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Case Analysis: Patagonia: Leading a Green Revolution

Patagonia, Inc. is an American clothing company that markets and sells outdoor clothing. The company was founded by Yvon Chouinard in 1973 and is based in Ventura, California.

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After reading case Patagonia-Leading a Green Revolution:

How has Patagonia munged to stay both green und profitable even when the economy is down, consumers are tight for cash, and doing the profitable thing is not necessarily doing the right thing? Are Patagonia’s business practices just good for the environment and Patagonia, or are there lessons here others can follow?

Twelve hundred Walmart buyers, a group legendary for their tough-as-nails negotiating tactics, sit in rapt attention in the company’s Bentonville, Arkansas, headquarters. They’re listening to a small man in a mustard-yellow corduroy sport coat lecture them on the environmental impact of Walmart’s purchasing choices.’ When Patagonia’s founder Yvon Chouinard finishes speaking, the buyers leap to their feet and applaud enthusiastically.

Such is the authenticity of Chouinard. Since 1972 he’s built the company into one of the most successful outdoor clothing companies in the world, and one that is steadfastly committed to environmental sustainability. Even though the CEO reins were turned over to Rose Marcario several years ago, it’s hard to discuss Patagonia without constantly referencing Chouinard. For all practical purposes the two are one. He breathes life into the company and models the outdoorsy athleticism of Patagonia’s customers. In turn, Patagonia’s business practices reflect Chouinard’s values and insistence on minimizing environmental impact, even at the expense of corporate profits.

Taking Risks to Succeed

Patagonia sits at the forefront of a cozy niche: high-quality, performance-oriented outdoor clothes and gear sold at top price points. Derided as Pradagonia or Patagucci by critics, the brand is aligned with top-shelf labels like North Face and Mountain Hardware. Patagonia clothes are designed for fly fishermen, rock climbers, skiers, and surfers. The clothes are durable, comfortable, sustainably produced, and they are not cheap.

It seems counterintuitive, almost dangerous, to market a $400 raincoat in a down economy. But the first thing you learn about Yvon Chouinard is that he’s a risk taker. I he second thing you learn is that he’s usually right. “Corporations are real weenies, he says.” They are scared to death of everything. My company exists, basically, to take those risks and prove that it’s a good business.”

And it is a good business. Patagonia succeeds by staying true to Chouinard’s vision.” They’ve become the Rolls-Royce of their product category,” says Marshal Cohen, chief industry analyst with market research firm NPD Group. “When people were stepping back, and the industry became copycat, Chouinard didn’t sell out, lower prices, and dilute the brand. Sometimes,” he says, “the less you do the more provocative and true of a leader you are.”

Ideal Corporate Behavior

Chouinard is not shy about espousing the environmentalist ideals intertwined with Patagonia’s business model. “It’s good business to make a great product, and do it with the least amount of damage to the planet,” he says. “If Patagonia wasn’t profitable or successful, we’d be an environmental organization.”

In many ways, Patagonia is just that–an environmental organization. The company publishes an online library of working documents, the Footprint Chronicles, which is intended to help employees to make sustainability decisions in even the most mundane office scenarios. Ils mission statement is to “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environ- mental crisis.”

Chouinard has cofounded a number of external environmental organizations, including 1% For the Planet, which secures pledges from companies to donate 1% of annual sales to a worldwide network of environmental causes. The name comes from Patagonia’s 30-year practice of contributing 10% of pre-tax profits or 1% of sales-which- ever is greater- to environmental groups each year. Whatever you do, don’t call it a handout. “It’s not a charity,” Chouinard flatly states. “It’s a cost of doing business. We use it to support civil democracy.”?

Another core value at Patagonia is providing opportunities for motivated volunteers to devote themselves to sustainability causes. Employees can leave their jobs for up to two months to volunteer full-time for

the environmental cause of their choice, while continuing to receive full pay and benefits from Patagonia.° Every 18 months, the company hosts the Tools for Grassroots Activists Conference, where a handful of participants is invited to engage in leadership training, much of it derived from the advocacy experiences of Patagonia management.

Growing Green

During its early growth phase Patagonia commissioned an external audit of the environmental impact of its manufacturing, Management anticipated bad news about petroleum-derived nylon and polyester. But they were shocked to learn that the production of cotton had a more negative impact on the environment-_destructive soil and water pollution, adverse health consequences for fieldworkers, and the consuming of 25% of all toxic pesticides used in agriculture. Chouinard’s response was to source organic fibers for all cotton clothing products. Company representatives went directly to organic cotton farmers, ginners, and spinners, seeking pledges from them to increase production, dust off dormant processing equipment, and do whatever it would take to line up enough raw materials to fulfill the company’s promise to its customers and the environment. Ever since, all of Patagonia’s cotton garments have been spun from organic cotton.

Sustaining Momentum

Now in his 70s Chominard continues to seek better ways for Patagonia to do business. “I think entrepreneurs are like juvenile delinquents who say *This sucks. I’ll do it my own way,” he says. “I’m an innovator because I see things and think I can make it better. So I try it. That’s what entrepreneurs do.”

One of his innovations is the Common Threads initiative.

Designed to minimize the number of Patagonia clothes that wind up in landfills, the program commits the company to making clothes built to last, fix wear-and-tear items for consumers that can be repaired, and collect and recycle worn-out fashions as efficiently and responsibly as possible. “Chouinard calls it “our promise that none of our stuff ever ends up in a landfill.” Also in terms of cradle to grave manufacturing, he describes “trying to convince zipper companies to make teeth out of polyester or nylon synths, which can be recycled infinitely.” The goal is to then be able to “take a jacket and melt the whole thing down back to its original polymer to make more jackets.”

Despite his boundless enthusiasm for all things green, Chouinard admits that no process is truly sustainable. “I avoid using that word as much as | can,” he says. He pauses for a moment and adds: “I keep at it, because it’s the right thing to do.

Answer the following questions:

  1. Discussion

How do you think Patagonia executives decide on what products to offer so that the outcomes will be both business practical (think profits) and environmentally friendly (think sustainability)? Take the case of a proposed hiking boot.  What criteria would you use to evaluate it as a new Patagonia product?

  1. Discussion

Even though he is no longer the CEO, Yvon Chouinard still exerts major influence over Patagonia’s business approach. What should he and other Patagonia executives be doing today to make sure that his ideals remain a permanent part of the company’s culture after he’s no longer active at the company?

  1. Problem Solving. Picture yourself working for Patagonia.  The CEO comes to you and asks for a proposal for a new-“forward looking”-sustainability agenda for the firm.  The goal is to drive Patagonia’s future, not just celebrate its past.  What would you include in this proposed agenda in order to really stretch the firm beyond what it is already doing, and why?
  2. Further Research. Evaluate the risk that ethics might someday lose out to greed even in a company with the idealism of Patagonia.  Look carefully into Patagonia’s products and practices and see if you can find any missteps where decisions put profits ahead of the company’s publicly stated environmental goals.  Can you find evidence for strong governance and leadership that will protect Chouinard’s values and legacy far into the future?  How about the competition?  Just how does Patagonia operate today to ensure that ethics and social responsibility are not displaced as core company values?  And finally, how about the competition?  Is Patagonia still the best role model, or can you identify other firms that deserve to be studied as well as role models in business and society relationships?