Report on Plans to Align Operations with Paris Agreement
WHEREAS: Climate change presents systemic portfolio risks to investors; a warming climate contributes to supply chain disruptions, lost productivity, commodity price volatility, adverse human health impacts, and regulatory risk, among others. The widely recognized Paris Climate Agreement established the imperative to limit global temperature increases well below 2 degrees Celsius to prevent the worst impacts of climate change. Alarmingly, the most recent science shows achieving this goas is now “extremely unlikely.”1 Thus, more urgent and ambitious action is needed from all sectors.
While Costco Wholesale Corporation (Costco) has adopted some initiatives to begin to address its climate impact, including installing renewable energy at some facilities, measuring its scope 1 and 2 carbon emissions, and working to reduce energy use, its measured carbon footprint continues to grow, up 6.5% in 2018 alone. Significantly, Costco has not measured the carbon footprint of its supply chains – called scope 3 emissions – that are often many times larger than a company’s direct footprint. Costco says its supply chain emissions are “relevant,” but it has not disclosed plans to measure or reduce them.
Agricultural supply chains are particularly susceptible to climate change. The 2018 National Climate Assessment found “climate change presents numerous challenges to sustaining and enhancing crop productivity, livestock health, and the economic vitality of rural communities,” and rising temperatures are “the largest contributing factor to declines in the productivity of U.S. agriculture.” Costco is heavily reliant on agriculture as it derived over 50% of its FY19 revenue from its “Food and Sundries” and “Fresh Foods” merchandise categories. Moreover, Costco’s Kirkland Signature brand accounts for roughly 25% of Costco’s total sales.2 Thus, the impacts of climate change on, and the emissions generated from, Costco’s agricultural supply chains are major issues for the Company.
Several retailers and food-based businesses including Walmart, BestBuy, Target, McDonald’s, PepsiCo, Nestle, Mars, Kellogg, and Danone are not only measuring their full value chain emissions (scopes 1, 2, and 3) but are also pursuing long-term, science-based emissions reductions consistent with the goals of the Paris Climate Agreement.
Each company is implementing different strategies to achieve this common goal. Examples include working with farmers on low-carbon agricultural techniques, focusing resiliency efforts on at-risk producers, and collaborating with other companies to scale efforts.
Given the clear need for more urgent and ambitious action on climate change, proponents believe committing to measure and reduce Costco’s full value chain emissions footprint is a vital course of action that will help reduce risks associated with climate change, including production and supply disruptions, and help prepare the Company for future carbon-related regulations.
RESOLVED: Shareholders request Costco issue a report, at reasonable cost and omitting proprietary information, describing if, and how, it plans to measure and reduce its total contribution to climate change, including emissions from its supply chains, and align its operations with the Paris Agreement’s goal of maintaining global temperature increases well below 2 degrees Celsius.