[NOTE: This blog post is based on an interview by Rick Goossen of Richard Galanti, CFO, Costco on January 25, 2010 at Costco Headquarters in Issaquah, WA. Mr. Galanti's comments are in quotation marks and were reviewed by him for accuracy. Please note that the interview has been edited for brevity.]
GOOSSEN: What is Costco’s approach to social responsibility (CSR)? Is it an integral part of your competitive advantage and, if so, in which way? How does Costco practice CSR?
GALANTI: “[Another] thing about corporate [social] responsibility is that there is a new word…”sustainability.” The nice thing about sustainability is that it rhymes with profitability in many cases. One example is the old traditional gallon jug of milk that has a square footprint and two-thirds of the way up it angles to the spout. Over the last couple of years we now have a taller jug, so it’s a smaller footprint, and it doesn’t have a lot of extra empty space at the top part of the jug. But just by doing that, and by increasing the number of gallons that fit on a pallet, we have eliminated thousands of truckloads of transportation costs and eliminated hundreds of thousands of pallets being moved throughout the US and Canada.
Another example is the water bottle. There are water bottles that seem like they’d fall over if the cap’s not on them because they’re so thin and you can crush them easily. Then there are the others, like Gatorade, that are so thick you can’t even crush them. The trend is towards less use of resin in making the bottles. Last year, on our private label, standard half-liter of bottled water, we took out 12 grams of resin. This required our production department to put a few more ‘ribs’ in the bottle to make it structurally stronger; but it is still a thinner bottle. Just those 12 grams on that one item helped us eliminate 17 million pounds of resin.
The good news is it’s such a small amount per bottle; so we’re actually saving the customer money and making a little more money. But it’s also environmentally responsible; so it’s nice when you have that. Even though not everything that’s socially responsible is profitable, we still do it. We recognize that we can’t be everything to everybody; we do what we think it right.
People would love to see us take a lot of plastic out of our packaging. One of the things is you buy something like the memory cards or electric razors in this blister pack it is in; that’s a hassle to open even when you get home. Well part of it is that we are self service. We sell a lot more volume if it’s there for the customer to simply pick up. If you sell more volume you can lower the price per unit because you are selling more stuff in that cube. All that makes us sell more. By having items in the blister pack that makes it hard to pilfer. So there is a trade-off. We can’t be everything to everybody. We do what we can and we are using plastics that are more biodegradable. We have a whole group of people that work on that now and we are clearly cognizant of it.”