At a time when many marketers are backing away from DEI programs, Costco, which recently reaffirmed its commitment to diversity, appears to be an outlier. Yet as the membership-based retailer refuses to budge to activist pressure, experts say its stance could offer a lesson to other brands facing similar pressure.

Costco recently came under scrutiny by the National Center for Public Policy Research, a conservative think tank, which alleged the retailer has engaged in potential discrimination against white, Asian, male and straight employees. The group proposed Costco issue a report on the financial risks of DEI goals, according to CNN.

Also read: Brands may lose billions of dollars by dropping DEI programs

Many on social media are promoting boycotts of Costco for its inclusion policies.

Yet Costco is remaining firm in its DEI practices.

“A diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the ‘treasure hunt’ that our customers value,” the Issaquah, Washington-based retailer wrote in a proxy statement last month to investors. “That group also helps to provide insights into the tastes and preferences of our members. And 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 the statement, the brand’s board of directors all recommended shareholders vote against the National Center for Public Policy Research’s proposal.

Costco did not respond to a request for further comment.

“Costco’s saying ‘This is good for business, but I’m doing this because it’s beneficial for my customers, my employees and for shareholders,’” said Leeatt Rothschild, founder and CEO of Packed with Purpose, a socially conscious Chicago-based gifting company. “They’re saying the three most important stakeholders are all benefiting and that they know this is not going to raise any legal issues.”

Strength of the business

Indeed, Costco, which was founded 42 years ago and is one of the three largest retailers in the U.S. by revenue, has seen financial success. In September, the company reported fiscal year net sales of $249.6 billion, a 5% rise over its 2023 fiscal year. Last month, the company’s first-quarter earnings and revenue exceeded analyst expectations thanks to e-commerce strength.

Costco is one of several brands to face such pressure from conservative activists; last year, companies including Walmart, Lowe’s, Tractor Supply Co., and Ford rolled back DEI policies after activist outcry.

Yet Rothschild said DEI policies may not have been as authentically ingrained in other brands as they have been for Costco. She noted a rush by marketers in the months following George Floyd’s death in 2020 to announce diversity commitments.

“For companies that this was authentically part of who they are, there is less pushback, but for others, it was a patchwork of policies put together quickly and they are balking at the pressure,” she said. “Is it how you practice your business or is it something you’re just putting on your website?”

Costco is seeing support on social media for its positioning.

PR lens

One expert said that Costco’s response could have been helped by a public relations lens. Kimberly Whitler, a marketing expert and professor at the University of Virginia’s Darden School of Business, noted that it appeared that the board’s response was written by lawyers rather than PR experts, which she said could explain why the response from anti-DEI activists was so “vitriolic” and resulted in calls for a boycott.

“Often, companies rely on lawyers to craft statements that they believe will reduce liability,” said Whitler, adding that legal experts only help with legal liability—not public perception. “Sociopolitical activism creates a different form of risk, one that impacts the brand’s positional advantage and market share and can potentially be as—or more—damaging as legal risk.”

Whitler pointed to McDonald’s recent response to criticism following President-elect Donald Trump’s visit to one of its Pennsylvania restaurants during his campaign as one of the best responses she’s seen from a brand in recent years. That statement noted that the food giant does not endorse candidates for elected office and that the brand is not red or blue but “golden.”

Yet Rothschild said part of the issue for many marketers is in how they package their diversity and inclusion policies. “Choice of language could be the problem,” she said, noting that the term DEI “is fraught with so many contentious points of view” now. She said that Costco’s reinforcement of its business results helped drive its point home.

“They’re saying ‘Don’t tell us how to do business … step back and see this is not about a DEI practice as you might define it, it’s how we conduct business.’”