1. Costco Sustainability Report 1
An Industry Leader in Sustainability Reporting: Costco Wholesale
Dominic DeMicco
Accounting 211
Professor Jobst
November 5, 2015
2. Costco Sustainability Report 2
Abstract
A growing topic in the world of accounting is the potential need for sustainability
reporting. The state of the earth’s environment has been slowly deteriorating and as more
regulations are created by state and federal governments it will be important for companies to
remain at the forefront of sustainability. This paper will look at the steps one corporation has
taken to set itself apart from many of its competitors in this area. Costco has looked at improving
sustainability in every segment of their business; from its supply chain to the displays on its sales
floor.
3. Costco Sustainability Report 3
An Industry Leader in Sustainability Reporting: Costco Wholesale
In a world of extreme competition for businesses, many have begun looking at
sustainability as a way to set themselves apart from others. One such business is Costco
Wholesale. Costco has been a global leader in sustainability reporting and is already publishing
“unofficial” sustainability reports which very few other businesses have done. According to the
AICPA Sustainability Assurance Survey, “meet[ing] new legislative or regulatory requirements”
is the largest single driver of organizations’ increasing focus on sustainability (AICPA 2015). As
potential legislative and regulatory requirements arise, Costco will be able to meet all of them
because it has measurable goals of limiting electricity and gas consumption. Furthermore, the
Company holds its suppliers to a high standard when it comes to human rights. Costco has put a
great deal of time and effort into sustainability reporting and, its business principle of “buying in
bulk” is in fact grounded in being environmentally friendly.
The first step the Company has taken towards sustainability is limiting its usage of
resources such as gas and electricity. One goal Costco has is to “maintain [its] carbon footprint
growth to less than [the] company sales growth” (Costco 2015) and they do this by comparing
total CO2/sales to annual growth. Since 2009 Costco has successfully achieved this goal – they
did so in 2013 by having an annual growth of 7.9% and a total CO2/sales of 1.8%. Another
statistic that Costco measures to ensure sustainability is Total Sales Floor Lighting Load. This
provides the Company with a way of measuring the operating expense of lighting. Figure 1
displays the 50% reduction of electricity used to light Costco’s sales floors over an 11 year
period (Costco 2015).
4. Costco Sustainability Report 4
The Company achieved this figure by using energy efficient LED lights instead of the antiquated
HID bulbs it had previously used. Another way Costco has reduced its carbon footprint is by
continually installing solar panels on top of its facilities. From 2007-2013 Costco installed 78
solar power systems and they plan to install more every year (Costco 2015). One final way the
Company limits its material usage is a very unique system of recycling rotisserie chicken grease.
To date, Costco has recovered and recycled 1,000,000 pounds of grease which converted to
286,000 gallons of biofuel – reducing CO2 emissions by 875,732 pounds (Costco 2015). As
sustainability reporting becomes more common, Costco will remain a leader in reporting the
steps it has taken towards reducing resource consumption and recycling materials.
Compared to other sustainability assurance service offerings, corporate spending on the
“Verification of sustainability performance of suppliers” is forecasted to grow approximately
twice as fast as other services (AICPA 2015). The behavior of Costco certainly follows this
trend. The Company has a very firm policy with suppliers towards ensuring human rights. This
Code of Conduct explains that their suppliers are audited by third party experts in social
responsibility to ensure there is no mistreatment of workers occurring (Costco n.d.). If human
rights violations are discovered, there is a well-organized system the Company has developed to
rectify issues. Their disclosure on supplier sustainability reads, “‘Critical violations’ are
considered serious enough to require immediate and decisive remedial action and may result in
Figure 1
5. Costco Sustainability Report 5
the termination of the business relationship. For less serious violations, we allow the supplier
reasonable time to develop and implement a plan for remediation. In those instances we conduct
follow-up audits to monitor progress” (Costco n.d.). A thorough examination of suppliers should
be required for all corporations to prevent supporting the mistreatment of workers. When it
comes to the treatment of employees, Costco has truly set a standard in the world of retail. The
Company did this by starting new employees at a 60% higher wage than federal law requires and
providing healthcare for 88% of its labor force (Short 2013). While it may not be the most cost
effective model, paying higher wages has kept Costco’s turnover rate to 5% for employees;
therefore, less time and money is spent training new workers (Taube 2014). Costco is very well
prepared for future regulations and legislation requiring audits of suppliers because it has already
been conducting such examinations.
For both Costco and its shoppers, the very nature of “buying in bulk” has many benefits
when it comes to sustainability. Costco explains in its 2015 Sustainability Report that bulk
packaging “means fewer trips by customers to serve their needs” (Costco 2015). Customers are
able to purchase two weeks or more worth of groceries in one trip which leads to less driving
and, therefore, less air pollution. To further decrease the amount of gasoline used, Costco and its
suppliers are experts in efficiently shipping products. As Figure 2 displays, the Company has
been able to decrease the amount of labor and materials that go into presenting many of its
6. Costco Sustainability Report 6
products by shipping in floor ready packaging. Another way Costco has managed to cut costs
and reduce its consumption of plastic is by geometrically designing packaging for many of its
food items. The example their sustainability report gave is how switching the shape of cashew
containers to a square design from a circular shape allowed for 50% more containers per pallet.
Cost effectiveness and sustainability are one and the same to the Company and such thinking has
allowed them to keep prices low for customers while limiting their impact on the environment.
Costco has taken many steps to become a leader in the world of corporate social
responsibility. The Company has successfully limited their use of resources by improving
efficiency in every aspect of its business. Costco has created an impressive infrastructure of
renewable energy by investing in solar power and harvesting biofuels. Furthermore, Costco is
always looking at how it can provide a better experience for customers while maintaining high
standards of sustainability. It is evident human rights are a very important issue to this company
because of its Code of Conduct with suppliers. If/when sustainability reports become necessary
for corporations to publish, the Company will be ready because it has already been creating
“unofficial” sustainability reports.
Figure 2
7. Costco Sustainability Report 7
References
American Institute of CPAs. (2015, June 1). The State of Sustainability Assurance and Related
Advisory Services in the U.S.: Two Market Assessments. Retrieved from
http://www.aicpa.org/interestareas/businessindustryandgovernment/resources/sustainabili
ty/pages/sustainability%20accounting,%20reporting,%20assurance%20and%20other%20
services.aspx
Costco. (2015, January 1). Costco Wholesale Sustainability Report 2015. Retrieved from
http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9Mjc3MzQ3fENoaWxkSUQ9LTF8VHlwZT
0z&t=1
Costco. (n.d.). Costco Disclosure Regarding Human Trafficking and Anti-Slavery. Retrieved
from http://www.costco.com/disclosure-regarding-human-trafficking-and-anti-
slavery.html
Short, K. (2013, November 19). 11 Reasons To Love Costco That Have Nothing To Do With
Shopping. Retrieved from http://www.huffingtonpost.com/2013/11/19/reasons-love-
costco_n_4275774.html
Taube, A. (2014, October 23). Why Costco Pays Its Retail Employees $20 An Hour. Retrieved
from http://www.businessinsider.com/costco-pays-retail-employees-20-an-hour-2014-10