Costco sources beef, palm oil, soy, and paper/pulp. These commodities are leading drivers of deforestation and land conversion, which are responsible for 12–20 percent of global greenhouse gas emissions[1] and 30 percent of the world’s biodiversity decline.[2] The UN Framework Convention on Climate Change identifies exposure to companies who drive deforestation as representing considerable financial, regulatory, and reputational risks to investors.[3]

With stores in Europe and the UK, Costco faces regulatory risk from the EU Deforestation Regulation, which requires that forest-risk commodities placed on EU markets don't come from land deforested or degraded after 2020, and similar legislation developing in the UK.[4] Absent a comprehensive deforestation risk assessment, Costco may be ill-equipped to meet a rapidly evolving regulatory landscape.

In 2023, Costco set a target to reduce its Scope 3 emissions intensity 20 percent by 2030 (excluding fuel). These emissions represent approximately 98 percent of Costco’s climate impact, a significant portion of which comes from crops that drive deforestation.[5] While Costco has committed to mapping 100 percent of its Kirkland Signature priority commodity supply chains by 2030,[6] this necessary first step is too slow to ensure that Costco mitigates deforestation risk on a timely basis to deliver on its 2030 climate commitment.

Further, without a comprehensive deforestation risk assessment and correlated deforestation elimination target(s), Costco increasingly lags peer companies:

Walmart enlisted third parties to conduct multiple deforestation risk assessments[7] and aims to source palm oil, beef, soy, and pulp/paper deforestation-free by 2025.[8]
Amazon enlisted a third-party consultancy to conduct a risk assessment of private brands’ soy supply chains.[9]
Target assessed environmental risks of owned brands at the source level for forest products and palm oil[10] and committed to deforestation-free palm oil by 2025.[11]
Carrefour pledged that by 2025, owned-brand products must use soybeans for animal feed that are not derived from deforestation or conversion.[12]
Kroger will source deforestation-free soy and beef used in manufacturing plants by 2025, and for owned-brand products by 2030.[13]
In neglecting to ensure its supply chain does not contribute to deforestation, Costco exacerbates financial risk by supporting the degradation of systems upon which agricultural productivity depends. It also lags the standards of peers, investors, regulators and global standard-setting bodies,[14] thereby exposing the company to undue financial risk.