ZOE WORSNIP BENJI LAFLAMME LUCAS STANOIS
INDS-3006 ACTIVIST DESIGN FEB 2016
costco CSR AUDIT:
“The question is not whether companies will engage in corporate social responsibility, but how they will create meaningful impact.�
http://www.conecomm.com/stuff/contentmgr/files/0/fdf8ac4a95f78de426c2cb117656b846/files/2013_cone_communicationsecho_global_csr_study.pdf
Costco: Quality Without Compromise Costco’s ethos is to provide members with quality goods and services at the lowest possible prices. As a membership based warehouse club, Costco offers quality products at low price points. The company works under the cost-leadership model, achieving low consumer cost through efficient supply chains, lean retail spaces, high-volume sales, and low profit margins. Costco has differentiated itself from other larger retailers through its unparalleled focus on multiple stakeholders: from customers, employees, and suppliers to local communities, they have come to be seen as a dependable and trustworthy company.
CSR: a triple bottom line approach We built our CSR framework from the triple bottom line approach because we felt it championed the most integrative approach to monitoring social and environmental sustainability. Our framework also takes into account the differences between the strategic and tactical initiatives. The strong suit of the triple bottom line is its ability to place all initiatives in relation to one another, allowing a company to determine when one policy is too singularly focused or being enacted at the detriment of another. The triple bottom line approach generates a feedback loop in which resources can be allocated to the most effective areas.
Mutually beneficial relationship Pack dynamics
Feeling of belonging Greedlessness Increased loyalty
Dependable annual income More stability
Calculated risk
Distress drive business Market control
First stop shop
Improved warrantee Future proofed earnings stability
Loyalty for a pittance Price control
Needs met
Fewer relationships
Offer quality rather than choice Top of mind Interior growth promotion
401k Matching
Member benefits
Pay it forward
Wholesale control Selective skews
Customer retention
#1 Customer satisfaction
Life em betterment Culture of value
SOCIAL
ECONOMICS
Execs that know every job
For the people by the people
Holistic leadership Securing loyalty
Longterm employees
ENVIRONMENT
Democratic leadership
Entrepreneurial Spirit
Emissions/sales growth index
Store energy use
Employee investment Employees as contributors
Lighting load reduction
Sale of local goods
Lower energy bills
Real data
Increased quality of employees
Waste to energy
Efficient excess use Solar power
Informed decisions
Upward mobility
No bragging Low exec pay
Actualization of the American dream
Inter-level compassion
Humble Mindset
No media presence
91% retention rate
Customer inclusion
Higher benefits
Non-PR feel
No corporation hatred
2% Member payback
Lower cost and price
Less stocking time
Moral Currency
14% Profit margin
GHG transparency
Emotionless transport
CO2 Transparency More money less compromise
Stunted innovation
Quantitative improvement
LiΠlocal community Obvious dedication
Holistic logistics Win-win eco-tactics
Visible environmental effort
Local loyalty Flexible packing
Community Nesting
Quantifiable self-monitoring
Index for Effectiveness In order to effectively use the triple bottom line approach to evaluate CSR, it is best to find a common factor by which all three sectors can be judged. Using currency can become problematic when placing dollar amounts on the worth of an ancient forest or the health of employees. We created an independent index by which to measure the effectiveness of Costco’s CSR offerings against our triple bottom line framework. Our index divides the effectiveness of both strategies and tactics employed by the company.
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CSR: Environment Warehouse Energy Management Costco has become a leader in energy and environmental design, with several new warehouses obtaining LEED certification for their exceptional strategies. Storm water management and bioremediative green gardens have contributed to mitigating runoff, whereas natural light and smart light sensors have cut lighting costs by 50% in 11 years. Experimentation with solar roofing have also incurred increased energy savings.
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Costco Wholesale Sustainability report, 2015 http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-sustainability
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Intelligent Index Costco makes use of a tailored sustainability index, in which the objectives are to limit carbon footprint growth to less than company sales growth. The company also practices GHG footprint transparency, revealing a very strong desire to self-monitor progress in mitigating emissions and improving carbon efficiencies. The company acknowledges the very real pitfalls of climate change and the potential economical, social and environmental issues we could be facing.
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Costco Wholesale Sustainability report, 2015 http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-sustainability
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Reduction of Fingerprints Supply chain efficiency is at the core of any Costco endeavor, from cost-effective distribution of high volumes to self-service warehouses. The company abandons the traditional supply chain to provide maximal operating efficiencies, directly contributing to higher employee wages and discounted prices for consumers. Reducing product handling at every step, particularly through cross dock distribution from manufacturer to distributor trucks and through pallet-based handling ensures minimal touch-points, storing and handling. NE W
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http://www.canadiangrocer.com/blog/the-secret-to-costcos-success-lies-in-supply-chain-efficiency-40691
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Efficient Excess From organic to electronic waste to packaging, Costco’s highly efficient waste stream management takes into account every variable with the same criteria for efficiency as their supply chain management. Costco has managed to divert 17,509 tons of post-recycled waste from landfills to recycling centers. The commitment to sensitizing shoppers and employees on various waste streams is made evident through various waste diversion programs, made visible in each warehouse.
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Costco Wholesale Sustainability report, 2015 http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-sustainability
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CSR: Economy Humble Mindset Nowhere is Costco’s humble mindset more obvious than in their executive compensation. While Costco’s CEO Craig Jelinek earns a base pay of $650,000 a year with performance-based stock options value at approximately 5 million, Wal-mart’s CEO Doug McMillon earned over $25.6 million last year. The pay gap between CEOs and workers only intensifies as Wal-Mart workers average at 11.83 per hour, whereas Costco employees earn an average of double the hourly wage. This modest ethos transpires through the crucial operations of the business, as reflected through the constancy in yearly stock pricing. NE W
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http://www.huffingtonpost.com/entry/ceo-worker-pay-gap_us_55ddc3c7e4b0a40aa3acd1c9 http://www1.salary.com/W-Craig-Jelinek-Salary-Bonus-Stock-Options-for-COSTCO-WHOLESALE-CORP.html http://www.businessinsider.com/why-walmart-cant-pay-costco-wages-2015-5
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People Above Profit In addition to offering above average working compensation, Costco offers several employee benefits such as generous 401k matching and extensive healthcare benefits to over 88% of it’s employees. In addition, the company scored 80% on the Human Rights Campaign’s Corporate equality index, that evaluates LGBT workplace policy. Certain categories (such as Marketing or advertising to LGBT consumers) being nonexistent for any demographic involved, given that Costco does not invest any capital in PR or Marketing teams. NE W
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http://asp.hrc.org/issues/workplace/organization_profile.asp?organization_id=1452&search_id=1&search_type=Quick
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Selective SKUS Having a selective set of SKUs allows for higher volume purchasing and efficient distribution. Costco carries approximately 4,000 products, in comparison with Target’s 80,000 units and Walmart’s average of 150,000. The purchasing volume allows for customized packaging, which fits according to specified pallet sizing and, once opened, converts into minimal displays. Managing less merchandise and display allows for reduced labor expenses.
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http://www.fool.com/investing/general/2015/04/26/why-doescostco-have-less-merchandise-on-its-shelv.aspx
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Economies of Scale As a wholesale retailer, Costco ensures high volume sales to vendors by limiting SKUs and eliminating brand competition, thus guaranteeing a reduced cost to consumer. Most often, a product’s only source of rivalry is the Kirkland house brand. The company’s purchasing power gained recognition when, in 2009, they intermittently cut Coca-Cola from their listings following a refusal on the soft-drink company’s part to reduce wholesale price.
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https://en.wikipedia.org/wiki/Costco
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Member Status Other than guaranteed savings and yearly cashbacks, members can rest assured that the product selection ensures quality as much as it does competitive pricing. Unlike any other retailer of its kind, Costco stands behind it’s products by extending manufacturer’s warranties on electronics to a two-year period. Costco members are normally highly invested in using Costco as a one-stop shop for several different services, seeing it as a return on their membership investment.
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https://en.wikipedia.org/wiki/Costco
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CSR: Social Upward Mobility More than 70 percent of Costco warehouse managers began their careers as a cashier or floor worker. Preferential hiring for corporate office positions are made through existing warehouse managers. Although this can pose certain challenges in skills conversion across platforms, the benefits far outweigh the challenges, through continued loyalty and much lower turnover rates (about 5%) then similar retailers. As a manager, having intimate knowledge of employee can be an invaluable asset to having holistic decision-making. NE W
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http://www.eremedia.com/tlnt/want-engagement-in-bulk-look-athow-they-do-it-at-costco/ http://www.businessinsider.com/costco-pays-retail-employees-20an-hour-2014-10
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Pay it forward Costco’s profit margin is capped at 14%, founded on the belief of passing savings onto members. The company’s business model is based off membership income, with Executive members receiving 2% of their purchases, for a maximum of 750$ and a minimum return of 55$ (basic membership cost). As previously mentioned, employees are paid fair living wages, ensuring high productivity and lower health claims. In addition, Costco donates 1% of pre-tax earnings to local communities, children’s hospitals and youth education. NE W
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http://willmarre.com/for-costco-giving-is-winning-means-giving-itsemployees-financial-payoff-for-their-success/
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Locally Diverse Supply Having a diverse set of suppliers maintains the interest of different demographic groups in various regions, and offers small businesses the opportunity to be stocked within their local region. Costco also provides “Roadshows,� in which diverse suppliers are invited to sell their products for a fixed amount of days in their warehouse. The mutual benefit lies in reduced transport costs and locally attuned product offering for Costco, and increased credibility and exposure for small brands.
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https://en.wikipedia.org/wiki/Costco
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CSR Assessment The strategies and tactics employed under Costco’s current CSR model are more than skin deep. Costco is dedicated to a multi-stakeholder approach, in which customers, employees, and the environment are considered on equal footing in any major endeavor taken on by the company. Our research has uncovered several emerging trends and drivers which could provide Costco the opportunity for higher impact improvements. While the company has put in place many efforts to to reduce the environmental footprint of their stores, the efforts have remained tactical.
Their social efforts are ahead of their time in regard to the way they treat their employees, yet there has been little emphasis placed on education and innovation. Their economic movements have been minor but deliberate. In order to keep close to their core values, they limit their maximizing of profit margins on their goods. While their focus is not on profit alone there have not been many efforts to reach out to emerging markets such as younger non suburban generations.
Value Implications:
If costco was built today what would it look like?
Core Values Commitment to quality
Costco warehouses carry about 4,000 SKUs (stock keeping units) compared to the 30,000 found at most supermarkets. By carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members.
Entrepreneurial spirit
Throughout the decades, the entrepreneurial drive for excellence has continued to define Costco staff at every level. From its management team to the people on the warehouse floor, everyone is united in a common goal to exceed member expectations.
Employee focus
Costco is often noted for being much more employee-focused than other Fortune 500 companies. By offering fair wages and top-notch benefits, the company has created a workplace culture that attracts positive, high-energy, talented employees.
http://www.costco.ca/about-us.html
Environmental Scan: Key Trends Automated Shopping
ECONOMY Wellness
Brand awareness through milenial skew
Risk-free Co-creatio
Brand awareness through milenial skew
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ENVIRONMENT
SOCIAL
Employees as ambassador s
From treasure hunt to purposeful purchase Rooftop Gardens
Widening Skills Gap
Trend Descriptions Left-brain Loyalty Successful brands are looking past points per purchase to engage on a more authentic level with consumers. Most understand that experiential loyalty rewards, which engage consumers with their products and services, are more successful at driving repeat sales. Using data-driven technology to facilitate meaningful brand interactions, such as making consumers top influencers in upvoting products or facilitating peer-topeer recommendations grows brand trust and C2C promotion.
Widening Skill Gap Skills shortages have come to burden current job markets, calling into question the efficiency of traditional education systems. This weight has burdened many companies, pressured into find new employee retention strategies, or offer extensive in-house training techniques. Many have turned to optimizing internal training to meet the unfilled positions with pre-existing employees.
Authentic Ambassadors Happy employees are the foundation to a successful retail environment. Consumers are becoming increasingly concerned with the large issues of environmental and ethical purchasing, yet remain starved for meaningful day to day interactions close to home. Many are willing to pay a premium for authentic exchanges, and have come to respond to this far better than traditional PR tactics.
Brand Awarness Through Millennial Skew Millennial buying power is currently reshaping the economy and in so doing they are also reshaping the world they live in. Engaging the millennials means more than just a new customer base. This generation is keen to engage in service based buying activities of the brands they support and so provide a grassroots word of mouth advertising opportunity.
Automated Shopping Warehouse stores are reconfigured to be only warehouses with a structure similar to an airport baggage carousel. The shopping is all done digitally from wherever is most convenient for the client and the orders are put together through automation, packaged, and are picked up at the convenience of the customer through a loading zone.
Rooftop Farming Rooftop gardens provide more than just recreational areas, they provide a great deal of air filtration in our concrete smothered cities and help to maintain the temperature within structures much better than conventional roofs. When mixed with the proper infrastructure they can eliminate the need for HVAC systems all together.
Max Value Trends
From Treasure Hunt to Purposeful Purchase Core Value: Commitment to Quality Purchasing has become a point of entry for any consumer seeking involvement in a company’s social and environmental responsibility. Ethical consumption implies activating a virtuous cycle, whereby consumers seek out products that align with their values, generating more demand and thus increasing shelf positioning of these items.
MORAL CONSUMERISM
ETHICAL PREMIUMS
PROSUMERS
88% of consumers feel a responsibility to purchase products they think are socially and environmentally responsible.
http://www.conecomm.com/stuff/contentmgr/files/0/fdf8ac4a95f78de426c2cb117656b846/files/2013_cone_communicationsecho_ global_csr_study.pdf
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Quantifiable Wellness Core Value: Employee focus
Wearables provide several advantages to overall workplace health & productivity. A collective sense of engagement in health practices incentives longterm habit change, whereas productivity is understood within much richer context, through appraisals of physical and mental wellness. Insurance costs become personalized, stimulating a currency for health, providing savings for employees and company alike.
CULTURE OF ENGAGE MENT
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DATA MD
68% of employees are willing to opt-in for insurance premium discounts in exchange for data through employer provided wearables.
https://www.pwc.com/us/en/health-industries/top-health-industry-issues/assets/pwc-hri-wearable-devices.pdf
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Risk-Free Co-Creation Core Value: Entrepreneurial Spirit
Increase in sharing between group members helps to increase feelings of unity and group purpose, leading to increase in innovation thinking. Project Aristotle demonstrated that the most effective teams have only two consistent indicators for success: safe sharing and a failfast approach. The implementation of this tactic would help to push innovation from within a company.
PS YCHOLOGICAL SAFETY
MICRO KI TCHENS
BLUE SKY THINKING
Google’s Project Aristotle is a seminal report outlining the fundamentals for effective co-creation, with success being attributable to mitigating risk of rejection. http://www.nytimes.com/2016/02/28/magazine/what-googlelearned-from-its-quest-to-build-the-perfect-team.html?emc=eta1&_ r=0
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Conclusion Consumers have come to expect their brands to mirror their dedication by contributing to authentic, sustainable and ethical advancements. CSR is the backdrop to brands that wish to continuously outperform in terms of their civic duties.
Workplace health and wellness is the key to enhancing long-term productivity and engagement. Costco’s updated benefits would allow them to continue to pioneer what they do best, while ensuring maximum employee satisfaction. The rise of millennial buying power, who crave for fundamentally great service can be satisfied by Costco’s socially and environmentally sustainable ethos. In return this consumer-base can offer the type of engagement and influence that results in more attuned & streamlined services
ZOE WORSNIP BENJI LAFLAMME LUCAS STANOIS
INDS-3006 ACTIVIST DESIGN FEB 2016
thank you