Too warm for the fleece: Patagonia’s quest for relevance amidst climate change

Patagonia, HBS fleeces, and climate change – fashion at an environmental cost.

In 2014, the Financial Times reported that nearly 90% of Harvard Business School students purchased the infamous Patagonia fleece1. Most of us purchase the fleece for warmth, style, and community. Only a few of us purchase them because of Patagonia’s intentionality in building an eco-friendly brand in response to a pressing megatrend. Climate change can both be attributed to and directly impacts Patagonia. Therefore, Patagonia should care about taking action through existing and new initiatives that address the issue for its supply chain.

The carbon footprint of my fleece

The $3 trillion apparel industry is responsible for 10% of global carbon emissions, and ranks second to oil as the most polluting industrial business2. Cotton and polyester are the two most pervasive natural fibers in apparel production3. Each cotton T-shirt consumes 2,700 liters of water in production, enough to satisfy a human for 2.5 years.  In 2015, polyester production for textiles resulted in Greenhouse gas (GHG) emissions equivalent to 185 coal power plants4.

Patagonia should care

Patagonia is an outdoors apparel company with $600M in annual revenues5. CEO Rose Marcario should be concerned with this megatrend for three reasons. First, she manages a complex, global supply chain network, vulnerable to the impacts of climate change6. Supply chain risk is contingent on how each country manages climate change with additional external factors such as political stability, governance, and development7.

Figure A 8

Nearly two-thirds of Patagonia’s factories and textile mills reside in developing countries, prone to accelerated impact9. The fiber and yarn production processes alone comprise 36% of the total GHG emissions10. Sixty percent of the world’s population lives in these countries where increased temperatures would be disastrous to the population and reduce labor supply11. Additionally, water shortages in these countries will inhibit the firm’s cotton production12. These effects are amplified when work-in-process inventories need to be transported cross-seas. Climate change impacts each component of the supply chain.

Second, management needs to care because climate change will ultimately reduce global demand for Patagonia’s core products, the jackets, increasing excess inventory. Retailers across the industry, reported a 30% decline in sales for December 2015 and beyond due to the lingering warmth 13,14. Finally, the impact of climate change aligns with the company’s mission to “cause no unnecessary harm15.”

Patagonia cares – the Triple Bottom Line

Patagonia established the triple bottom line (Profit, People, Planet) in the late 1990s as its primary measure of success. The company website acknowledges, We make products using fossil fuels, built in factories that use water and other resources, create waste and emit carbon into the air16.As an industry, the first step to creating change is recognition and measurement of the issue.

In 1996, Patagonia shifted production practices to create apparel from recycled polyester and organic cotton17. The company has launched various initiatives including Footprint Chronicles, Materials Sourcing, and Worn to Wear. In the short term, the Worn to Wear initiative, where employees fix broken Patagonia gear, perpetuates the longevity of Patagonia clothing18. The Footprint Chronicles is a map that creates traceability in the supply chain19. For the long-term, Patagonia has changed the raw materials used in the supply chain to incorporate more durable natural fibers such as hemp and organic cotton19. Moreover, the firm altered its denim fabric dying methodology through dyestuffs that use 84% less water, 30% less energy, and emit 25% fewer carbon emissions than the traditional dyes20. These initiatives reduce per person GHG emissions due to lower garment turnover.

Patagonia can care more – a deeper commitment to improvement

While Patagonia is an industry pioneer in climate change initiatives, there are observable areas of improvement that management should address. In the short term, the company can engage retail employees to transfer knowledge about the supply chain to the end-consumer. First-hand experience indicates that consumers are not properly educated about the positive impact of Patagonia’s supply chain. A training program to increase awareness would “accommodate” the megatrend through building conscientious consumption at the end of the supply chain.

In the long term, Patagonia ought to focus on the negative impact of transportation in its supply chain. The firm has engaged in ways to reduce GHG emissions at most stages in the supply chain except transportation. While tactically more challenging, relocating the Asia facilities to South America or other geographically closer areas will reduce the transportation carbon footprint.

Patagonia’s environmental efforts are admirable, but beget the following questions: (1) European corporations have consistently demonstrated a greater ability to reduce their carbon footprint through 100% commitment to closed loop production and supply chain management. Why is Patagonia lagging relative to its counterparts? (2) What’s preventing the firm from leveraging its industry leadership to lobby and shape policy around carbon caps for apparel firms?

(797 words)

 

References

1Elizabeth Paton, “MBA chic on the business school campus,” Financial Times, January 21, 2014, [https://www.ft.com/content/19ca340c-7d0b-11e3-a579-00144feabdc0], acceded November 2017.

2,4 James Conca, “Making Climate Change Fashionable – The Garment Industry Takes On Global Warming,” Forbes News, December 3, 2015,

[https://www.forbes.com/sites/jamesconca/2015/12/03/making-climate-change-fashionable-the-garment-industry-takes-on-global-warming/#e93ef3879e41], accessed November 2017.

3Luz Claudio, “Waste Couture: Environmental Impact of the Clothing Industry,” Environmental Health Perspective, 115,9 (2007), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1964887/, accessed November 2017.

5World Resources Institute. “The Apparel Industry’s Environmental Impact in 6 Graphics.”  http://www.wri.org/blog/2017/07/apparel-industrys-environmental-impact-6-graphics, accessed November 2017.

6Fortune. “Patagonia.” http://fortune.com/change-the-world/2015/patagonia-24/, accessed November 2017.

7Richard Gledhill, Dan Hamza-Goodacre and Lit Ping Low, “Business-not-as-usual: Tackling the impact of climate change on supply chain risk.” PwC: Resilience, https://www.pwc.com/gx/en/governance-risk-compliance-consulting-services/resilience/publications/pdfs/issue3/business_not_as_usual.pdf, accessed November 2017.

8Cooper Hewitt. “Infographic: Environmental Impact of the Textiles Industry.” https://www.cooperhewitt.org/2016/11/08/infographic-environmental-impacts-of-the-textile-industry/, accessed November 2017.

9Patagonia. “The Footprint Chronicles.” http://www.patagonia.com/footprint.html, accessed November 2017.

10Subramanian Senthilkannan Muthu, Assessing the Environmental Impact of Textiles and the Clothing Supply Chain (United Kingdom: Woodbridge Publishing Limited, 2014), PDF e-Book, [70-78] https://books.google.com/books?id=QAujAgAAQBAJ&pg=PA75&lpg=PA75&dq=climate+change+clothing+supply+chain&source=bl&ots=hLP36zE1Wu&sig=3y-i9uv_DNF-kHbeYqf57XGthbE&hl=en&sa=X&ved=0ahUKEwj5y5bZmb3XAhXL5IMKHcZWC0kQ6AEIUDAJ#v=onepage&q=climate%20change%20clothing%20supply%20chain&f=false, accessed November 2017.

11United Nations Climate Change. “Developing Countries Need Urgent Support to Adapt to Climate Change.” http://newsroom.unfccc.int/unfccc-newsroom/developing-countries-need-urgent-support-to-adapt-to-climate-change/, accessed November 2017.

12United Nations Global Impact. “Climate Change and the Global Water Crisis: What Businesses Need to Know and Do.” https://ceowatermandate.org/files/research/UNGC-PI_climate-water_whitepaper_FINAL.pdf, accessed November 2017.

13Hiroki Tabuchi, “Retailers Feel the Heat of Lost Winter Clothing Sales,” New York Times, December 15, 2015, https://www.nytimes.com/2015/12/16/business/retailers-feel-the-heat-of-lost-winter-clothing-sales.html?_r=1, accessed November 2017.

14Arthur Zaczkieicz. “Is Climate Change Killing the Seasonality Of Fashion Apparel Retailing?” Women’s Wear Daily, December 2016, http://wwd.com/business-news/business-features/climate-change-impact-fashion-apparel-10525390/, accessed November 2017.

15,16 Patagonia. “Patagonia’s Mission Statement.” http://www.patagonia.com/company-info.html, accessed November 2017.

17Geoffery Jones and Ben Gettinger, “Alternative Paths of Green Entrepreneurship: The Environmental Legacies of the North Face’s Doug Tompkins and Patagonia’s Yvon Chouinard,” HBS Working Paper No. 17-034, 2016.

18Patagonia. “Environmental and Social Initiatives: 2015.” http://www.patagonia.com/on/demandware.static/Sites-patagonia-us-Site/Library-Sites-PatagoniaShared/en_US/PDF-US/patagonia-enviro-initiatives-2015.pdf, accessed November 2017.

19Patagonia. “Our Business and Climate Change.” http://www.patagonia.com/climate-change.html, accessed November 2017.

19Lou Wang and Bin Shen. “A Product Line Analysis for Eco-Designed Fashion Products: Evidence from an Outdoor Sportswear Brand.” Sustainability, 9, (2017), http://www.mdpi.com/2071-1050/9/7/1136/htm#B46-sustainability-09-01136, accessed November 2017.

20Patagonia. “Environmental and Social Initiatives: 2015.” http://www.patagonia.com/on/demandware.static/Sites-patagonia-us-Site/Library-Sites-PatagoniaShared/en_US/PDF-US/patagonia-enviro-initiatives-2015.pdf, accessed November 2017.

 

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16 thoughts on “Too warm for the fleece: Patagonia’s quest for relevance amidst climate change

  1. Really well written article! I think a large part of why European corporations are further along in their sustainability efforts than Patagonia may have to do with the consumer demand for these corporate behaviors. While many Patagonia shoppers care about the outdoors, many apparel purchases seem to be feature-driven (how cold of temperatures does this product withstand, how sophisticated is the material, etc.). To your point about the lack of awareness of Patagonia’s sustainability efforts, I did not know about many of these initiatives. Only when I started reading about the company some more did I see that sustainability is core to the company’s mission. By increasing awareness, I think that this could drive many more customers to Patagonia, and incent management to push these sustainability initiatives even further. Beyond the training program that you suggest, I think that a high-profile marketing campaign could also aid the company’s cause. Since Patagonia is privately-owned, they can invest in building their brand in the short term without substantial ramifications.

  2. Thank you for writing this piece – in my opinion, Patagonia is one of the leaders in Corporate & Social Responsibility. I believe that there may be limitations to Patagonia building a closed-loop system due to challenges with collecting recycled clothing. Patagonia is a global company with a significant portion of its sales in the U.S., where the culture is often to pass down or donate clothing to the less fortunate after it is “consumed.” Based on Patagonia’s CSR write-ups, it does appear that the company is committed to purchasing and manufacturing products from recycled materials, but the collection issue may make it challenging to close the loop. While Patagonia could certainly do more to create awareness of climate change issues, it really does embody the triple bottom line mentality. One of the most interesting aspects of its CSR initiative is the support the company provides to others creating a positive environmental impact. Patagonia gives the larger of 1% of sales or 10% of pre-tax profits to environmental groups each year which is truly incredible.

  3. Awesome article and such an interesting comparison to our recent IKEA case. To your first question – regarding whether or not Patagonia can improve their ability to reduce their carbon footprint through 100% commitment to closed loop production – I believe they can certainly do more here. Similar to the IKEA case, my biggest critique of companies who focus solely on the sourcing of raw materials in the production of their goods is the fact that they are not providing consumers a process to return those same goods into the usage loop once they no longer need the product. For companies like IKEA and Patagonia, I would argue that a bigger part of the problem is the fact that consumers buy a lot of products and often times, the product are trashed after just 1-2 years of usage. Without addressing this issue, Patagonia (and IKEA’s) commitment to the ‘triple bottom line’ seems insincere to me.

    Patagonia can certainly do more here – many companies (Madewell, APC) now have a brand renewal program where the company pays a substantial amount of money ($25-50) each time you return a pair of jeans to them, to spend on new jeans at the store — and the old pairs are then resold after the company fixes them up. I think a program like this benefits the consumer – since they’re able to buy the next pair of jeans at a discount, benefits the company since it keeps purchases at that company and, benefits the environment since people are actually using and re-using products for as long as its viable.

  4. Cool article! At first, I was a little bit skeptical as to whether Patagonia would actually be able to communicate this additional value proposition (apart form its high quality standards) to its consumers. However, after browsing trough Patagonia’s online catalogue, it is quite clear to me that they have done a tremendous job in highlighting the relatively positive climate impact of its products under the description of the product features. My only concern is whether all of Patagonia’s consumers are willing to pay a premium towards climate change combat. Considering the amount of good causes out there, an alternative model could perhaps be to allow the consumer to choose which causes Patagonia should support upon payment- e.g. climate change, breast cancer, poverty, etc.

  5. Without question, Patagonia is a pioneer when it comes to sustainability. The company has been committed to environmentally friendly practices for the past 30 years [1]. And I do believe consumers in today’s world are finally giving such practices equitable importance in their purchasing decisions. There are over 90 million millennials in the U.S. alone, spending ~$600 billion each year [2]. These group of consumers are dedicated to improving our planet — studies show that 45% of millennials stated they could be influenced to support companies that are committed to helping the environment [2]. They are even willing to pay more for sustainable products [3]. Retailers like Patagonia have played a pertinent role in placing importance on sustainable practices, but the next wave of importance will be created by the consumers themselves. I believe the next generation of consumers will generate pull for sustainable products, creating a movement within retail players to uplift their standards.

    [1] http://csrcentral.com/patagonia-the-clothing-company-with-a-revolutionary-approach-to-csr-sustainability/
    [2] http://www.mytotalretail.com/article/millennials-going-green-means-retail-must-follow/
    [3] https://www.cnbc.com/2016/11/04/millennials-willing-to-pay-more-for-sustainable-better-quality-goods-nestle-chairman.html

  6. Very interesting read. To the questions posed, its unclear why Patagonia should take further initiative than it already is in lobbying for carbon caps for apparel firms, which might be seen as a protectionist or anti trust move. Patagonia already seems to be the leader in sustainable apparel and there is no imminent threat to its supply chain due to climate change. Shifting production locations closer to retail locations will decrease not just transportation related CO2 footprint but also possibly bring costs down for end consumer. Beyond the incremental improvement in their carbon footprint, I would argue that lobbying for carbon caps is not Patagonias responsibility , though they could possibly capitalize on brand goodwill.

  7. Very interesting essay, great job! I had no idea that the apparel and textile industry contributed so much towards greenhouse emissions and water usage. To that end, I think your point about educating the end consumer is very important. Beyond educating me about Patagonia’s own supply chain sustainability initiatives, I believe that consumers would benefit from learning about the apparel industry’s environmental impact as a whole. I recommend that apparel brands/retailers collaborate together on an industry education initiative, with Patagonia at the forefront. Currently, sustainable products and business operations is a competitive point of differentiation for most companies; I would argue that for the collective good, we should expect it as table-stakes, rather than a differentiator. Consumers are growing increasingly conscientious about what they consume — oftentimes, the education piece is lacking.

    The other parallel I would draw is with the food / agriculture industry, which is one of the biggest offenders in terms of GHGs and water usage. One initiative that food leaders, such as General Mills, have done is pledge a certain reduction in GHG and water reduction. To implement this, they have actually pledged to reduce their environmental footprint throughout the ENTIRE supply chain – beyond their own direct operations. The majority of GHG and water usage occurs upstream of the company’s own operations, in the operations of the suppliers and growers. I could see that applying to Patagonia and apparel brands as well (e.g. with cotton growers and fiber manufacturers).

  8. Thank you for writing this article! As I read it I reflect on the role that each individual company has on what is the second most polluting industry in the world. The problem with many sustainable initiatives is directly link to the power of competition. The fact that one company has the responsibility to drastically change its operations to diminish the amount of greenhouse emissions and waste they produce is hindered by its competitors. Implementing these changes are without a doubt costly so all fashion companies should be held to a similar standard.

    I think in this sense the responsibility to change the industry should come, in a way, through the consumers. We often forget the amount of power that consumers hold. If our own buying habits change, the fashion will have no other option but to adapt to out own standards. Is there a way Patagonia could partner with similar brands that advocate heavily for climate change and change de consumer perspective? How realizable is this?

  9. I suspect the question that Patagonia grapples with relates to which way a public ‘announcement’ of their sustainability efforts will swing the pendulum. While consensus tends to be that consumers around the world put a big price on sustainable manufacturing practices, research doesn’t always support the same. To quote Yvon Chouinard (Patagonia founder) in an interview some years back, “ Sustainability is not enough at all. Saving the planet is number 19 on people’s priorities. You’d think it would be number one. But no, number one is personal security. The world is scared to death of everything, right now.”

    Given that Patagonia is manufacturing a product associated with comfort in harsh climates, the focus on sustainability could well drop even further. In such a case, the onus is on the manufacturer to drive change in manufacturing practices, and in consumer behaviour. Interestingly, this was echoed by Chouinard in the same interview when he said, “So it’s not going to come from the consumer. It has to come from businesses who understand that the consumer is going to be demanding these kinds of products in the future. You have to start reacting right now, before the customer tells you so.”

    As a result, the onus is on Patagonia to drive customer education and sustainable production initiatives until the next generation of environmentally conscious consumers aren’t paying for their Patagonia themselves. The lack of faith that lobbying initiatives will, in fact, change competitor behaviour probably holds the firm back. After all, Patagonia refusing to undertake the same additional practices it propagates because its competitors refuse, while fair, will not play out well from a public perception standpoint.

  10. Thanks for writing. Overall, I am not sure Patagonia has a huge incentive to promote policy changes to enhance sustainability. As you mention, the production of a cotton shirt consumes a large amount of water, and transporting production from Asia to America results in high carbon emissions. Therefore, one could argue that an appropriate policy response would be to disincentive the sale of clothes, such as by taxing clothes sales to account for the negative externality they cause. However, since Patagonia’s business model is based on constantly selling new clothes, I do not think the company would want to a) highlight the inherent negative environmental impact its business or b) ask for governments to increase the cost of clothes production.

  11. What an articulate and thoughtful article, with a wonderful exhibit – I learned so much! I find your comment comparing Patagonia’s progress to its European counterparts to be particularly telling. Are there key political or cultural differences surrounding the integration of business and corporate responsibility or climate change that may help explain why Patagonia has not adopted these practices? I would argue that Patagonia has differentiated itself from its peers not only with its loud and demonstrated commitment to corporate social responsibility but also to its excellent customer service which encourages consumers to bring Patagonia products back for repair over and over instead of purchasing replacements and discarding, which I think adds to the company’s positive feedback loop. However, even this practice does not mitigate, and indeed may exacerbate, the huge burden contributed by absence of attention to the transportation implications of its sustainability initiatives.

  12. I enjoyed the reading very much, thank you!
    Answering the second question I would like to notice that even though Patagonia with its $600M in revenue might be a leader in the outdoor clothing space, within the whole $3 trillion apparel market it might not have enough weight to lobby the policy. In contrast to IKEA case, in which the company has been one the largest consumers of wood and could’ve influenced its supplier by the virtue of the financial pressure, Patagonia doesn’t have enough scale to set the trend. I agree that companies in the clothing space should definitely be the force that changes the current situation with waste and environmental change and some of them already do that successfully – IKEA mentioned earlier, Nike and Adidas that are using recyclable plastic for its boots [1,2] and are imposing rigid standard for their suppliers, and many others. My view is that the larger the public company is the more its investors should demand careful consideration of opportunities for positive environmental changes. As we saw in IKEA case it might not only bring positive appearance to the company but also might be a source of operational improvements, for instance, cost reduction.

    [1] https://www.nike.com/us/en_us/c/innovation/grind
    [2] http://www.adidas.com/us/parley

  13. Very interesting read! Patagonia has been a pioneer in the sustainability arena and one of its great marketing campaign from 2011 “Don’t Buy this Jacket” which emphasized the company’s environmental initiatives. Having said that, I do think there is more that can be done. One of the points you brought up in the article was relocating some of the factories to south America in order to be geographically closer to North America. This will indeed enable to cut down on emitted carbon dioxide but there are other factors to take into account such as availability of resources and human labor policies in the country.
    Another option would be to incentivize people to return used clothes when buying new ones – whether by receiving a discount a new product or even being part of a social sustainability loyalty program. Although many people donate or hand down their clothes, there are some who don’t and prefer to know that these clothes will be recycled.

  14. Very interesting article! I was very encouraged to read about the extent to which textile manufacturers are willing to incorporate additional costs into their supply chain, in pursuit of more sustainable ends. My initial concern was similar to that of Philip, in that I was skeptical of the extent to which consumers would consciously opt into paying more explicitly to ameliorate carbon emissions, especially as I expect consumers value their right to sovereignty over the causes to which they direct their money. It would be interesting to explore the extent to which their environmentally friendly image is tied to their brand image as an American company, and thus the extent to which it would be challenged by the transitioning of manufacturing facilities over seas.

  15. Interesting read but I am curious to know how much of their profit margins are they willing to reinvest in the improving production process. Is Patagonia looking at drastically improving the process by reducing the amount of water used and in turn the GHG emitted. I understand that they are looking at cutting transportation cost however it will be interesting to find out how much of their future investment is made towards improving the overall production process at their factories as that seems to be the root cause of the problem.

  16. Thank you so much for writing about this important topic! As a consumer of Patagonia, I had limited knowledge of the sustainability initiatives they have taken on as a company and appreciate your essay in helping educate me personally.

    Patagonia is definitely taking tremendous steps in the right direction, and I commend all the initiatives they have. I believe they are lagging relative to their counterparts partly because the U.S. has not adopted the same standards as European corporations and there is less industry pressure overall in apparel versus oil and gas. When I think of fighting climate change, I often immediately think of automobiles and manufacturing plants, not t-shirts and fleeces. I think that to pressure corporations to speed up change, consumers need to do their part to focus on the apparel industry and make that a criteria in their buying choices.

    There is nothing tangible preventing Patagonia from leveraging its leadership to shape policy for apparel firms, but I think a lot of it can be drilled down to lack of consumer education and marketing of its efforts. If consumers better understand Patagonia’s efforts and credit them with purchases, competitors will take note and follow suit.

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