Climate Concerns Drive Shareholder Agenda At Kroger Meeting

The adoption of measures to reduce plastic pollution, a motion to join an organization working to enhance protections for U.S. agricultural workers, and eliminating the output of hydrofluorocarbon (HFCs) from refrigeration were among the most contested shareholder proposals presented during Kroger’s annual investor event today.

Rodney McMullen, the grocery chain’s chairman and CEO, repeatedly emphasized the prominence of Environmental Social Governance (ESGs) commitments within Kroger’s business, highlighting that the Ohio-based retailer has reported ESG activities for the past 15 years and originally established a Public Responsibilities Committee in 1977. However, multiple shareholders expressed displeasure with Kroger’s performance outside the context of its own stores. Kroger’s Board of Directors recommended participants vote against all of the shareholder proposals.

First on the agenda was the topic of reducing virgin plastic production generated in the retailer’s stores. The proposal began with an acknowledgement of the looming financial risk, appraised at approximately $100 billion, that Kroger could be faced with if additional recycling-related legislation similar to the recent enactments in Colorado, Maine and Oregon, becomes nationally or globally recognized practice.

Citing research from Pew Charitable Trusts, the shareholder affirmed that recycling efforts must be coupled with reduction efforts stating that “without immediate and sustained new commitments throughout the plastics value chain, annual flows of plastic into oceans could nearly triple by 2040.” However, McMullen argued that Kroger is already meeting its needs through its current sustainable packaging commitments, citing its goal to transition all private label products to recyclable, compostable or reusable packaging by 2030.

If approved, the rule would require Kroger’s Board to issue a report detailing plastic use reduction measures by at least one-third. According to the proposal, 17 other publicly traded consumer goods companies already report their virgin plastic reduction goals including Nestlé and Target.

Next on the docket: farmworker’s rights and a proposition for Kroger to join the Fair Food Program (FFP) which “protects against modern day slavery” in the U.S. agricultural industry.

The proposal, which was presented by Geraldo Reyes Chavez, leader of the Coalition of Immokalee Workers, highlighted recent instances of forced labor on U.S. farms including an incident last year that involved 70,000 farmworkers in Georgia. Additionally he explained that Kroger’s human rights protections make it “an outlier” when compared to the policies of retailers like Walmart, Whole Foods, Ahold, Fresh Market and Trader Joe’s, all of which have joined the FFP.

Additionally, the impact of climate change has made the existing unsafe working conditions, even worse, according to Reyes Chavez, who cited increased reports of “climate change induced heat exhaustion,” and a lack of action to prevent workers from being forced into labor during extreme weather conditions.

The board is seeking to reject the motion, stating it prefers to work directly with suppliers rather than third-party organizations like the FFP when it comes to human rights policies. The rebuttal also highlighted Kroger’s updated and expanded human rights policy, published earlier this year, which also features the inclusion of ​​an interim Human Rights Progress Update.

“We expect all suppliers to agree to our vendor code of conduct as a condition for doing business with us,” McMullen said. “If we find any evidence that any supplier is not following our requirements, or implementing the agreed upon corrective actions to resolve issues, we stop doing business with them. We will expand our established social compliance programs to suppliers, U.S.-based facilities and farms in the next phase of our due diligence.”

However, one of the most contested proposals regarded the elimination of HFCs, a climate change-causing chemical emitted by refrigerators used in almost all of Kroger’s 2,800 stores. Despite competitors, ALDI, Whole Foods, Target, Publix, and Meijer having done so, Kroger was admonished by shareholders and ​​investor advocacy group Friends Fiduciary for only transitioning away from the chemical in seven of its newly opened stores.

While the proposal acknowledges that Kroger has taken steps to reduce refrigerant leakage, the company’s reliance on the chemical and its responsibility for its eventual disposal continues to cause HCFs to be released into the environment. The HFCs currently used by Kroger account for about 63% of its Scope 1 emissions, according to shareholder representative Amy Carr.

The proposal requests that Kroger issue a report detailing how it can “curtail the predominant source of its operational (Scope 1) [greenhouse gas] (GHG) emissions,” HFCs, by using better and available technology. McMullen responded by stating that the retailer has plans to release a comprehensive Climate Impact report by the end of the year to outline its GHG emissions.

“Kroger has committed to reset its current GHG emissions reduction goal for a science-based target,” said Carr during the proposal. “But without a plan to transition away from HFCs to ultra low [global warming potential] refrigerants, there is significant doubt that Kroger will be able to reach its greenhouse gas reduction goals, thus exposing the company’s reputational risk and [showing it is] not doing its part as an industry leader to mitigate climate change,”