Costco’s reasons for DEI might surprise you.

Sustainability, ESG, DEI... radioactive these days! Refresher: the S in ESG refers to social responsibility.

People

The S is all about the people – human capital management (employees), protecting customers, human rights. For employees that means enabling opportunities on a level playing field, i.e., everyone (Diversity) has an equal shot (Equity) and is respected (Inclusion). This delivers a meritocracy.

Recently, Costco’s board chairman, Hamilton E. (Tony) James, explained why Costco is standing behind its DEI policies and procedures. Not surprisingly for a company that delivers the highest retail volume per square foot on the smallest margins, they have to execute flawlessly everyday. And for that, they need the best people, performing their best. They can’t afford to have anything that’s not based on merit.

Tony’s reasons why Costco is sticking with their DEI programs are sensible and realistic:

1. None of their policies are illegal, having been reviewed by many lawyers
2. None of them are new (i.e., post George Floyd), they go back to the company’s founding
3. They are part of a meritocracy

Scared?

Do Trump administration threats to come after companies on DEI grounds, or boycott threats from activists scare Tony?? He says Costco is just trying to run a good business and while these current DEI conversations bring unwanted attention and unnecessary risk, the fact is DEI principles are core to their values and they aren’t doing anything illegal—nothing with quotas or preferences or anything that could be deemed illegal from the new interpretations by the Supreme Court or the Trump administration.

Leadership courage

By standing firm on their core values of running a business based on meritocracy, Costco's courageous leadership in the face of DEI pressure is refreshing.

I think DEI done legally and well enables meritocracy. We should evolve our words and the framing of practices but the concept of looking everywhere for the best talent makes sound business sense.

Watch Tony explain DEI here: https://youtu.be/AuZX5yJyInQ

What do think about Costco's three reasons? Is it possible to do DEI legally? Should companies strive to do so? How do you define DEI in practice?