Patagonia: Accidental Success Through a Deliberate Mission
“If I had to be a businessman, I was going to do it on my own terms.” – Yvon Chouinard, Let My People Go Surfing
– Business Model –
Patagonia was founded by Yvon Chouinard, a mountain climber and environmentalist, in 1973. While the company’s roots are in equipment for rock and alpine climbing, Yvon became an accidental apparel mogul when fashion models in Manhattan began wearing his fleece vests. [1] The company is wholly owned by Yvon and his wife Malinda and generated approximately $600 million in revenue in 2013. [2]
Mission + Product Offerings
Patagonia’s mission statement is to “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.” The company’s products include (i) men’s, women’s and children’s apparel and accessories (ii) bags and packs (iii) sporting gear and (iv) Patagonia Provisions: responsibly-sourced, healthy snacks such as jerky, bars, salmon, soup and dry goods.
Bucking the trend of fast-fashion retailers, Patagonia has successfully cashed in on the rapidly growing post-Great Recession consumer segment that has abandoned impulse buying and conspicuous consumption in favor of goods that offer enduring worth. With every purchase, the company promises its products will live longer than competitors’ and to repair, resell, and recycle apparel and gear as necessary. Even the Megacorps have been paying attention: Patagonia recently entered into odd-couple pairings with Walmart to advise on reducing packaging and water use in its supply chains and Nike to help craft clear, quantifiable standards for environmentally responsible clothing production. [2]
Charitable Donations
While CSR for most companies is treated as a cute sideshow to salve the consciences of higher-ups, social responsibility has remained at the core of Patagonia’s business model. Since 1985, Patagonia has given 1% of revenue to grassroots environmental organizations. In 2002, Yvon and friend Craig Mathews, owner of the Blue Ribbon Flies, created a non-profit organization dubbed 1% For The Planet to encourage other businesses to do the same.
– Operating Model –
Materials Sourcing
Since 1996, Patagonia has selected materials in the most responsible manner feasible: clothing is made with organic vs. conventional cotton (although supply costs were initially tripled due to the change), certain lines of fleece jackets are made exclusively from recycled soda bottles, products are durable and timeless enough to require less frequent replacement, 192 styles are fair-trade certified, and as of Fall 2014, all down products contain 100% traceable feathers that can be linked back to birds who were never force-fed or live-plucked. While these practices support Patagonia’s underlying mission, they also serve as effective branding: Patagonia’s high-quality and conscious aura have covertly driven up consumers’ willingness to pay, thereby benefiting the company’s bottom line. [3]
Legal Structure
Patagonia transitioned into an official B-Corp in 2012. To qualify as a B-Corp, a company must have an explicit social or environmental mission and agree to a legally-binding fiduciary responsibility to consider the interests of workers, the community and the environment, in addition to shareholders. Patagonia’s specific public benefit goals – sharing best practices and transparency, to name two – are written into the bylaws and articles of incorporation of the company and may not be changed or removed without unanimous shareholder approval; as a result, they govern the company’s actions at the most fundamental level. In 2014, Patagonia’s Overall B-Score (a measure of impact across all stakeholders) was 116 compared to the peer average of 80. [4] [5]
Human Capital: Let My People Go Surfing
The company has religiously maintained its cultural values, even as it has transitioned into a formal organization. Patagonia has been recognized for offering its employees flexible work hours and job sharing; on low-key days, when the waves are rolling, employees are encouraged to spend their lunch hour surfing on the beach outside of the company’s Ventura, California headquarters. Patagonia has defied modern convention by operating human resources practices under the belief that a more fulfilling, happier workplace attracts and retains better talent. [6]
Patagonia’s mission has shaped the fundamentals of its business model and is deliberately supported by its operating model. Yvon may certainly be a reluctant businessman, but through clear and passionate focus, he has created a successful double bottom line organization that has both contributed to economic growth and benefited society as a whole.
Footnotes
[1] http://www.patagonia.com/us/patagonia.go?assetid=3351
[2] http://www.wsj.com/articles/SB10001424052702303513404577352221465986612
[3] http://www.patagonia.com/us/patagonia.go?assetid=2076
[4] https://www.bcorporation.net/community/patagonia-inc/impact-report/2014-10-16-000000
[5] http://www.patagonia.com/pdf/en_US/bcorp_annual_report_2014.pdf
[6] http://www.economist.com/node/21542432
This was a lovely read. I’m curious — you mention that Patagonia’s customers are often willing to pay a premium because of the quality of its products and its social mission. This came up earlier in the year in the Nike case, but I feel there may sometimes be a tension between being environmentally cautious and providing the highest possible quality. The example you give of the fleeces made from recycled soda bottles — do customers find that they are objectively higher quality than alternatives or is it more of an emotional benefit from knowing the products promote sustainability? (And if these recycled materials are actually better options why doesn’t everyone use them?). Regardless, I’d love to work at a company that lets me surf every afternoon. Well done!
Interesting read. It sounds as though Patagonia has been able to stay ahead of other brands in the same space (The North Face, Columbia, etc.) by adhering to their original social mission and thus, providing the consumer with more value than just a high quality good. It will be interesting to see how the company will fair once ownership has changed hands in 10, 20, 30, etc. years time.
This has been such an interesting read. I was not aware of Patagonia’s social mission and B-corp status until now. It’s interesting to see how Patagonia has flourished because of its high quality products and environmental mission. I’d love to understand more about how being a B-corp has helped its profitability (certain tax benefits perhaps? increased mind share in socially conscious customers?).
Nevertheless, this seems like the best company to work for: contributing to a great cause, creating tangible value for customers, and incredible culture (Surfing during lunch time!).
For me as an active user of Patagoni gear for fishing, the fundamental difference with other brands is that they are trully honest on their enviromental care. Every time i go into a store they have a different campaign supporting local communities and fighting against projects that can potentially damage the ecosystem around it.
High quality is an attribute that could be easily replicated, having a clear mission is something harder to imitate, and the continuous years of success have proven it.