Walmart, Target and other companies warn about growing consumer boycotts

By Nathaniel Meyersohn, CNN

New York (CNN) — Companies are warning investors about the risks of becoming the next target of angry customers.

Corporate America is required to disclose risks to their businesses in their annual regulatory filings. This year, Walmart, Target, Home Depot, Corona-parent Constellation Brands join an increasing number of companies advising investors about customer and legal backlash to their diversity, equity and inclusion (DEI) policies and environmental, social and governance (ESG) initiatives. They’re also giving notice of the risks of rolling back these programs.

Businesses typically warn shareholders about economic downturns, data breaches, natural disasters, and tax code changes. But companies are adding new risk disclosures in response to the intense political divide over corporate efforts to increase diversity in the workplace, promote LGBTQ rights and slow down climate change, corporate governance and risk management researchers say.

“Companies face a Catch-22 situation,” said Kristen Jaconi, director of the Peter Arkley Institute for Risk Management at USC. “Consumers may be dissatisfied if a company takes a particular position on a social issue or if a company takes no position at all.”

Consumer brands are trying to avoid damaging boycotts like those against Bud Light, Tesla, and Target. They are also reacting to opposition to DEI on the right, including the Trump administration’s threats to investigate companies with “illegal” DEI programs, conservative lawsuits and activist shareholder proposals against companies, and right-wing activists like Robby Starbuck targeting companies with DEI programs.

“The heightened debate on DEI and climate, in particular, has driven the inclusion of these disclosures in the last few months,” said Matteo Tonello, the head of benchmarking and analytics at The Conference Board.

‘Conflicting expectations’

Many companies are warning about consumer boycotts from both the political right and left, stoked on social media platforms.

“Strong opinions continue to be publicly expressed both for and against diversity, equity and inclusion and ESG initiatives,” Walmart said in its annual report released in March.

Walmart, which ended some of its diversity programs earlier this year, said it and other companies’ positions are “subject to heightened scrutiny from consumers, investors, advocacy groups and public figures, potentially leading to consumer boycotts, negative publicity campaigns, litigation and reputational harm.”

Target said in its annual report in March that expectations from shareholders, customers and employees over whether it should offer certain products or pursue ESG and DEI goals are varied, and at times conflicting.

“We have previously been unable to meet some of those conflicting expectations, which has led to negative publicity and adversely affected our reputation,” Target said.

Target noted backlash to its merchandise selection during Pride Month in 2023. That year, a boycott from the right over some of Target’s LGBTQ-themed merchandise led to a drop in sales and lawsuits from Republican-aligned legal groups.

Conversely, Target also noted “adverse reactions from some of our shareholders, guests, team members, and others” over its decision to end some of its diversity programs this year. Target’s sales fell last quarter, driven in part by customer backlash to Target’s retreat on DEI.

Target said any future changes to its policies could result in a negative reaction from some customers. The company also warned that it could face litigation and investigations from states and federal agencies that assert diversity programs violate the law, but said its initiatives were legal.

Anti-ESG backlash

Target is not alone in signaling that the Republican legal assault and right-leaning consumer backlash against diversity policies, in particular, could pose a big risk to business.

Abercrombie & Fitch, Kroger, PVH Corp. and other companies warn they could be hurt by the Trump administration’s anti-DEI and anti-ESG crackdown.

“There is some indication that sustainability goals are becoming more controversial,” Kroger said in its annual filing last month. “The recent change to the United States administration and changes in investor perspectives could also affect our ability to pursue our sustainability goals and could lead to increased criticism and associated reputational harm.”

PVH, the owner of Calvin Klein and Tommy Hilfiger, said in its annual filing last month that it could be “subjected to negative responses by governmental actors (such as anti-ESG legislation or retaliatory legislative treatment) or customers (such as boycotts or negative publicity campaigns) that could adversely affect our reputation.”

It’s notable that companies are now anticipating boycotts, said Lawrence Glickman, a historian at Cornell University who studies consumer activism.

“Often, boycotts catch companies by surprise,” he said. “Recent boycotts have been successful enough that (companies) are worried about them.”

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