Introduction
Costco Wholesale Corporation formed their corporate sustainability and energy group in 2007 to spearhead the creation and implementation of the sustainably sourced strategies for products and energy policy. Their energy policy included a program for reduction of greenhouse gas emissions with the implementation of measures for energy efficiency. In 2007, Costco discovered that 85 percent of their carbon footprint was coming from purchased electricity. Their energy program placed emphasis on energy efficient operations and building designs. Costco also started working to reduce their deliveries by consolidation of freight at their distribution centers and increasing the load of every truck they used to the maximum. Costco also added the strategy to source products sustainably that stresses on products coming from a supply chain, which are socially, economically and environmentally sustainable. Costco started working with their suppliers for improving and preserving resources for their products, improving the producer’s livelihood and minimization of environmental impacts (DiBenedetto, 2009).
Costco’s Sustainability Goals
The sustainability goals of Costco are:
• Maintaining their growth of carbon footprint to less than the company’s sales growth.
• Enhancing their energy management systems in warehouses.
• Expanding their packaging design initiatives.
• Further developing their waste stream and recycling management systems.
• Assure the availability of goods for long-term.
Costco identifies that the climate change subject is important for many customers and their investors. Climate change is also a risk factor for a few aspects of their business. The business model of Costco and many of their long-term business practices are aligned with their climate change objectives. The model clearly states that they need to be more carbon efficient than their competing retailers. Costco’s bulk emphasis means customers making lesser trips to make purchases; and their highly efficient cross docking distribution system reduces the trips necessary to keep their warehouses stocked in comparison to several direct to location delivery done by several suppliers. The company is striving to bring products to customers at the lowest rates and the focus has been on reducing operational expenses (Costco Inc, 2015).
Costco has identified that energy expenses are significant costs for their warehouses and they are keen to reduce their overheads. Energy use is tracked closely as part of their effort to reduce carbon footprint. Since purchasing electricity is the main source of their carbon emissions, reducing their energy usage contributes directly to a reduction in emissions. There have been specific demonstration and efforts for reducing greenhouse gas emissions and efforts have continuously tracked their growth rates since 2007. Tracking and recording the GHG footprint is also an evidence of Costco’s commitment towards environmental sustainability. Costco believes that they need to continually focus on improving efficiency and reducing costs, as it is the best source for reducing their impact on the environment (Costco Inc, 2015).
Sources of Emissions
Scope 1 and Scope 2 gas emissions are the main sources concern for Costco and they are not tracking Scope 3 gas emissions from their operations. The Scope 1 emissions comprise of propane and natural gas provided to control or owned facilities used for food processing or heating and manufacturing. Direct emissions also include diesel used in fleets of Costco trucks, yard haulers, refrigerated trailers, mobile floor scrubbers running on propane, jet fuel used in corporate jets and leakage of HFC refrigerants from fugitive emissions from refrigeration and air conditioning equipment. The Scope 2 indirect emissions come from purchased electricity and it is the largest element of the GHG emissions (Costco, 2015).
Setbacks
There have been certain setbacks in Costco’s sustainability efforts, as per the EPA (Environmental Protection Agency). Costco failed in keeping adequate servicing records of their refrigeration equipment, which is a lawfully required according to the Clean Air Act for preventing harmful leaks (Roos, 2010). The EPA also added that Costco has violated the Clear Air Act as they failed to repair the leaks of R-22 refrigerant, ozone depleting substance and a hydrochlorofluorocarbon, between 2004 to 2007. The R-22 is also categorized as a strong greenhouse gas, which is 1,700 times stronger in global warming than CO2. Apart from improving the refrigerant management in 274 stores worldwide, Costco also had to pay $335,000 as penalties for failing to meet the Clean Air Act regulations (Hardcastle, 2014).
Costco were asked to cut their greenhouse gas emissions from refrigerants in more than half of their stores. This would end up costing the company around $2 million in the next 3 years, for settling the case. As part of the settlement, Costco will also implement a management system for refrigerants for preventing and repairing the coolant leaks and reducing the corporate wide leak rates by one-fifth reaching 19% by 2017. The settlement also required Costco to retrofit their commercial refrigerant equipment in 30 stores, reducing the ozone depleting greenhouse gas emissions. Costco will also need to install and run a glycol secondary and environmentally-friendly refrigeration system and add a refrigerant leak detection system that monitors leaks centrally in all their new stores (Hardcastle, 2014).
Conclusion
Costco has been actively working on environmental sustainability by making changes to their operations since 2007. Since implementing changes, Costco identified that the majority of their emissions are based on purchased electricity and logistics of their products. Over the years, Costco has worked on reducing their energy use by implementing a program for energy use reduction in their warehouses and consolidating their logistics. Their programs have worked in some ways as there has been a reduced energy use in their operations and logistics system has been modified to suit the sustainability needs. But, there have been setbacks in terms of penalties and conditions for the settlement of their case filed by the EPA. Under the settlement Costco needs to make changes to their current refrigerant strategy and pay penalties over failing to satisfy the Clean Air Act regulations.
References
Costco Inc. (2015). Costco Wholesale Sustainability Report 2015. Retrieved 17 January 2016 from, http://phx.corporate- ir.net/External.File?item=UGFyZW50SUQ9Mjc3MzQ3fENoaWxkSUQ9LTF8VHlwZT0z&t=1
DiBenedetto., B. (9 October 2009). Costco Dives Into Product Sustainability. Retrieved 17 January 2016 from, http://www.triplepundit.com/2009/10/costco-dives-into-product-sustainability/
Hardcastle., J.L. (4 September 2014). Costco Settlement to Cut GHG Refrigerant Emissions. Retrieved 17 January 2016 from, http://www.environmentalleader.com/2010/09/10/amazon-costco-xpedx-fail-to-make-the-green-grade/
Roos., G. (10 September 2010). Amazon, Costco, Xpedx Fail to Make the ‘Green’ Grade. Retrieved 17 January 2016 from, http://www.environmentalleader.com/2014/09/04/costco-settlement-to-cut-ghg-refrigerant-emissions/
