’s going on: “Republican lawmakers pushed almost immediately for a veto override targeting the…WOTUS rule on Thursday in the hours after President Joe Biden nixed a resolution that would roll it back.”

• A Republican-led measure in the House and Senate using the Congressional Review Act to block the overly restrictive WOTUS rule passed both chambers of Congress last month.
• House Republicans say they will push for a veto override.

Why it’s important: The Biden administration’s version of the rule replaced NAM-backed regulations from the previous administration.

The background: The Supreme Court is expected to make a decision this year on Sackett v. EPA, a case brought by an Idaho couple who have been blocked from building a house on their land for more than 15 years after the Environmental Protection Agency said part of the property was a wetlands.  

• The NAM and many GOP congressional leaders previously urged the administration to await the ruling on this case before releasing a final WOTUS rule.
• Issuing a new rule prior to a Sackett v. EPA decision only confuses things for manufacturers, making hiring and investment more difficult, NAM Senior Vice President of Policy and Government Relations Aric Newhouse said in December, following the release of the new rule.

What’s next: While “the fate of WOTUS remains murky as ever,” according to the article, several states have frozen the new rule.

• “Texas and Idaho secured an injunction on March 20, the day WOTUS took effect in the rest of the country. Those states are now subject to 1986 regulations, while the other 48 states are operating under the Biden administration’s definition—a split that has left the regulated community baffled as to how to operate nationally.”

The NAM says: “By vetoing the bipartisan Congressional Review Act on the WOTUS rule, the president removed an item that manufacturers greatly desire: regulatory certainty,” said NAM Vice President of Energy and Resources Policy Brandon Farris.

• “While the country awaits the decision in Sackett v. EPA, numerous investments in much-needed energy and infrastructure projects may be put on hold due to confusion over the new definition and potential added costs of compliance.”

The NAM is opposing the reintroduction of legislation that would institute “card check” and other labor policies harmful to manufacturers.

What’s going on: A coalition of nearly 100 organizations including the NAM urged Congress last week to reject the Protecting the Right to Organize Act, introduced in the House in February by Rep. Robert C. Scott (D-VA).

• “This bill would limit workers’ right to secret ballot elections, trample free speech and debate, jeopardize industrial stability, threaten vital supply chains, limit opportunities for small businesses and entrepreneurs, cost millions of American jobs and greatly hinder the economy,” they told Congress.

What’s in it: This legislation would significantly worsen—not improve—conditions for employees, the coalition argued. It would:

• Limit workers’ free speech and remove the right to vote via secret ballots.
• Hand confidential worker information over to unions without employee consent.
• Allow unions to choose bargaining units that maximize their chances of winning elections.
• Eliminate right-to-work laws.
• Allow intermittent strikes and remove bans on unions boycotting companies that do business with those engaged in an active labor dispute.

The cost: “The economic impact of the PRO Act would be catastrophic,” the coalition continued, citing one study which “found that the bill’s independent worker reclassification provision alone could cost as much as $57 billion nationwide, while the joint-employer changes would cost franchises up to $33.3 billion a year, lead to over 350,000 job losses, and increase lawsuits by 93%.”

In the spotlight: Many provisions of the PRO Act were raised during a hearing Wednesday of the Senate Health, Education, Labor and Pensions Committee chaired by Sen. Bernie Sanders (I-VT)—demonstrating that this issue and this legislation will remain a top priority for him and others in the Senate.

The NAM continues to push back against proposed revisions to the National Ambient Air Quality Standards for particulate matter.

What’s going on: On Tuesday NAM Director of Energy and Resources Policy Chris Morris urged the Environmental Protection Agency to withdraw its recent proposal to lower the primary annual particulate matter standard from 12.0 µg/m3 to between 8.0 and 10.0 µg/m3.

The big picture: “Manufacturers in the U.S. have become leaders in environmental stewardship and sustainability,” Morris pointed out.

• “Across the board, levels of major pollutants have declined dramatically, and the United States is outpacing our global competitors in air quality improvements,” he said.
• “According to the EPA, the U.S. has reduced six common NAAQS pollutants, including PM₅, by 78% between 1970 and 2020. Additionally, the EPA data show that PM_2.5 air quality has improved 43% between 2000 and 2020.”

The new regulations: The EPA’s new standards would impose a substantial economic burden on manufacturers, Morris continued.

• “First, there is the direct economic exposure manufacturers will face, which is a measure of the gross value added or employment in the manufacturing sector that could be affected or [placed] at risk,” he said.
• “Second is the indirect economic exposure of manufacturing as a result of a stricter PM₅ standard. This refers to the effects on the sector as the consequences are felt throughout the supply chain due to decreased overall investment.”

By the numbers: The EPA has estimated the total cost of the controls required for compliance with the proposed standard at up to $1.8 billion—and that figure could go higher, the agency admitted.

• This expensive policy will lead to job losses and fewer new manufacturing facilities, as well as fewer modernizations and expansions to existing facilities, Morris continued.

Unattainable standards: What’s more, some areas in the U.S. are “in non-attainment” with the current PM_2.5 standard, so a stricter standard will only put them further out of compliance, Morris told the EPA.

What should be done: To keep U.S. manufacturing competitive and to safeguard well-paying jobs, Morris said, the EPA should maintain the current annual particulate-matter standard of 12.0 µg/m3 and withdraw its proposal. 

The NAM in action: The NAM has been rallying manufacturers across the country to speak out against the EPA’s proposal and calling on Congress to oppose these harmful regulations.

• During the 2023 State of Manufacturing address last month, Timmons announced the launch of a nationwide campaign to maintain these standards in order to protect manufacturers.

The NAM’s Competing to Win Tour in Europe continued this week with a stop in Poland, where NAM President and CEO Jay Timmons highlighted manufacturers’ support for Ukraine both in his high-level meetings and in media interviews.

Solidarity with Ukraine: At the U.S. Embassy in Warsaw, Timmons and U.S. Ambassador to Poland Mark Brzezinski met to advance manufacturers’ shared solidarity with Ukraine and the importance of strengthening U.S. commercial relationships with Poland and other democratic allies.

• During a meeting with Poland’s Minister of Economic Development and Technology Waldemar Buda, Timmons discussed the direct support and investment by U.S. manufacturers in Poland, which they can use as a base for rebuilding Ukraine after Russia’s defeat.

Humanitarian work: A visit to UPS Poland highlighted the company’s humanitarian work to support refugees from Ukraine.

• UPS has suspended operations in Russia and Belarus and has partnered with several organizations on the ground in Ukraine to provide emergency funding, in-kind support and core relief supplies to refugees.
• UPS has transported and donated millions of meals, winter coats, medical supplies, blankets and other items to aid refugees, while also providing support to its Ukrainian employees and their families.

Interview on “Morning Joe”: Live from Warsaw, Timmons appeared on “Morning Joe,” where he emphasized the power of commerce, and manufacturers, to preserve, protect and expand democracy.

• “[T]he most important thing is to support our allies that believe in democracy. I’m very concerned right now that we have a divide between democracies and authoritarian regimes,” said Timmons. “And American business, I think, can help lead the way to strengthen and support democracy.”
• “I don’t think that there’s any threat quite as grave as what we’re seeing coming out of Russia right now,” he continued. “President Xi, and his visit from China to Moscow, I think really sends a pretty big warning signal for the West.”
• The show covered Ukrainian President Zelenskyy’s recent address to the NAM Board of Directors and spotlighted the NAM’s leadership on the world stage—as well as that of individual companies.

Roundtable discussion: Timmons’ last event in Warsaw was a roundtable discussion at AmCham Poland with representatives of manufacturers in the United States that operate in Poland.

• The meeting highlighted the importance of supply chain resilience, energy security and robust, market-opening trade agreements in the work ahead in rebuilding Ukraine, which require a mobilization of capital, industry and governments not seen in Europe since 1945.
• The meeting also covered opportunities for American businesses to support Poland in these efforts and to promote democratic values.

The last word: “Forty years ago this month, President Reagan warned the world not ‘to ignore the facts of history and the aggressive impulses of an evil empire,’” said Timmons. “A [statue of President Reagan] stands across the street from the U.S. Embassy in Warsaw.”

• “As Poland generously absorbs and supports nearly 2 million Ukrainian refugees who have been displaced by Russia’s barbaric and unprovoked war, Reagan’s words are just as important today as they were then.”

The Environmental Protection Agency has proposed the first federal limits on two chemical compounds that were used widely in everyday products for decades, The Wall Street Journal (subscription) reports.

What’s going on: “The agency is proposing maximum allowable levels in the nation’s public drinking-water systems for two compounds in a class of chemicals known as perfluoroalkyl and polyfluoroalkyl substances, or PFAS, which were used for decades in carpeting, clothing, food packaging, firefighting foam and other consumer and industrial products. The EPA also said it would regulate four other PFAS chemicals by requiring treatment if the combined level reaches a certain concentration.”

• The suggested limits under the Safe Drinking Water Act are part of a larger move by the EPA to tighten rules around “forever chemicals”—so known because they take years to break down—owing to “a growing number of studies [that] have shown links to a variety of cancers, thyroid disease, high cholesterol and other issues.”
• The two individual chemicals under discussion are known as PFOA and PFOS, which various industries began using in the 1940s for their ability to resist grease, corrosion, water and stains, as well as to douse fires.

Why it’s important: While the EPA says the change would prevent numerous deaths and illnesses, not everyone is assured of the soundness of the science behind it—and others say it would cost companies unnecessarily.

• Critics of the new proposed standard say the chemicals are still necessary components of numerous products, from cell phones to medical devices, and there are no viable alternatives. Moreover, when used correctly, PFAS compounds do not pose a significant health risk to humans or the environment, they say.
• One source told the Journal the new limits “would cost water systems $40 billion” in compliance-related spending.

 Our take: “Everyone deserves access to clean drinking water, and manufacturers continue to do their part to ensure we achieve the highest levels of environmental stewardship,” said NAM Director of Energy and Resources Policy Chris Morris.

• “Manufacturers in America are committed to the communities in which they live and serve and are dedicated to protecting the health, safety and vibrancy of those communities. The EPA’s proposal leaves many questions unanswered on the feasibility of meeting these new standards and the economic impacts this will have on communities, especially rural communities and consumers. The NAM looks forward to continuing to work with the EPA to ensure everyone has access to clean drinking water.”

The NAM is opposing the Federal Trade Commission’s proposed ban on all noncompete agreements, pushing back on a move that would damage the manufacturing industry. We talked to NAM Vice President of Infrastructure, Innovation and Human Resources Policy Robyn Boerstling about the NAM’s reasoning on this crucial issue.

What noncompetes do: As Boerstling put it, manufacturers use noncompete agreements only for select workers handling their most sensitive information.

• That information might include the details of the company’s most sophisticated processes and strategies, which cannot be allowed to fall into competitors’ hands.
• Not only do these employees handle the keys to a company’s success, Boerstling added, but they are the recipients of significant investments in time, compensation and training.

The potential damage: Banning noncompetes would force companies to revamp their human capital operations completely, argued Boerstling.

• It would mean that trade secrets or other essential information might walk out the door and be exploited not only by competitors, but also by foreign adversaries.
• Manufacturers would be forced to put in place burdensome controls or silo parts of their operations from each other, which would result in less training for employees and less efficiency across various divisions.
• In a highly competitive industry—not to mention during significant economic uncertainty—that is a high price to pay, Boerstling pointed out.

Why not something else? Noncompete agreements are a critical tool for protecting manufacturers’ intellectual property, and alternatives like nondisclosure agreements are not sufficient, said Boerstling.

• In fact, in IP cases, courts look specifically at whether a company has employed noncompete agreements in deciding whether that company has taken reasonable steps to protect their property and processes.

FTC in the wrong: The FTC is wrong to put forth this blanket ban on a number of counts, said Boerstling.

• First, the rulemaking concerns an issue of “vast economic and political significance” that is beyond the scope of the FTC Act.
• Second, the regulation of these agreements has been handled successfully at the state level, a situation that works well for manufacturers.
• Third, the FTC is being too simplistic by striking at all noncompetes at once. Complex technical industries require noncompetes for good reason, as their sophisticated IP is the core of their business.
• Last, this ban is set to be retroactive, which is sure to cause confusion for both employers and employees.

What the NAM wants: The NAM objects to the FTC’s proposal in its current form and asks that it be withdrawn until the FTC can propose a more tailored approach that allows for sensible exemptions, said Boerstling.

Manufacturers across the United States have long been leading the way on sustainability. From outpacing international competitors on emission reductions to making investments in clean technologies, the industry has implemented best practices for others to use and blazed a trail for them to follow.

NAM Director of Energy and Resources Policy Chris Morris emphasized manufacturers’ track record during a hearing before the Environmental Protection Agency last week, where he explained to policymakers that their proposed air quality rules would stifle rather than enhance manufacturers’ efforts. Here’s what he had to say.

A record of leadership: “Our industry has championed environmental stewardship at every turn, and our members have invested heavily in new processes and technologies that have made manufacturing in the U.S. cleaner and more sustainable than ever,” said Morris.

• “This innovation in the manufacturing sector has played a key role in the reduction of air pollution we have seen over the last 50 years.”

Manufacturers’ impact: “Across the board, levels of major pollutants have declined dramatically, and we are outpacing our global competitors in air quality improvements,” said Morris.

• “According to the EPA, the U.S. has reduced six common NAAQS pollutants, including PM2.5, by 78% between 1970 and 2020.”
• “Additionally, EPA data shows that PM2.5 air quality has improved 44% since 2000. Manufacturers are committed to ensuring that progress continues.”

The challenge: New proposed regulations from the EPA would have a number of negative effects, Morris noted.

• Tighter air quality standards would make permitting more difficult, raise compliance costs and make it harder for manufacturers in the United States to compete with companies abroad—especially at a time when manufacturers are concerned about the country’s economic outlook.

The path forward: Morris urged policymakers to ensure that current regulations are fully implemented before they propose new ones, and to work together with innovative manufacturers on smart solutions.

• “The U.S. has some of the best environmental standards in the world, and American manufacturers are consistently reducing emissions, conserving critical resources, protecting biodiversity, limiting waste and providing safe products and solutions so others in our country can do the same,” said Morris.
• “But in order to maintain our environmental leadership, we need better regulations.”

The last word: “In our view, environmental protection and a thriving economy are not mutually exclusive,” said Morris. “We can have both—but it requires working together toward a constructive solution. Manufacturers are committed to smart, strong environmental safeguards and improving the lives of all Americans so that no one—and no community—is left behind.”

NAM President and CEO Jay Timmons has been making the most of his time on the road during the Competing to Win Tour, delivering a strong message to congressional leaders about top manufacturing priorities. He did so again yesterday on permitting reform with congressional leaders in Washington:

• “Some of the biggest obstacles preventing manufacturers—and therefore the entire American economy—from reaching our full potential are the permitting delays, red tape and complicated bureaucracy that have plagued us for decades,” he told the leadership of several House committees.

He went on to cite a number of different areas in which permitting reform is desperately needed, including . . .

Energy: Permitting reform is crucial to almost every sector of energy manufacturing, from oil and gas all the way to nuclear and clean energy technologies.

• “For example,” Timmons noted, “the siting of and infrastructure for hydrogen power generation and transportation and for advanced, small modular and micro-nuclear reactors have progressed far too slowly.”
• “Manufacturers depend on access to reliable and affordable energy to expand, which is why we support reforms that would foster transparent, streamlined and timely federal regulatory processes for the siting, permitting and licensing of energy delivery infrastructure of all types,” he continued.

Transportation: Manufacturers also need railroads, highways, airports and ports to run their operations and get their products out the door.

• “Yet obtaining permit approvals for these projects often takes years, especially when reviews are piecemeal and duplicative,” Timmons pointed out. “[M]any companies are waiting on the sidelines because transportation infrastructure construction moves too slowly—or not at all.”
• “To ensure the broad and beneficial impact of [the bipartisan Infrastructure Investment and Jobs Act of 2021] … it is critical to clear permit backlogs and ease processing timelines,” he said.

Resource development: Manufacturers prioritize sustainability, Timmons noted, but “restricting access to America’s abundant natural resources hinders our ability to strengthen domestic supply chains.”

• “The inconsistent administration of critical mineral policies, for example, has limited our ability to use a wide range of resources that lie on and beneath federal lands—resources that are critical to producing everything from cars to medical devices,” he added.
• “Streamlining resource permitting and leasing policies will help stabilize manufacturing supply chains, control costs for consumers, reduce our reliance on foreign countries and create jobs in the U.S.”

Environmental standards: Manufacturers have worked steadily to improve U.S. air quality, helping to “lead our country to the cleanest air in the modern world,” said Timmons.

• “Unfortunately, when federal agencies continually revise standards before current standards are met and before states have implemented prior mandates, they create unpredictability”—which may mean that new manufacturing facilities get built in other countries instead, where they don’t face as rigorous standards.
• However, if Congress makes regulations more predictable and consolidates review processes, the U.S. “can continue to build on its strong record of environmental stewardship by boosting domestic manufacturing, which is environmentally cleaner than international competitors,” Timmons concluded.

Congressional intent: Congress should make sure that permitting reform isn’t just passed, but also implemented as easily as possible, Timmons advocated.

• It should conform to “on recent and future statutory streamlining efforts such as One Federal Decision,” while making sure federal agencies don’t duplicate each other’s efforts and waste time.

The last word: “Permitting affects every aspect of our lives—from our economic security to our national security,” said Timmons. “[I]f we seize this opportunity to lead, there is no limit to what manufacturers in the United States can accomplish—for the good of our people and for the good of the world.”