The Costco difference

It’s a difficult question: Should a business’ main goal be profit or something more public? Businesses like Tom’s Shoes, Starbucks, Method Cleaning Products and more have emerged and thrived, largely in part because these companies offer something that counterparts don’t: a push for justice on a social issue of their choosing, whether it be sustainable farming or supplying shoes to people who need it.

Costco’s social issue is the living wage.

“The company has been recognized throughout the country for providing its employees with real living wages — the highest in the industry — and for its ethical business practices,” says a press release announcing Costco’s newest store, which opens Friday in Meridian Township on property developed jointly with East Lansing. It is the company’s 15th store in Michigan and its 743rd nationally.

Doing so follows from the company’s code of ethics.

“It’s based on five principles: obey the law, take care of our members, take care of our employees and respect our suppliers,” explained Patrick Mulholland, warehouse manager at the new location, at the corner of Park Lake Road and East Saginaw Highway.

“If we follow these four principles throughout our organization, then we will achieve our fifth principle, which is to reward our shareholders. We don’t just talk about our Code of Ethics, we live it every day. Simply stated, Costco is committed to do the right thing.”

Costco, like Sam’s Club, is a wholesale warehouse retailer, meaning that they offer their products and suppliers’ products in bulk sizes, typically at a lower price than a normal grocery store. Also like Sam’s Club, in order to shop there, guests must become members, costing customers an additional annual fee. Sam’s Club, which is owned by Walmart, has a lower annual fee starting at around $45, whereas Costco’s annual membership fee starts at $55. But a $10 difference doesn’t seem to be keeping customers away. One of the main attractions to Costco for customers is one of the biggest issues the two warehouse giants part ways on — how they treat their employees.

“Our current starting wage is $13 per hour,” said Mulholland.

Walmart, which owns Sam’s Club, has a reputation for non-sustainable sourcing practices, questionably cheap prices and poor compensation and working conditions for its employees and suppliers. Its minimum wage sits around $10 per hour, depending on the Sam’s Club or Walmart location.

Terry Link, the founder of the Office of Sustainability at Michigan State University, admitted that he has never shopped at a Costco, but knowing the company’s reputation for paying their employees living wages is a plus.

“They are creating a workforce that’s a little more stable, rather than employees who are just trying to get by on what they are being paid. I’m sure it makes for better performance as well,” said Link.

His concerns, from a sustainability standpoint, are the sheer size of the Costco empire and sourcing products as locally as possible.

“If Costco is shipping in products from around the world and can afford to sell them in bulk at a lower price than a smaller, local, independent grocer, people will still choose to shop at Costco and the local guy won’t be able to compete, even if the little guy is getting products locally.”

The Costco code of ethics has an entire section devoted to sustainability. The premise is that the more the world thrives, the more Costco thrives. While Costco doesn’t claim to source as locally as possible, it does claim to tackle problems like climate change, human rights and compromised natural resources through ethical treatment of employees, involvement in the communities that Costco stores reside, and sustainable and strategic merchandising.

“Costco does not take a public political stand on any issue,” said Mulholland.

“Instead, we maintain a consistent position that aligns with our code of ethics. That position is simply to do the right thing.”

While its stance on these large issues seems broad and somewhat vague — what does “do the right thing” mean anyway? — it is clear that its focus is providing affordable goods that were produced in a way that is respectful to the environment, animals and people who produce products.

Kirkland Signature, for example, is Costco’s private-label line of products. Aside from choosing to supply specific brands based on sustainability, Costco has developed its own brand that it could control.

“In developing Kirkland Signature products, we have the unique opportunity to have better control over the entire supply chain, including where the product comes from and under what conditions it is produced,” according to the Costco website.

This brand, like other retailers’ private labels, produce a wide range of products like gasoline, sheets, coffee, milk and more.

While one of Link’s concerns was Costco not sourcing products locally, when looking at Costco and its holistic approach to social responsibility, we see that its focus on global sustainability runs into the local sector as well. One of Costco’s sustainability responsibilities, as stated on their website, is to “support the communities where our employees and members live and work.”

Can a global warehouse retailer double as a community asset as well?

East Lansing Mayor Mark Meadows thinks so.

“I definitely see it as a positive for the community. It brings in an employer, a big box employer, which has a different business plan that the other big box employers in the region,” explained Meadows.

“Others pay their employees minimum wage or slightly above, and they focus working their employees under full time so that they don’t have to offer them health care or benefits. Costco’s employees are taken care of, and I think that reflects things that people who live in East Lansing find important. I’m excited about that being in the region.”

The new store also gives the city of East Lansing and Meridian Township another project to work together on.

“With this property, we have a section 108 agreement. This property that Costco is built on, the tax revenues that come from it will be shared by both cities. With this project, the City of East Lansing is in charge of it, but is working with Meridian Township’s planning department to make sure that the requirements were met for both cities.”

A plus is that Costco is known as a destination. “I’ve heard that It’s not uncommon for people to travel a long distance to go to Costco,” Meadows added. “People plan a day to go shop there.”

The new East Lansing Costco will employ 230, filling 130 positions with local people. The other 90 are transfers from other stores.

“I know there are a lot of people who say negative things about Walmart, from how they treat their employees to where their products come from,” said Link, noting that the addition of Costco will certainly add pressure to the greater Lansing retail market. In his opinion, the social responsibility aspect of Costco’s business plan is what sets it apart.

“Knowing what everyone else knows about Costco, I’m assuming that given the option, some will leave Sam’s Club and choose to shop at Costco. Only time will tell, but it’s clear that Costco treats its employees much better, which might contribute to that pull.”