This paper examines how Costco can implement the triple bottom line framework across its social, environmental, and ethical dimensions. It explores social justice along supply chain, internal, and external axes — highlighting Costco's comparatively strong labor practices — before addressing environmental stewardship and measurable sustainability metrics. The paper then analyzes true cost accounting, supply chain management responsibilities, and the consequentialist ethical framework underpinning the triple bottom line. Finally, it considers how different leadership orientations toward responsibility, as identified by Pless and Maak (2012), affect a company's ability to pursue triple bottom line goals without sacrificing financial performance.
The triple bottom line covers both the social and environmental dimensions of corporate performance. Justice may be a vague concept, but it is one of those "you know it when you see it" ideas for which any company can and should develop specific metrics. Social justice can be examined along three dimensions: the supply chain, the internal, and the external. The supply chain receives special treatment among external stakeholders because it has become a central focus of the social dimension in recent years. Fair trade farming has become a major concern, especially for products sourced from the developing world — such as coffee and chocolate — that are often sold at premium prices in the West. There are frequent controversies about sweatshops or factory conditions like those of Foxconn, the controversial Apple supplier. Typically, companies that produce goods sold at premium prices (Nike, Apple, etc.) are more at risk for controversy than a company like Costco that sells at lower prices, because justice is always weighed on a balance. The central theme of supply chain justice is that the profits from an activity are distributed in proportion to the inputs. Costco must instill a code of conduct for its suppliers in order to ensure that workers are well treated. This is important because it is otherwise difficult to manage outcomes throughout the supply chain, save through the bargaining power that comes from being a major buyer and enforcing such a code.
Costco is a leader in social justice for workers and therefore probably needs to do relatively little in that regard. The company pays wages that are much higher than those of its competitors and provides superior benefits as well. This is a central element of the company's strategy and has resulted in very low employee turnover rates (Stone, 2013). Social justice for other external stakeholders is a little tougher to manage, but the company should be aware that its actions affect other people — especially those in the communities where Costco operates. These communities must be taken into account, and Costco can contribute through charitable works and community involvement projects in order to improve its triple bottom line with respect to social outcomes.
Environmental justice represents the idea that we should leave the world no worse off than we found it. It is a noble idea, though almost impossible to implement fully given consumption levels in the Western world. Still, Costco can operate in line with principles that reduce energy consumption and waste. The company has sufficient bargaining power to reduce packaging, for example. One of the benefits of seeking to reduce both energy consumption and packaging is that both of those things cost money, meaning the company can simultaneously improve its financial bottom line by improving its environmental bottom line.
Social and environmental impacts can be difficult to measure, but there are ways to do so. The first measure for most companies is the avoidance of controversies, because controversies damage the brand. It is a good starting point to avoid missteps serious enough to produce negative financial impact — but that is only a starting point. Other measures for social impacts include the following. For the supply chain, a living wage for every country of operation can be quantified, and the company should pay that. Certain benefits can also be quantified, should the company so desire. For its own employees, Costco already maintains external equity, but it can also take into consideration the concept of internal equity — wherein an individual's compensation is commensurate with that person's contribution to the company (Kappel, 2012). The gap between executive wages and worker wages is one of the key measures that draws public attention and is a prime example of the concept of internal equity.
Environmental measures are relatively easy to obtain, especially usage-based measures. Energy usage can be quantified, and the power company likely already tracks this. Solid waste and wastewater can also be measured. There are many metrics for each individual type of resource consumed, and ultimately Costco can measure all of them, set objectives, and track performance against those objectives.
The concept of true cost accounting is related to the triple bottom line, particularly with respect to measurements. True cost accounting seeks to include the cost of negative externalities in the pricing of goods and services (Investopedia, 2014). There is little doubt that a company with a low-cost business model is not going to enthusiastically begin pricing in externalities, raising prices and reducing its competitiveness. The concept of true cost accounting is better applied as a call for the company to understand the externalities created by its business operations and then seek to eliminate them. There are some negative externalities associated with every business. A Costco store has a fairly large physical footprint. The company sells gasoline at prices lower than competitors, which actually runs counter to true cost accounting principles. The lower gasoline prices, combined with the fact that the store attracts customers to drive from miles away, create significant negative externalities that are not priced into Costco's operations at all. The company has a long way to go before it fully honors the concept of true cost accounting.
"Enforcing triple bottom line standards across suppliers"
"How leadership values shape triple bottom line adoption"
The key takeaway is that the triple bottom line is a specific orientation toward responsibility, reflecting primarily a consequentialist perspective on the issue, slanted toward the concept of justice. If the leader of a corporation holds any other perspective on responsibility, it will be necessary for that leader to reconcile his or her own viewpoint with the requirements of the triple bottom line in order to implement it effectively. Even within the C-suite there may be a range of different perspectives on responsibility, and having a framework like the triple bottom line can orient different leaders within the company toward a common set of goals, rather than allowing each to focus solely on his or her own ideas.
You’re 57% through this paper. Sign up to read the remaining 2 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.