Patagonia is an outdoor clothing manufacturer and retailer that has the unique aim of becoming the model of an environmentally sustainable company. In fact, the company’s Statement of Purpose “to use business to inspire and implement solutions to the environmental crisis” states this mission explicitly. This mission makes Patagonia unique among its field of competitors. Established in 1984, and roots going back to Chouinard Equipment in 1965, Patagonia has a long history of providing outdoor products of the highest quality and functionality for extreme sports such as mountain climbing, skiing and surfing. Patagonia’s reputation and excellent brand name rest on the company’s integrity and values, which have been promoted throughout the entire organization, and have become the main reasons Patagonia’s customers have remained so loyal over the years. Throughout the company’s history, founder Yvon Chouinard attempted to offer high quality products that have as little impact on the environment as possible. However, only in recent years have they developed a systematic framework for rigorously achieving their environmental goals.

As an avid mountain climber in the early days of the sport, Chouinard realized that the steel pitons (climbing spikes) that were hammered into the rock to support the climbers were leaving behind marks on the trails and degrading the aesthetic quality of the environment. With this realization, Yvon developed aluminum climbing chocks that were wedged into the cracks and removed without harming the rock.  Chouinard’s first catalog brought this situation of environmental degradation from pitons to the attention of his customers, and convinced them to switch to aluminum chocks. Eventually, the entire climbing industry switched over from an environmentally harmful practice to one that does little or no harm. This example illustrates the courage shown by a company leader in his honesty about the negative effects of his company’s main product line, even though the change would require new manufacturing processes and large capitol investment.

In another catalog, Patagonia went on record saying “everything we do pollutes,” and invited its customers to join them on the journey to environmental sustainability. Managers were amazed at the positive response in letters from customers, showing their appreciation for the company’s honesty and willingness to try.[i] Throughout the life of the company, Chouinard has shown a great willingness to take the risks necessary to protect the environment, as well as the core values of the company. The company’s strong commitment to social and environmental responsibility have earned them strong customer loyalty and increased revenue. Approximately 20% of its customers say they purchase Patagonia’s products because of their reputation and integrity in these cases.[ii] This suggests that there is a solid business case to be made for proactive dedication to social and environmental performance. 

Today, Patagonia’s business strategy is still one of integrating environmental and social responsibility into the fabric of it daily business activities. They continue to differentiate themselves through high levels of product quality and functionality while rapidly developing new designs and manufacturing processes. Environmental performance also serves to differentiate Patagonia from its competitors in a market where differentiation based on technological performance is becoming increasingly difficult. Constant innovation is one thing that keeps Patagonia on the cutting edge, and keeps their products competitive in a very crowded and demanding clothing market. However, the pursuit of high quality and differentiation can be costly. Firms pursuing such a differentiation strategy must still control expenses to balance the somewhat higher costs associated with these activities.[iii] This cost structure must be very carefully managed. In 1991, Patagonia created its statement of purpose and a new direction, which included controlled growth, prudent cash management and even greater dedication to environmental responsibility.[iv] Reigning in operating expenses has allowed the company to invest in greater environmental and social performance, which has eventually led to improved profitability and value.

Another reason for the company’s success is in its unique culture that values its employees. Patagonia maintains a very relaxed, friendly and casual work environment, and works hard to attract employees, such as environmentalists and sports enthusiasts, that share the company’s vision of environmental integrity and activism. The culture inside its headquarters and retail stores is very values-driven, much like that of a non-profit organization. Patagonia offers its employees many popular programs such as Flextime hours and on-site childcare programs. They also offer a very unique Internship Program where employees are allowed to take off one or two months per year to work at any non-profit organization that shares Patagonia’s values, and still retain full salary and benefits. Because many of its employees are attracted to Patagonia because of its cultural and environmental values, the company is able to maintain a very low turnover rate while paying salaries that are generally lower than industry standards. These practices result in many benefits to the company such as lower recruiting and training costs, and higher levels of motivation and quality of work.

In 1990, Patagonia hired several environmental consultants to learn more about the impacts of the materials and processes they used to produce their garments. They had learned from these consultants that the use of cotton, a natural fiber, which they thought should be less harmful to the environment, turned out to have large negative impacts similar to other materials being used such as petroleum-based nylon and polyester. The process of growing conventional cotton involves the heavy use of chemicals that poison the soil, air and ground water. 25% of the world’s pesticides are used in the production of cotton. The soil is sterilized and essentially used as nothing more than a mechanical support medium for the plants. Synthetic fertilizers, herbicides and insecticides are then applied to feed the plants and protect them from pests. Other chemicals are applied to maximize the number of cotton bolls on each plant. Then, defoliants are used to remove the leaves to maximize harvesting. The chemicals used in this process can easily drift to nearby land or leach its way into waterways and pollute drinking supplies. Conventional cotton crops in six California counties alone are dusted every year with 57 million pounds of chemicals. Patagonia’s use of conventional cotton in its sportswear line constituted 20% of the Patagonia’s total business revenue.[v] The report from the consultants brought forth this disconcerting realization. But, armed with this knowledge, it did give a general direction for the management team to pursue. They eventually decided they had to eliminate the use of conventionally grown cotton from their product line.

In late 1992, Patagonia began development of a corporate environmental strategy to focus efforts more effectively.[vi] This effort led them to the work of Hardin Tibbs, Fritjof Capra and Ernest Callenbach, which involved the concept of industrial ecology.  From this concept, the company created a set of environmental principles:

1) maximize system efficiency,
2) close the material resource/waste loop,
3) protect worker and public health,
4) use renewable resources judiciously,
5) conserve non-renewable resources and
6) educate employees and customers.[vii]

Adopted in 1993, these principles helped to identify many ways to modify their processes and reduce their impacts on the environment. Since then, many sustainable innovations have developed, such as Synchilla fleece made from recycled PET soda bottles, the use of 100% organically grown cotton and packaging improvements that use less materials.

In 1993, Patagonia became the first outdoor clothing manufacturer to introduce a high performance fleece (Synchilla) product line made from recycled Polyethylene Terephalate (PET) soda bottles, which was developed with one of Patagonia’s suppliers, Wellman, Inc. in the early 1990’s. Using recycled bottles as a raw material allows for the use of less non-renewable, petroleum based “virgin” material. Today, this post consumer recycled (PCR®) material is used in about 31 products, and has saved approximately 86 million soda bottles from going to the landfill.[viii] PCR® saves about one barrel of crude oil for each 150 garments produced, and eliminates approximately ½ ton of toxic emissions.[ix]

Organic cotton production uses many practices that are far less harmful to the environment than conventionally grown cotton. Organic farmers keep the soil healthy by using compost, organic matter, crop rotation and natural fertilizers rather than using toxic chemicals. Using beneficial insects and planting trap crops to divert insects away from the main crop manage pests naturally. Organic farming is more labor intensive, and the yields can often times be lower than conventional farming. This results in a higher cost product. But, the benefits are a healthy ecosystem, less soil erosion and reduced dependence on toxic compounds. In 1994, Patagonia’s management team decided to absorb the higher cost of moving to organic cotton, and switched their entire product line to this more environmentally benign resource.

Switching to recycled PET and organic cotton for their garment materials involved many risks. Both materials were more expensive to purchase or produce than the conventional materials, and would force the company to increase the retail prices of the garments that used them. The company had to pay three times more for organic cotton fabric in 1996 than it cost in 1995.[x] If the customers wouldn’t accept the higher prices for clothing, the company could incur heavy losses in revenue. Also, the number of farmers growing organic cotton at that time was few, and there weren’t any suppliers of organic fabric. So, Patagonia had to work down the supply chain to develop the different fabrics it needed for all of its cotton garments. They also help create a more stable market for the organic farmers by convincing other large users of cotton such as Nike and Levi’s to commit to using a small percentage of organic cotton in their material purchases. These initiatives resulted in considerable investment of time and money into an undeveloped industry. But, Chouinard decided that not switching to raw materials that have less environmental impact held an even greater risk in the long term. As Yvon once said, “no business can be done on a dead planet…” Initially, the higher retail cost of Patagonia’s products made from recycled PET and organic cotton caused sales of these items to drop dramatically. But, because customers are beginning to choose to pay a little extra to reduce their environmental impacts, the sales of organic clothing are growing steadily.[xi] Having learned of Patagonia’s success following their decision to take these risks, and given my pro-environmental values, I would certainly make the same kinds of decisions if I were the general manager of a company in a similar situation.

 Even with these improvements to product design and material resourcing, Patagonia decided that they still needed even more rigorous tools to further reduce environmental impacts. This led them to contact The Natural Step in Sweden, which was founded by Dr. Karl-Henrik Robèrt and the Environmental Protection Encouragement Agency (EPEA) in Germany. EPEA’s Intelligent Products System developed by Dr. Michael Braungart is a methodology where measurable action can be taken to develop more environmentally sound products. This procedure describe products as either:[xii]

1.      Consumable - things that can be composted at the end of their life.
2.      Service - products are returned to manufacturer for rebuilding or recycling.
3.      Unmarketable - things too hazardous to use or must be disposed of without recycling.

Patagonia’s management team decided that Braungart’s Intelligent Products System (IPS) was straightforward and easy for everyone in the company to understand. Using the IPS, they categorized natural fiber products without any hazardous chemicals that could be composted at the end of their useful life as Consumable. Polyester garments were classified as Service products since they could be taken back from the customer and recycled. Synthetic materials with multi-material coatings were classified as Unmarketable since they are difficult to recycle. From these initial concepts, a rating system was developed that would provide a clear framework for product development that was easy for the staff to use in their assessments of new designs. 

  
Patagonia’s management team also decided to implement a Life Cycle Assessment (LCA) to help develop an “ideal” garment, which would satisfy the Natural Step’s model for sustainability.[xiii] This model is characterized by the “four system conditions” for a sustainable society:

1.      Do not extract substances from the Earth’s crust
2.      Do not increase concentrations of substances produced by society
3.      Do not physically degrade natural systems
4.      Meet human needs worldwide

The LCA helped meet these conditions by looking at six components of the company’s processes:
1) product design,
2) material selection,
3) production processes,
4) distribution,
5) product maintenance and
6) “end of life’ potential for recyclablility or reusability.

A rating system based on a 1 to 5 scale is used to evaluate each product on each of the above six components. The average of these is calculated for an overall score to use as an indicator of how well the product performs environmentally. Although this process is relatively subjective, it does give the company’s staff a basic tool for determining which products should be reviewed to determine where problems lie, and begin to address those problems which have the highest priority.

By implementing the sustainability tools and frameworks discussed above, Patagonia has positioned itself well for future demands of customers for continually increased environmental and social performance. By having complete control of the company’s direction through his sole ownership of Patagonia, Yvon Chouinard has been able to implement his vision of environmental sustainability and social equity at every turn. Because of the commitment of Chouinard to environmental initiatives, Patagonia has been able to make significant progress toward achieving its mission and goal. This is a situation that is somewhat unique to a smaller, private company such as this. It may be more difficult for a larger, publicly owned company to commit to so many environmental initiatives due to shareholder demands and the drive to increase profits. What does the future look like for Patagonia after Chouinard is gone? Will the management of the company continue to have the same level of commitment to the environment the Chouinard has had? Will a future CEO have different values from Yvon that will change the direction of the company? Will pressure from competitors that don’t implement similar environmental protections force Patagonia to give up their expensive sustainability programs? Only time will answer these questions completely. My guess is that quality and true sustainability will win in the long run.

Fortunately, we have seen other companies make similar attempts at becoming more sustainable. Ray Anderson, CEO of Interface Carpets, has charged his company with becoming environmentally sustainable, while at the same time remaining financially sustainable. Interface is a $1.3 billion public company, and is well on its way to achieving Anderson’s goal.[xiv] Other large corporations such as IKEA and Nike have also implemented frameworks such as the Natural Step for Business, and are committing to greater social responsibility.[xv] As more large companies follow suit, I believe it will become more feasible for any company, large or small, public or private, to becoming the next model of an environmentally sustainable company. By using sustainable frameworks such the Natural Step, Intelligent Products System and Life Cycle Assessment in real business situations, these companies will be able to flush out any issues with implementation, and refine these systems so they are more effective and usable within the context of a financially viable company. Having the experience of using these methods will also allow the employees of these companies to go out and teach other companies what works, and help them avoid the pitfalls they may have encountered.

If Patagonia’s sustainability initiatives are done in a truly ecologically sustainable manner, they will have profound beneficial effects on the natural environment. However, as with all companies that are implementing “green” standards, they will need to be carefully monitored to insure that they are not just rhetoric or superficial improvements, but do in fact produce meaningful positive environmental effects.