Shareholders in The Home Depot have voted in support of a proposal seeking a report on the company’s impact on deforestation and another seeking an independent racial equity audit.
At the company’s May 19 AGM, a proposal seeking disclosures about deforestation garnered 64.7 percent of the votes cast. The resolution, filed by Green Century Capital Management, asks Home Depot to issue a report ‘assessing if and how it could increase the scale, pace and rigor of its efforts to eliminate deforestation and the degradation of primary forests in its supply chains.’
Green Century suggests that meaningful indicators in such a report might include whether the company has adopted a no-deforestation and no-degradation policy for all relevant commodities, and disclosure of its ‘comprehensive forest footprint and progress toward more ambitious efforts, such as quantitative progress reports, time-bound action plans, due diligence activities and non-compliance protocols.’
The proponent’s filing describes Home Depot as the world’s largest home improvement retailer and as such a major purchaser of wood products, which are major contributors to deforestation and forest degradation. ‘Companies that do not adequately mitigate deforestation and forest degradation in their supply chains are vulnerable to material climate and reputational risks,’ Green Century writes.
The proponent says Home Depot’s policies do not meaningfully address its impacts on primary forests. The company does not report to CDP forests or comprehensively disclose the sourcing geographies and certifications of its wood products, and has not committed to ensuring that its purchased wood is free of deforestation and forest-degradation impacts, according to Green Century.
The investment adviser writes: ‘In its 2020 10K, Home Depot acknowledges reputational damage could materially impact company finances, and notes that the company’s position on environmental issues ‘could harm our reputation’. Failure to adopt and implement policies that mitigate these exposures may subject the company to significant systemic and company-specific risks.’
In a statement following the vote, Green Century president Leslie Samuelrich says: ‘It’s a good day for the world’s forests, from Canada’s boreal to the tropical rainforests of South America, and for the species that depend on them. We are pleased that a majority of Home Depot’s shareholders have called on the company to accelerate action to end deforestation and the clear-cutting of old-growth trees in its supply chains.
‘Destroying ecosystems for a new set of kitchen cabinets is not the bargain we believe Home Depot’s customers want. Customers may now be unknowingly purchasing wood logged from endangered forests. The company has the opportunity to change this and use its market power for good. We look forward to working with Home Depot to implement our proposal. These issues require urgent action: the world’s forests, the species that rely upon them and our climate cannot wait.’
BOARD’S ARGUMENTS
Home Depot’s board urged shareholders to vote against the proposal. Writing in the 2022 proxy statement, it says: ‘The company shares the proponents’ concerns regarding the protection of forests at high risk for deforestation and degradation, and the impacts our forests have on the climate. As the world’s largest home improvement retailer, we have the ability to support change by working with our suppliers, and we have taken action for more than two decades to drive sustainable forestry practices in our organization and our industry overall.’
Those actions, it says, include having a wood-purchasing policy that features measures such as not accepting wood products from the Amazon or Congo Basin areas, Papua New Guinea or the Solomon Islands, unless they are Forest Stewardship Council-certified.
‘At The Home Depot, we know responsible forest management is essential to the health of our ecosystems, as well as for ensuring timber and forests remain available for future generations,’ the board writes. ‘The creation of a stand-alone report on these topics would not further the goal of protecting endangered forests from degradation but would only create an additional administrative burden which would be better devoted to operational initiatives in this area.
‘We believe our wood-purchasing policy and our current disclosures appropriately detail our efforts to monitor and manage our impacts on our forests, and our efforts and goals will continue to help us address deforestation-related risks in our supply chain.’
ANOTHER VOTE FOR A RACIAL EQUITY AUDIT
In further evidence that such proposals are gaining traction, a resolution seeking a racial equity audit garnered 62.8 percent of the votes cast at Home Depot’s meeting.
The Service Employees International Union (SEIU) Master Trust filed the measure, which urges the board ‘to oversee an independent racial equity audit analyzing Home Depot’s adverse impacts on non-white stakeholders and communities of color. Input from civil rights organizations, employees and customers should be considered in determining the specific matters to be analyzed.’
Companies face growing investor pressure to improve their performance in terms of diversity, equity and inclusion (DE&I). That pressure was sparked in part by the killing of George Floyd and the disproportionate impact of the Covid-19 pandemic on communities of color.
The SOC Investment Group (then the CtW Investment Group) and the SEIU were prime movers of the racial equity audit concept, between them filing proposals at eight major financial institutions last proxy season. Those proposals attracted significant though not majority support. Citigroup last October agreed to have a third party conduct a racial equity audit of the bank, six months after 39 percent of votes cast backed the resolution.
Home Depot is not the only company so far this proxy season to have seen majority support for such proposals. For example, almost 63 percent of votes cast at Johnson & Johnson’s AGM backed a proposal from Mercy Investment Services urging the board to ‘oversee a third-party audit… [that] assesses and produces recommendations for improving the racial impacts of its policies, practices and products, above and beyond legal and regulatory matters.’
Johnson & Johnson had urged shareholders to vote against the measure. The board wrote in its 2022 proxy statement that ‘[DE&I] is built into our credo and has long been a core value of the company.’
A request for comment from Johnson & Johnson was not returned at the time of the original article.
Fifty-four percent of the votes cast at Apple’s AGM in March supported a shareholder proposal requesting that the board oversee a third-party audit ‘analyzing the adverse impact of Apple’s policies and practices on the civil rights of company stakeholders, above and beyond legal and regulatory matters, and to provide recommendations for improving the company’s civil rights impact.’
Apple opposed the resolution, writing in its proxy statement that it is ‘committed to respecting human rights, including civil rights, and to ensuring everyone is treated with dignity and respect.’
The company argued that it ‘already fulfills the objectives of the proposal in several ways, including through impact and risk assessments, active governance and board oversight, engagement with our communities and key stakeholders and regular, transparent public reporting. We believe our current framework for the implementation and oversight of our human rights commitments is more effective than the broad and unfocused audit requested by the proposal.’
A request for comment from Apple was not returned at the time of the original article.
For its part, Home Depot’s board also urged shareholders to vote against the SEIU proposal, writing in the proxy statement: ‘At The Home Depot, we strive to create an environment centered on our core value of respect for all people, with a commitment to [DE&I] for our associates, customers and the communities we serve.
‘In fiscal 2020, we pledged to intensify our efforts as a company to make a meaningful, sustainable difference on this goal. We have long had a formal diversity and inclusion program, but in fiscal 2020 we expanded our scope and renamed the program to fit its enhanced mission: [DE&I]. Adding equity to our focus reflects our desire to promote fairness, remove bias and ensure all of our associates have access to the resources they need to succeed at work.’
The board writes that it and its committees provide oversight and guidance and drive accountability to support a continued focus on DE&I: ‘We believe our continued assessment of the areas where we can make the biggest difference – our associates, community and suppliers – better supports our efforts at advancing [DE&I] than a more narrowly focused racial equity audit, and we will continue to work within that strategic framework to support our associates and stand behind our core value of respect for all people.’
A Home Depot spokesperson says in a statement: ‘The board will take the vote on these proposals into consideration and determine the appropriate action.’
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
