When about 70 percent of your investors want something, what’s a Fortune 500 company — even the 14th largest — to do?
On Jan. 20, 69.9 percent of Costco’s voting shareholders said “yes” to a proposal that called on the big box retailer to set “short, medium, and long-term science-based greenhouse gas emissions reduction targets” to achieve net-zero emissions by 2050. The vote may have shocked the Costco board, which had recommended that shareholders reject the proposal. But it shouldn’t have. Seventy-two percent of investors surveyed in a Kiplinger-Domini poll released in October said that environmental practices such as climate change, renewable energy and sustainability are “somewhat” or “very” important to them when they choose investments.
Actions on the grand scale of Costco’s shareholder resolution are crucial to the long-term habitability of our planet. The United Nations’ Intergovernmental Panel on Climate Change (IPCC) warns that to slow global warming and preserve the liveability of the Earth, we must cut greenhouse gas emissions in half by 2030 and reach net zero emissions by 2050.
Mitigating climate change is the right thing for corporations including Costco to do for society. After all, unless these companies evolve, they face a deeply inhospitable future along with the rest of us. While in the past, companies may have used the excuse that they’re not sure how to start taking environmentally responsible actions, that rationalization no longer works. The Science Based Targets initiative (SBTi) provides a framework for corporations to set and track progress toward carbon reduction goals in line with the IPCC’s advisory.
One of the goals that SBTi recommends is limiting deforestation, which, in addition to keeping animals and other plants alive, allows trees to play their natural role of removing and holding carbon out of the atmosphere, which helps to combat global warming. The Costco proposal that was advanced by a leading environmentally minded mutual fund company addresses the company’s ability to limit deforestation.
Except when it’s clearing land to build new stores, Costco doesn’t cut down trees itself. But a lot of its suppliers do. The shareholders are requesting that Costco cut emissions not just from its direct operations and energy usage, but also indirect emissions caused by its suppliers. Costco has acknowledged that those indirect emissions — including substantial amounts from deforestation and other agricultural practices — account for the vast bulk of its global warming pollution.
Since Costco buys and sells agricultural products from a wide array of sources and middlemen around the world, it occupies a unique position — it can use its purchasing power to pressure companies across product categories. To heed its shareholders’ wishes, Costco will need to require the companies in its supply chain to protect forests, which for ages have sustained “collateral damage” from the palm oil, soy, beef, cocoa and paper industries. Costco sells each of those products separately or, in the case of palm oil and soy, as an ingredient in hundreds, if not thousands, of items.
While pressure from Costco should be enough to get suppliers to enact their own policies to limit deforestation, if they don’t, it’s only a matter of time before their own investors force the issue. Costco is far from the only company to face this type of shareholder action recently and behind the scenes, advocates are negotiating with many other corporations to either change their ways, or answer to their shareholders.To those who say it’s not doable — they’re wrong. Walmart, one of Costco’s chief competitors, has been actively working to reduce emissions from its supply chain since 2017, when it rolled out Project Gigaton, an initiative to avoid 1 billion metric tons of greenhouse gas emissions by 2030. Thousands of Walmart suppliers have signed on and taken action, and the company has a detailed “forests policy.” Target, another peer, has also set science-based targets to reduce planet-warming emissions from its supply chain.
But even these three giant chains aren’t enough. To make real progress in reducing emissions from food and forests, every major food retailer must take action. If Costco joins its peers, others will follow. But Costco’s leadership still needs to decide to act. With so many trees falling in the forests, the world’s leading companies need to engage their ears.
In a moment when action to protect the environment is desperately needed and yet seems so hard to come by politically, it’s a welcome sign that shareholders are flexing their power. We need a multipronged strategy for long-term sustainability. And we need Costco and its peers to be part of the solution, not part of the problem.
Caribou photo and shopping cart photo from pixabay.
President & Chairwoman Environment America Research and Policy Center; Senior Vice President, the Public Interest Network
As president of Environment America Research and Policy Center, Wendy is a leading voice for the environment in the United States. She has been quoted in major national, state and local news outlets for nearly 40 years on issues ranging from air pollution to green investing. She is also a senior vice president with The Public Interest Network. She is a founding board member of Green Corps, the field school for environmental organizers, and Green Century Funds, the nation’s first family of fossil fuel free mutual funds. Wendy started with WashPIRG, where she led campaigns to create Washington state’s model toxic waste cleanup program and to stop the nation’s first high-level nuclear waste dump site. She is a 1983 graduate of Whitman College. She lives in Los Angeles with her husband and dog and hikes wherever and whenever she can.