November 1, 2015

Shareholder Advocacy: Convincing Costco to Reduce Its Greenhouse Gas Emissions

Sometimes change comes through building relationships. That’s just as true in the business world as it is in the church. In this instance, Portico Benefit Services’ long-term investment relationship with Costco Wholesale Corporation has led to two important changes to Costco’s environmental stewardship. Both of these changes came in part through Portico’s shareholder advocacy efforts.

In 2007, Portico — in collaboration with other shareholder groups — filed a shareholder resolution requesting a report on Costco’s greenhouse gas (GHG) emissions.

The proposal was withdrawn (not sent to a shareholder vote) when Costco agreed to provide shareholders basic information about GHG emissions in its annual report. Withdrawals of shareholder resolutions are positive because it means that the company agrees to work with filers to implement the proposed changes.

In 2015, as part of the ELCA’s continued efforts around climate change, Portico filed a shareholder resolution asking Costco to adopt absolute, time-bound, quantitative, company-wide targets for reducing GHG emissions, and to issue a report on its plans to achieve these goals.

This resolution seemed especially appropriate as it aligned with Costco’s own analysis about the effect of climate change on both the environment and the company’s bottom line. Costco’s 2014 annual report stated: “Factors associated with climate change could adversely affect our business. We use natural gas, diesel fuel, gasoline, and electricity in our distribution and warehouse operations. Increased U.S. and foreign government and agency regulations to limit carbon dioxide and other GHG emissions may result in increased compliance costs and legislation or regulation affecting energy inputs that could materially affect our profitability. In addition, climate change could affect our ability to procure needed commodities at costs and in quantities we currently experience. We also sell a substantial amount of gasoline, the demand for which could be impacted by concerns about climate change and which also could face increased regulation. Climate change may be associated with extreme weather conditions, such as more intense hurricanes, thunderstorms, tornadoes, and snow or ice storms, as well as rising sea levels. Extreme weather conditions increase our costs, and damage resulting from extreme weather may not be fully insured.”

Costco’s Commitment

After numerous discussions, Portico withdrew our shareholder resolution after Costco agreed to resume participation in the Carbon Disclosure Project (CDP), update its next sustainability report to include a discussion of the company’s approach to energy use, and commit to keeping the growth of its GHG emissions to less than its sales growth over the next five years. Costco also expressed willingness to continue the discussion as to how Costco can further improve its performance in this area.