Organizational Governance

Costco Stands Its Ground, Asserts Business Case for DEI

Costco has set a great example of finding the value in values — and a precedent that hopefully many more companies will follow.

By Jennifer Elks | Published 1 year ago | About a 5 minute read

Image: Marcus Reubenstein

In a refreshing change from the growing corporate capitulation regarding their DEI policies, retail giant Costco closed out 2024 by standing up to a conservative group aiming to add the wholesaler to the list.

Costco’s Board of directors unanimously recommended that its shareholders reject a proposal brought by the National Center for Public Policy Research (NCPPR) — a conservative think tank — which contends that Costco’s DEI practices are potentially discriminatory and cites potential “litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders” of diversity and inclusion policies.

Costco explained in its proxy statement to investors that the opposite is true: “Among other things, a diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the ‘treasure hunt’ that our customers value. We believe (and member feedback shows) that many of our members like to see themselves reflected in the people in our warehouses with whom they interact.”

In addition to its recommendation to vote against the proposal, Costco’s Board called out the NCPPR for pushing an anti-diversity agenda under the guise of reducing risk and “inflicting burdens” on companies with its challenges to DEI:

“The proponent professes concern about legal and financial risks to the company and its shareholders associated with the diversity initiatives. The supporting statement demonstrates that it is the proponent and others that are responsible for inflicting burdens on companies with their challenges to longstanding diversity programs. The proponent’s broader agenda is not reducing risk for the company but abolition of diversity initiatives.”

As CNN’s Nathaniel Meyersohn pointed out, Costco — which pays some of the highest wages in retail and is considered a progressive employer — is standing by DEI at a moment when such initiatives are under attack from right-wing activists, legal groups, conservative customers and the incoming US administration.

And while Costco’s rebuff of NCPPR’s proposal has riled the right-wing hornet’s nest, many are applauding the company for staying true to its values. Writer, speaker and corporate strategist Andrew Winston commended the company for its “long history of doing right by employees,” “buck[ing] the pressure of pulling back on diversity and inclusion” and issuing “a nicely worded ‘buzz off’ message to anti-DEI activists. Bravo.”

“This decision highlights the true value of DEI,” said executive coach Herman Armstrong. “It's not just about social responsibility, but also about building a stronger, more successful organization.”

Nadine Smith, co-founder and CEO of Equality Florida, wrote, “If you crumble when your values are tested, they weren’t values — they were marketing campaigns. Well done, Costco!”

“If Costco can eloquently make the ‘business case’ for DEI … surely, others can if they choose to do so,” said Purpose Hive co-founder Sam Monnie. “This isn’t about having a backbone or pushing back. It’s simply based on the commercial savvy that you can be purposeful and profitable simultaneously.”

In its decision to uphold DEI practices, Costco set itself apart from a growing number of companies that have watered down or scrapped their programs in 2024. But the conservative backlash against corporate ESG and DEI initiatives has largely been unaligned with the views of the US public, as reflected in a growing number of studies:

In a 2023 Allison + Partners study, nearly two-thirds (65 percent) of respondents said they want companies to continue their ESG programs; more than half (53 percent) said they would stop buying from a brand if it stopped ESG action due to political pressure.
A 2024 study from the Unstereotype Alliance dispels NCPPR’s assertion that DEI initiatives could be culturally, socially and financially detrimental to business by providing an irrefutable link between inclusive advertising and higher profits and brand value; respondents said inclusive ad campaigns would increase the likelihood of a brand being their first choice by 62 percent.
This was recently echoed in new studies in which the majority of Americans — across the political, racial and economic spectrum — value a people-first approach to business: JUST Capital’s 8th annual Americans’ Views on Business Survey, found the public is united in their desire for companies to treat their workers and customers with respect, humanity and fairness; and in a post-election survey from Carol Cone ON PURPOSE/Harris Poll, nearly half (46 percent) are calling for businesses to take on a much larger role in addressing social issues under the incoming administration.

And in the wake of the company’s decision, social media users have been vocal in their support — with many saying excited to start, renew and gift Costco memberships.

Costco is a great example of a company that has found the value in values — and it has set a precedent that hopefully many more companies will follow.

Costco shareholders will vote on the DEI resolution at the Annual Meeting on Jan. 23.