Costco's shareholders are pushing the retail superstore to address its impact on the climate.
Tucked in amid reports on the number of rotisserie chickens sold (106 million) and the number of hot dog-and-soda combos customers consumed (122 million), Costco's shareholders voted Thursday to push the company to cut carbon emissions faster and more aggressively than its previously outlined action plan.
Shareholders also rejected two proposals to have the company report in more detail about its efforts to combat food insecurity and provide more transparency about its charitable donations. The latter, which was proposed by a conservative think tank and would require Costco to publicly list any contributions over $5,000, was aimed at monitoring donations to groups including Black Lives Matter organizations and the American Civil Liberties Union.
Costco's board of directors did not support any of those proposals. When it came to cutting greenhouse gas emissions, the board wrote in a statement released ahead of the meeting, "we need more time to determine how we can achieve meaningful and operationally viable" emissions reductions at the Issaquah-based company.
Green Century Capital Management, a Massachusetts-based shareholder that introduced the climate resolution, argued that time had already run out — and Costco was at risk of falling behind its competitors.
Under the resolution, shareholders recommended Costco adopt a fixed timetable and targeted limits on emissions by June, about six months earlier than the company's own timeline for its climate action plan.
"It's timeline significantly lags competitors, but they're also lagging in ambition," said Thomas Peterson, a shareholder advocate with the investment firm.
Emissions are broken down into three categories: direct emissions, like those from company vehicles; emissions associated with electricity, steam, heat or cooling; and a broad category of emissions from areas outside the company's direct control, like vendors.
Emissions attributable to Costco have increased over the last four years, Peterson said. And the company hadn't yet detailed an action plan for measuring, disclosing and reducing most of its indirect emissions.
In response to the resolution, Costco committed to announcing reduction targets for direct emissions by the end of 2022, as well as unveiling an action plan for all indirect emissions in the same time frame.
Tony James, chair of the board of directors, said the company had also committed to have 100% of the electricity it purchased be renewable by 2035, and to reduce use of refrigerants by 30% by 2030.
"While reducing emissions, we must also maintain the health and competitiveness of our business," James said. "Our solutions need to be deliverable, but we are moving forward aggressively."
Over the last year, Costco reported net sales of $192 billion, an increase of 18% from the 2020 fiscal year. Net income also increased 25% to $5 billion, or $11.27 earnings per share.
Traffic at stores grew roughly 7% and the company now has more than 820 warehouses around the world. Globally, Costco sold 8.9 million tires and 7.9 million pairs of glasses and filled 49 million prescriptions.
At Thursday's annual meeting, shareholders voted down two other resolutions introduced.
The American Baptist Home Mission Society, a shareholder from King of Prussia, Pennsylvania, introduced a proposal calling on Costco to report on its efforts to improve access to healthy foods in the communities it serves.
The report, it said, would expand on the company's previously stated sustainability goals to more explicitly address links between nutrition insecurity, health disparities and structural racism.
It would also be good for business, the group said, pointing to incidents in the company's past where it reportedly punished workers for wearing apparel in support of the Black Lives Matter movement. Before that, a couple in Maryland sued the company for $4 million for being racially profiled while shopping at a Costco store in 2018.
"Taking meaningful action to leverage Costco's core food business, lessen racial disparities in nutrition and healthy outcomes is in the best interest of the company, its customer base and its shareholders," said David Moore, the director of investments with the American Baptist Home Mission Society.
Costco did release a report on food security in September. The company said Thursday the information requested in the proposed resolution was already covered, while Moore argued it did not include an analysis on racial equity.
Shareholders also decided against a proposal to publicly list any charitable donations of or more than $5,000. The National Center for Public Policy Research, a conservative think tank based in Washington, D.C., that introduced the resolution, called on Costco to list on its website its donations, a plan for monitoring the funds and an explanation of safeguards in place to make sure the donations went toward the intended services.
A representative from the think tank said Thursday "corporate America has spent record sums donating to so-called racial justice organizations. ... Corporate philanthropy should work to improve the communities with which it engages. Unfortunately, many far-left organizations" have not, the representative argued.
Citing a list of philanthropic endeavors that included the Black Economic Development Fund and the Entrepreneurs of Color Loan Fund in a proxy released ahead of the shareholders meeting, Costco's board of directors said listing all its donations would be an "unwise use of company resources and produce no material benefit."
