Walgreens, We Need To Talk

However, the foundation’s legacy holdings also included some investments where the choices were less clear cut. One of those was Walgreens, a profitable and growing national drugstore chain which, like its competitors, has expanded its offerings to include groceries, household goods, and a wide array of personal care products, cosmetics, and general consumer items. The company appears to pay attention to social and environmental concerns, and its website and annual reports include some promising sustainability measures and progress.
Over the past few years, however, the company has drawn fire from a national coalition of environmental health organizations. Recently, the groups have targeted the company over concerns with ingredients in the cosmetics, personal care, and consumer products it sells, generating news headlines with a national “Mind the Store” campaign. The groups have found Walgreens’ management singularly unresponsive to their requests for dialogue, in contrast to several of Walgreens’ competitors, who have not only agreed to meet but have also made public commitments to change practices and product offerings in response.
Together with Clean Yield, we decided to take another look. If Walgreens was as serious about sustainability as it claims to be, why were these concerns persisting and how might we as shareholders engage with the company about improving its sustainability performance? After taking a deeper dive into the company’s sustainability reports and existing commitments, we decided to file a resolution asking the company to add teeth to those commitments by tying its executive compensation policies to the company’s sustainability performance.
This approach is proving to be a timely one, as Walgreens recently announced plans to merge with the European-based Alliance Boots pharmacy chain, a company with much more stringent sustainability standards and practices, particularly on water, toxic waste management, and wood and paper sourcing. Our foundation and the other investors who have co-filed with us hope that the company may now be more receptive to dialogue with investors about improving corporate sustainability practices. To date, a handful of other companies have begun to link executive compensation to sustainability performance, with encouraging results. We believe that a decision by Walgreens to take similar steps will help make its pending merger with Alliance Boots smoother and more profitable, provide some competitive advantage over other companies in the sector, and better protect Walgreens against the risk of reputational damage by defusing its adversarial relationship with NGOs with environmental and health concerns.
In partnership with Clean Yield, we are looking forward to engaging with Walgreens’ managers on these matters. The opportunity for this kind of “active ownership” approach to managing the foundation’s investments is one important advantage of working with Clean Yield. For this small family foundation, active ownership is an exciting way to magnify our positive social impact beyond our grantmaking alone.

Jonathan A. Scott is president of the Singing Field Foundation, a Clean Yield client since 2010.