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Management in Practice

How Patagonia Learned to Act on Its Values

Patagonia’s path toward living up to its own commitment to sustainability has involved decades of acknowledging flaws, solving problems, and finding ways to bring along suppliers, employees, and customers. But by highlighting values and using environmental constraints as a source of innovation, the company has found profits. Vincent Stanley, Patagonia’s company philosopher and former director of marketing, chronicles the company’s efforts.

A Patagonia store with "Demand Fair Trade" and "Buy Less, Demand More" in the window.

Artur Widak/NurPhoto via Getty Images

  • Vincent Stanley
    Director of Philosophy, Patagonia; Resident Fellow, Yale Center for Business and the Environment

Q: Patagonia has a history of values-driven innovation. Where did that start?

Yvon Chouinard started making climbing equipment in his parents’ backyard when he was still a teenager. When he and his friends began pioneering big wall climbs in Yosemite in the ’60s, almost all climbing equipment was imported from Europe. Pitons, metal spikes that climbers used to establish protection, were made out of soft iron that could only be used once or twice. That was fine on shorter routes, but for long climbs like the ones at Yosemite, you would need to carry a huge supply. Yvon’s innovation was the hard steel piton that could be hammered in, then tapped out and reused time and time again.

As climbing became more popular in the late ’60s, early ’70s, climbers gravitated to the established routes. Every time someone hammered a piton in, it widened the crack slightly. You had to use wider and wider pitons. Yvon and his business partner realized that the way that they were making their living was destroying the sport and desecrating the rock.

There was an alternative. British climbers used aluminum chocks that could be placed and removed without damaging the rock. But American climbers were not familiar with them. And it would be a very expensive proposition for a tiny company to switch from making steel pitons to aluminum chocks. The company had a reputation for making the best pitons in the world. It had great market share. If it had just been, “Well, chocks are newer and more innovative,” I don’t think the company would have made the change. The moral dilemma was the reason for the change.

They produced a catalog with a 14-page essay that was part user’s manual and part manifesto explaining why climbers should switch from pitons to chocks. It was reviewed in all the climbing magazines. It was discussed at the base of the climbs. It had an enormous impact. When the catalog went out in June ’72, 70% of the business was pitons. When I came to work in March ’73, nine months later, the business was 70% chocks.

“If you speak to your customers as a community, as friends and equals, and share something that you’ve learned and a change that you’ve made, you can be influential in helping others to change.”

That was an indication of how if you speak to your customers as a community, as friends and equals, and share something that you’ve learned and a change that you’ve made, you can be influential in helping others to change. It was a useful lesson.

Q: How has Patagonia’s approach to business evolved over time?

Patagonia, the clothing company, was conceived as a way to support Chouinard Equipment, which was hugely labor-intensive and earned about 1% profit. Eventually, the climbing equipment company was sold to its employees and morphed into Black Diamond, which is still a very successful company.

By the late ’80s, Patagonia was growing in a crazy way. Yvon was really worried, “Are we going to lose our soul? Will it continue to be a place that I want to come to work for every day?” Seeking some guidance, he found Michael Kami, who had led strategic planning for IBM and helped turn around Harley-Davidson. That seemed like an interesting combination. He lived on a yacht off of Miami. Yvon and the top leaders from the company flew to Florida.

Kami asked, “Why are you in business?”

Yvon said, “Well, I’m in business to give money to environmental causes.”

Kami said, “That’s bullshit. You could sell the company, start a foundation, and give away a lot more money than you do now.”

That brought Yvon up short. He thought about it for a while. He was still thinking about it a year later when the recession halted years of 30% to 50% growth. There was still 20% growth but the failure to meet expectations meant the company had to lay off 120 employees.

Coming out of that, Yvon decided he was in business to prove that you could do things a different way. So for the past 30 years, rather than finding a compromise between doing well and doing good, we’re demonstrating that doing the right thing can help build your business.

We’ve seen that the environmental constraints we’ve placed on ourselves generate innovation. Customer loyalty has always been part of the business model. For a long time that loyalty was based on the quality of the goods. When we explained everything we were doing to minimize our environmental impact and improve our social practices, customers developed a sense of participating in shared values when they buy from Patagonia.

The activism that the company has undertaken in the past five years, especially heightened during the Trump administration, has become almost the basis of a relationship with a large group of customers. We produce films and books. We engage in environmental campaigns. I think we’re engaged in a virtuous circle.

We’re in business to save our home planet. That’s our stated mission. We want to inspire other businesses to address social and environmental challenges.

Q: How important is it that Patagonia is a private company?

It’s significant. But we can inspire larger, publicly traded companies. I know that we do because Emmanuel Faber, the head of Danone, a French company doing $30 billion a year, said he was inspired to make the whole company a B Corp, which they’re on the road to doing, by Patagonia’s “Don’t Buy This Jacket” ad. [On Black Friday in 2011, Patagonia placed a full-page ad in the New York Times. Under the headline “Don’t Buy This Jacket,” the ad copy highlighted the environmental and social costs associated with one if its best-selling jackets and urged, “Don’t buy what you don’t need. Think twice before you buy anything.” ]

Q: As part of Patagonia’s effort at transparency, the company has used the term “responsible” instead of the term “sustainable.” Why?

Everywhere we work, we try to reduce environmental harm. Relative to our competitors, we are more sustainable. But sustainability implies that you can keep going indefinitely. Ultimately, we’re taking back from the planet more than we’re giving back. That’s unsustainable.

Because we are a fairly small company operating within a global industrial system, there’s an awful lot of things that we can’t change. But we can take responsibility for what we do. We acknowledge our impacts. Where we can make changes, we make changes. Responsible implies agency, and everybody’s got agency to do what they can.

About 85% of our environmental impact is in fabrics. If we get out of fossil fuels as a feed stock for nylon and polyester—we’re to close doing that—it makes a huge difference. But the ideal is regeneration, working with an ecosystem in such a way that it is capable of replenishing the energy that you take from it. We’re moving toward using not just organic cotton but cotton grown using regenerative organic practices. Regenerative means we’re actually not being extractive; we’re giving back as much as we’re taking by sequestering carbon and returning soil to health. We’ve really just started. That may take 10 years.

Patagonia also has a small food business and we’ve invested in a number of businesses that take a synergistic approach to solving food production problems. It’s in line with the industrial ecology model studied by Marian Chertow at the Yale School of the Environment. Typically, we think of businesses as inherently competitive. There is a tremendous opportunity for businesses to work cooperatively, creating the kinds of things that businesses have always provided while also acting as social enterprises by addressing social and environmental challenges.

Q: Could you give an example?

We have an alliance with Wes Jackson, the founder of the Land Institute in Salina, Kansas. His work for the past 50 years has been to restore the Great Plains to health. It was one of the most fecund areas on the planet. The topsoil was several feet thick and kept healthy by the hooves of buffalo. Now, there’s about six inches of topsoil and monocultures of soy, corn, and wheat grow throughout the Great Plains.

Wes came up with Kernza, a perennial wheatgrass with roots that go three meters down into the earth. When a plant reaches that deep, it breaks up the soil, allowing microbes and fungi the opportunity to create new topsoil much faster. It’s amazing stuff. After he told us about it, we asked where we could buy it. He said, “Oh, you can’t buy it. Farmers won’t grow it until there’s a market for it.”

So, we teamed up with Hopworks, a brewery in Portland, to produce Long Root Pale Ale, which got the first 200 acres planted. Since then, major cereal companies have gotten very interested in Kernza because of the potential to sequester carbon while you build topsoil. Creating a self-sustaining business that sequesters carbon—that, for us, is the North Star.

Q: You mentioned the effort to develop sources of regenerative organic cotton. When did Patagonia switch to organic cotton?

Three days after we opened a store in Boston, employees started to call in sick. We shut down the store, called in an environmental engineer, and he fixed the problem with the building’s ventilation. We asked what was in the building that was making people sick. He said, “Oh that was the formaldehyde off-gassing from the cotton clothes stored in the basement.”

That was in the late 1980s. It was the first indication we had that cotton was a problem. We were giving 1% of the sales to environmental causes, but we still didn’t pay much attention to the impact of the business itself. We had thought of cotton as this benign, natural fiber.

We hired an independent company to assess the four major fibers we used: cotton, wool, polyester, nylon. Turns out, cotton was the worst, and not because nearly 25% of the fabric is not cotton but formaldehyde and other additives used to finish the fabric. The biggest problem is what is done to the land to grow cotton.

In 1994, we decided to switch the entire sportswear line—that’s about a third of the business—to organic cotton. We gave ourselves 18 months. We bought most of the organic cotton being grown in the San Joaquin Valley. Then we discovered we hadn’t done enough homework. In buying cotton directly from the farmers, we broke our connection to the global supply chain. Farmers have no relationship to the spinners who turn fiber into yarn. They have no relationship to the mills that turn yarn into a knit or a woven textile.

When we started looking for spinners to turn our cotton into yarn, they said, “We hate organic cotton. It gums up our machines.” At the same time, our designers and our production people were telling us, “Listen, I’ve got to do everything I did last season to design, color, and spec the line, and, by the way, now I have to find an entire new infrastructure for producing cotton sportswear. We’re raising the prices $3 to $5, and not a single customer has asked for this. So why are we being martyrs?”

As an answer, we started taking employees, about 40 at a time, in buses out to the San Joaquin Valley to visit conventional and then organic farms. This is still true—the first thing you notice when you get out into cotton-growing country is the smell of organophosphates, which were developed as nerve gasses for World War II. The second thing you notice is the absence of birds anywhere near the fields. Because the San Joaquin Valley doesn’t drain to a river, there are selenium settling ponds. They hire guys to sit there in lawn chairs with shotguns to scare off the birds that wouldn’t survive getting into the pond. If you put your hand into the soil, on a conventional farm, there are no worms—they take three years to come back after you stop using the chemicals.

“People often choose to do the right thing, not strictly as a business decision, but on the basis of values. They may be shy about talking about values as a basis for action, but I think it’s very common and can build strong business relationships.”

At the end of the day, we would have a picnic on an organic farm, which didn’t smell like an outdoor factory, where you could dig your hand into the soil and see life. Everyone came back saying, “This may be a real pain. It may be really hard. But it’s the right thing to do and we’re going to make it happen.”

I think that the lessons we had learned when we made the switch from pitons to chocks helped us as a culture make this really difficult decision. But it also helped us communicate it to our customers, to bring them along. From a production perspective, it was a huge change, though when you put an organic cotton shirt, it doesn’t feel any different from any other cotton shirt. We explained our thinking in our catalog, on the website, and in our stores, where we had exhibits of conventional versus organic practices.

That was an absolutely pivotal moment for the company. We had 166 styles beforehand. We dropped it to fewer than 70. It took us a couple years to get sales volumes and our margins back, but we did.

Q: How did you work out the supply chain challenges?

Eventually, we found a spinner in Bangkok who figured out that freezing the cotton before working with it solved the gumminess problem. Afterwards, we asked him, “You’ve got this huge spinning mill, and we were such a small player. Why did you bother talking with us?” He smiled and said, “I guess I’m a closet environmentalist.”

We’ve found a lot of partners that way. I’m constantly surprised by the power of values. People in business often choose to do the right thing, not strictly as a business decision, but on the basis of values. They may be shy about talking about values as a basis for action, but I think it’s very common and can build strong business relationships.

It’s hard for people to go into unknown territory. Tensie Whelan at NYU suggests, when you make a big change, rather than viewing it as a risk, view it as an investment. That simple change of phrase can help you move ahead with less fear.

Q: Can this approach to business become the norm?

I think the Business Roundtable statement affirming corporations’ responsibility for all stakeholders was a big deal. I’m not oracular; I don’t know if it will be enough. But we certainly have an opportunity. Other large companies are moving in the right direction. Unilever has several subsidiaries that are B Corps, and the intention is to make the whole corporation a B Corp.

We need businesses to act. We have these social and environmental problems coming to a head. We have the pandemic. We have an economy that is great for some and doesn’t work at all for others. Increasingly, we almost never get a break from the effects of climate change—75% of our employees were displaced by wildfires of 2017.

We need to use our productive, inventive, and financial capacities to address the chronic existential crises that we face. It will take every form of social institution—governments, NGOs, and business—in a focused effort almost like what was used in World War II.

There’s an alignment between the B Corp movement and the UN Sustainable Development Goals. While the SDGs don’t mean that much in the U.S., they mean a lot to businesses in Europe and around the world— 183 countries signed onto the agreement. The goals identify 17 areas required for human communities and for the environment to thrive. They provide focus for what governments, NGOs, and business each need to accomplish. The B Corp movement can help scale business’ capacity to respond to the urgent needs of our time.