Patagonia – Turning Social Responsibility into Company Business.
Patagonia's Sustainability: How their efforts attract their core consumer, and make for a socially responsible business.
Patagonia started as small company selling tools for climbers, and has grown into a wide-ranging outdoor apparel industry with over $560 million in sales in 2013.[1] As a company that targets consumers who care about the environment and the outdoors, Patagonia has been highly effective at creating alignment between it’s business and operational model.
The business model is to create value by selling high-quality, high-utility outdoor products, especially for low impact sport like hiking, climbing, snowboarding, and others. They do this while maintaining corporate ethics that have made it one of the “World’s Most Ethical Companies” for over six years in a row.[3] They root their business model in four core values – quality, environmentalism, integrity, and innovation – all of which are plainly conveyed through their operational model.
Part of Patagonia’s business model also includes an emphasis on helping to protect the very thing that their top consumers care about most: the outdoors. It’s best summarized in their “Reason for Being,” which emphasizes the connection between their customer’s love of outdoors, and Patagonia’s dedication to protecting it.
“Our values reflect those of a business started by a band of climbers and surfers, and the minimalist style they promoted. The approach we take towards product design demonstrates a bias for simplicity and utility. For us at Patagonia, a love of wild and beautiful places demands participation in the fight to save them, and to help reverse the steep decline in the overall environmental health of our planet. We donate our time, services and at least 1% of our sales to hundreds of grassroots environmental groups all over the world who work to help reverse the tide.” [2]
OPERATIONAL MODEL
Patagonia has integrated their value proposition through their entire corporate system, most obviously through their Product Lifecycle Initiative, supply chain management and transparency, and company structure. These decisions have allowed the company to differentiate itself by more than just price and quality, and create a strong reputation that appeals to its core consumers.[4]
Product Lifecycle Management
The Product Lifecycle Initiative is based in the commonly know “4 R’s”: Reduce, Repair, Reuse, and Recycle.[5] To keep resources from being used in the first place, Patagonia offers durable, high quality products that are made with low-impact inputs, like using recycled materials or organic cotton, instead of high-pesticide conventional cotton. Then, to minimize further impact, they offer services like in-store repairs, online “repair guides,” partnerships with consignment stores, recycling programs and even a piloted “trade-in” program in Portland that accepts used goods for new ones.
They actively advertise these services to customers, even with the explicit mission to reduce purchases. Their “Don’t Buy This Jacket” campaign garnered a lot of attention for emphasizing these values while telling customers to repair or reuse their existing Patagonia clothes, versus buying new ones. Meanwhile, campaigns like this have had an positive impact on sales, with a 40% increase in the two years following these ads.[6]
“We design and sell things made to last and be useful. But we ask our customers not to buy from us what you don’t need or can’t really use. Everything we make–everything anyone makes–costs the planet more than it gives back.” – Patagonia Public Statement, 2012” [7]
Supply Chain Management and Transparency
Before any factory becomes a Patagonia supplier, they are screened for four criteria: quality, social standards, environmental impact, and production/sourcing. To uphold a certain standard among their suppliers, Patagonia performs audits and develops deep, collaborative relationships with their suppliers. They screen for environmental impact down to the farm-level, carefully sourcing products with sustainable harvesting methods,and ensuring humane treatment for all animals involved in the supply chain. To support their end of the deal, Patagonia also maintains internal controls that prevent last minute order changes, or demand price cuts – all things that could have an adverse impact on worker conditions.
The integrity of Patagonia’s supply chain can be directly investigated by outside sources, thanks to their innovative transparency 
effort, the Footprint Chronicles, which details the exact social and environmental
conditions in their supply chain. The interactiv
website includes profiles for over 70 factories and 28 textile mills, which are also linked to product pages, allowing shoppers to trace back the exact product that they would like to purchase.[8]
Management Structure
Most companies have a specific department responsible for all social responsibility. Oftentimes, this department is one person. In 2014, Patagonia got rid of their large sustainability office, decentralizing all the roles across key departments in the company. Following the policy recommendations of leading ratings and certificate leaders, “sustainability team members with environmental materials expertise were moved into the materials department, and folks with social labor and environmental impact skills are now installed in the design department — advising on the impacts of design choices at the drawing board.” [9] This decentralized approach ensures that sustainability and corporate responsibility is considered at every step of product development, marketing and sales – truly integrating the Patagonia business model into their operating model.
[1] http://www.patagonia.com/pdf/en_US/bcorp_annual_report_2014.pdf
[2] http://www.patagonia.com/us/patagonia.go?assetid=2047
[3] https://danielsethics.mgt.unm.edu/pdf/patagonia.pdf[4] http://www.businessinsider.com/patagonia-business-strategy-2014-9
[5] http://www.slideshare.net/johannesmahlich/environmental-differentiation-strategy-of-patagonia
[6] http://www.businessinsider.com/patagonia-business-strategy-2014-9[7] http://www.bloomberg.com/bw/articles/2013-11-25/patagonias-confusing-and-effective-campaign-to-grudgingly-sell-stuff
[8] http://www.patagonia.com/pdf/en_US/bcorp_annual_report_2014.pdf
[9] http://www.triplepundit.com/2014/11/patagonias-new-decentralized-approach-sustainability-management/
This is a really interesting company. Their prices reflect the care and attention that they pay to the 4 R’s. What is really surprising though is that they actively encourage customers not to purchase new items but to repair their current ones. This is the first operating model that I have seen that is not aggressively biased towards creating higher revenues.
I love Patagonia (wearing a jacket right now!) but I had no idea about this side of their mission before today. We’ve done cases about companies with social missions and I’m always skeptical about the argument that (most) consumers really care. I’m curious if you think they’d be as successful without this emphasis or if they bring it to light simply because it’s who they are and they want to share that side of the business.
Great post, Kelley! I am a huge Patagonia fan. If you haven’t already, I would highly recommend that you read Yvon Chouinard’s book, “Let My People Go Surfing”. It’s a wonderful read, and touches on a lot of the ideas that your post explores. One thing that you didn’t mention that is another perk of their social mission is its ability to attract and retain top-quality talent. Patagonia is consistently ranked as one of the best places to work by outdoors and adventure magazines, in part because it infuses its social responsibility into everything that it does. Most, if not all, Patagonia employees share in its social values, which creates an authentic, mission driven culture that not only yields a happy work-force, but a successful business.