Investors Push Jack in the Box to Report Greenhouse Gas Emissions

If your goal this year was to get companies to report their carbon emissions, then Jack in the Box has you covered. No Jack Wrap included, sadly.

A majority of Jack in the Box JACK shareholders endorsed a proposal for the fast-food restaurant operator to disclose its greenhouse gas emissions (which are widely acknowledged to cause global warming) and to set goals for reducing them. The vote took place at the company’s annual general meeting on March 1, 2024.

Some 57% of shareholders asked Jack in the Box to measure and disclose, at a minimum, its scope 1 and scope 2 emissions and to set short-, medium-, and long-term goals for emissions cuts. Scope 1 emissions are those a company creates directly, while scope 2 emissions include emissions from the power it buys from utilities and other sources.

Jack in the Box recommended that shareholders reject the proposal, saying the disclosures were premature given the legal challenges to California’s climate disclosure rules and uncertainty about what rules the Securities and Exchange Commission would impose.

But since then, the SEC has issued a sweeping new rule mandating that US-listed companies report climate-related financial risks and their plans to adapt to them, disclose scope 1 and scope 2 emissions, and more in the next couple of years. Currently, Morningstar Sustainalytics’ Low Carbon Transition Rating assesses Jack in the Box as “severely” misaligned with the target of limiting global warming to 1.5 degrees Celsius above preindustrial levels (the goal of the Paris Agreement).

The Jack in the Box resolution was made by the Accountability Board, and its support suggests endorsement by large investors. “The company’s two largest shareholders, BlackRock and Vanguard, together control around 30% of the votes. It’s very likely that one or both voted in support of the resolution,” says Jackie Cook, director of stewardship at Morningstar Sustainalytics, which also offers advice on proxy voting.

Support for the proposal was even higher than that for another greenhouse gas proposal at Darden Restaurants DRI in 2023, which received 23.5% support, notes Jekaterina Spiridonova, an analyst at Morningstar Sustainalytics. “This is the first greenhouse gas targets resolution voted in 2024, and the high level of support may be indicative of things to come,” Spiridonova adds.

Preview: This Week in Proxy Season

Starbucks SBUX breathed a sigh of relief after a labor group withdrew its director nominees from the proxy ballot.

The move came after Starbucks and a union seeking to organize its workforce said they would create a “framework” to guide organizing, which could reportedly settle a number of legal disputes. Starbucks said “as a sign of good faith” it would give unionized workers the same benefits as nonunion workers, including getting tips from credit card transactions.

The proposal was made by the Strategic Organizing Center, a coalition of labor groups that launched a campaign in November 2023 to elect its own slate of three new directors, including a former National Labor Relations Board chair. The group used the new universal proxy card rule to put its nominees on the company’s proxy ballot, instead of running a costly parallel proxy campaign. (Before the rule was adopted in 2022, companies and dissident shareholders had to send separate proxy cards with their own slates of nominees.)

It was reportedly the first time a labor union used tools traditionally employed by hedge funds to push for board seats at a corporation.

“The use of a proxy contest is a novel way for labor unions to run a shareholder campaign, in this case, challenging Starbucks’ opposition to a nationwide unionization campaign,” says Morningstar Sustainalytics analyst Andrew Spurr. “Rarely do proxy contests center on a social issue. In the wider context of labor unrest in the US in 2023, the universal proxy card right may become a tool for challenging corporate opposition to organized labor.”

Additional shareholder proposals that Starbucks will face at its March 13 annual meeting include:

• People for the Ethical Treatment of Animals is asking the coffee chain to report on costs to its reputation and sales outlook caused by its extra charge for plant-based milk.
• The National Center for Public Policy Research has submitted an anti-ESG proposal that asks Starbucks to report on how its programs and practices “direct systemic discrimination against groups or types of employees, including ‘nondiverse’ employees.”
• The National Legal and Policy Center has also submitted an anti-ESG proposal that asks Starbucks to analyze the “congruency” of its human rights policy positions with its actions.

Starbucks recommends shareholders vote against all three proposals. You can read the details of the proposals here.