Resolved clauseIn 2018, the Intergovernmental Panel on Climate Change advised that greenhouse gas emissions must be halved by 2030 and reach net zero by 2050 to limit warming to 1.5°C, prevent the worst consequences of climate change, and meet the goals of the Paris Agreement.
Companies must act rapidly to reduce emissions in line with these science-based goals, as recent studies show that limiting warming below 1.5°C is now “extremely unlikely.”
Costco Wholesale Corporation (Costco) uses palm oil, soy, cattle, cocoa, and pulp/paper in its products. These commodities are leading drivers of deforestation, which accounts for over 10 percent of global greenhouse gas emissions.
In its 2020 10-K, Costco acknowledges that “climate change, extreme weather conditions, and rising sea levels could affect our ability to procure commodities at costs and in quantities we currently experience.” Furthermore, Costco identifies a “highly competitive” retail marketplace and failure to respond to changing consumer preferences, “including those relating to sustainability,” as risk factors.
Costco claims to prioritize “the mitigation of Scope 1, 2 and 3 CO2e emissions” and to focus on “addressing the climate impacts attributed to our global operations and supply chains.” However, Costco’s absolute Scope 1 and 2 emissions have increased in each reported year since 2016. Worryingly, Costco does not plan to announce Scope 1 and 2 emissions reduction targets until December 2022 and has no time-bound plans to measure, disclose, or set reduction targets for its Scope 3 emissions.
Scope 3, or value chain, emissions are likely to be Costco’s greatest source of emissions. Walmart, a Costco competitor, discloses that Scope 3 emissions make up 95% of its total emissions. If the Company is to accelerate emissions reductions consistent with global goals, halving GHG emissions by 2030, it must act broadly and expeditiously.
Competing retailers and food companies, including Walmart, BestBuy, Target, McDonald’s, PepsiCo, Nestle, and Kellogg, measure their Scope 1, 2, and 3 emissions and are pursuing science-based emissions reductions consistent with the goals of the Paris Agreement. Failure to keep pace with competitors and anticipate regulatory changes may pose material risks to Costco, including restricted market share, inability to meet government mandates, and reputational damage.
Whereas clauseShareholders request that Costco adopt short, medium, and long-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to achieve net-zero emissions by 2050 or sooner and to effectuate appropriate emissions reductions prior to 2030.
Supporting statementIn assessing targets, we recommend, at management’s discretion:
• Consideration of approaches used by advisory groups such as the Science Based Targets initiative;
• Adopting emissions reduction targets inclusive of all GHG Protocol-defined sources of Scope 3 emissions – including from agriculture, land use change, and deforestation – that align with limiting temperature increases to 1.5°C;
• Disclosing these targets to investors at least 180 days prior to the next annual meeting.