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10 min read

Patagonia Traditional CSR, Strategic CSR or CSV

CSR only has a limited connection to the business while CSV is 'integral to a company’s profitability and competitive position.'

Yvon Chouinard, founder of Patagonia, is a self-described 'dirtbag' whose company employs people with a 'love of wild and beautiful places,' a love which 'demands participation in the fight to save them, and to help reverse the steep decline in the overall environmental health of our planet.' This mission stems from a realization by Chouinard that his company was in part responsible for the overconsumption he so reviled. But unlike much hyperbole surrounding businesses with a desire to implement CSR (Corporate Social Responsibility), Chouinard’s commitment was make or break: 'They say if you want to be a samurai, you can't be afraid of dying, and as soon as you flinch, you get your head cut off. I'm not afraid of losing this business.'

Such fervor has seen Chouinard push Patagonia to choose business partners based on values, not mere commercial efficiency. This was done through careful selection of what goes into every product from using less environmentally harmful dyes through to reducing the amount of packaging used to deliver the end product. Perhaps the best example of this philosophy is not in the detail but in the overarching concept: reduce, repair, reuse, and recycle. These core principles can be seen at work in Patagonia’s recycled products made from Polartec fleece, launched in 2005 and their attempts to reduce landfill waste by creating more durable products with a longer working life.

Yet such processes created tension within the company as the need to remain profitable clashed with the far reaching ideals of Patagonia’s mission statement. Despite his earlier claim to not being afraid to lose the business, Chouinard, in a nod to corporate realities, acknowledged the need to turn a profit in his book Let My People Go Surfing: 'It’s okay to be eccentric, as long as you are rich; otherwise you’re just crazy.' Yet for all this dose of realism, Patagonia has proved time and again 'that making decisions in favor of environmental reasons always proved to be a good business in subsequent years.'

According to Michael E. Porter and Mark R. Kramer, the key difference between CSR and CSV (Creating Shared Value) is CSR only has a limited connection to the business while CSV is 'integral to a company’s profitability and competitive position.' In this context Patagonia can be clearly seen as a company practicing CSV as it consistently prioritizes environmental reasoning in not only its business philosophy, but also though its emphasis on quality – reducing waste, its innovation – making zippers 100% recyclable, its production and logistics – holding suppliers to Patagonia’s own standards of social and environmental responsibility, its sales and marketing – reducing paper use even as the circulation of product catalogues increased by 65%, and human resources – by offering paid sabbaticals of up to two months to work for environmental organizations of their choice. In this way, all areas of the business are working to deliver an emphasis on quality, with a strong commitment to reduced environmental impact while insuring Patagonia remains an industry leader in technological innovation; placing Patagonia firmly in the camp of CSV.

'If the stakeholder concept is to have practical significance, it must be capable of yielding concrete actions with specific groups and individuals.' In the case of Patagonia this begs the question who are their stakeholders and in what ways does the company take definitive action?

Stakeholder Management

Although stakeholders form a 360-degree relationship with a company it is beyond the scope of this article to deal with them all, as such I will examine consumers, or customers a la Freeman’s model, and employees.

360-degree stakeholder relationship

When it comes to supplying products to consumers, Patagonia has a simple mantra: 'Reduce, Repair, Reuse, Recycle, Reimagine.' These five words are the unpacking of what Patagonia means by quality, a quality based on the French aviator Antoine de Saint Exupéry’s statement: 'perfection is finally attained not when there is no longer anything to add, but when there is no longer anything to take away.' Chouinard set this notion in the clothing and accessories space by saying 'our goal is to offer only viable, excellent products that are as multifunctional as possible so a customer can consume less but consume better. A ski jacket should work perfectly for all disciplines of skiing, but… you should be able to wear it on a sailboat or in a winter rainstorm in Paris.' In producing a ski jacket this way, Patagonia reduce and reimagine with their customers in a way that is not only environmentally sensitive but also economically viable, as their product line allows them to charge 20% more than other outdoor apparel companies, and 50% more than mass-market brands, do for similar products.

There is a line from the Upaniṣads which Patagonia’s product build could be said to embody: 'They remain here as long as there is a residue, and then they return by the same path they went.' By first offering to repair products, at a rate of more than 12,000 garments per year, Patagonia prolong the life of a garment beyond the usual disposal point of cloths after general wear and tear. For those customers who no longer want their items, Patagonia encourage a culture among consumers of swapping, reselling or giving the garments away to try and reduce the amount of clothing in circulation; they further facilitate this culture though an online swap market and by holding retail swap events. For consumers with garments beyond repair or reuse, Patagonia encourages the return of items for recycling in the most efficient way, a recycling program where Patagonia foots the postage cost for returned items. Although such initiatives exposed some underlying tensions in the management of Patagonia, the VP of Environmental Initiatives, Rick Ridgeway, stated an ongoing commitment to implement such schemes as history demonstrated decisions 'in favor of environmental reasons always proved to be a good business in subsequent years.'

Yet for all of its outward commitment to social responsibility, a company is greatly constrained if there is little internal passion for the social commitments of its mission statement. As a self-described 'dirtbag,' it made sense for Chouinard to hire the very qualities he fostered in himself: environmental concern and entrepreneurial spirit. Staff at Patagonia are encouraged to lead the 'dirtbag' lifestyle with surf conditions posted daily on the board and employees encouraged to take time off from work when the surf is up. This lifestyle extends beyond staff to their buildings which are engineered to minimize environmental impact thought the use of solar panels, natural heating and cooling systems and energy efficient lighting. 'Each year since 1985, Patagonia has donated 10% of its profits or 1% of its sales (whichever is greater) to more than 900 environmental groups, for a total of $17 million in cash. The company donates millions of dollars worth of outdoor gear to conservation causes.' Patagonia also offers civil disobedience training training and pays bail for employees who are arrested, so long as their protest is non-violent, during expressions of activism for environmental causes.  Employees at Patagonia are also eligible for an environmental internship program where participants are paid their regular salary for up to eight weeks to volunteer for nonprofit environmental organizations.

Patagonia was also one of the first US companies to provide maternity and paternity leave and to offer on-site child care, built in 1984, with a low child to caregiver ratio, despite charging 20% less than similar facilities.

According to Freeman, for the stakeholder concept to make a difference there must be consistency when the rational, process and transactional levels of analysis are brought to bear on a company’s activities. Voluntarism must also go hand in glove with the workings of a firm for the stakeholder concept to fully embed in strategic management processes. At Patagonia it is clear, from a brief examination of consumers and employees, there is a strong sense of engagement between Patagonia and its stakeholders. Customers demonstrate a strong engagement with the company through their willingness to pay up to 50% more for Patagonia products than for the goods of competing firms (F. Reinhardt, 1999), the low employee turnover, less than 5% at the Ventura headquarters, and the demonstrable commitment to environmental activism shows Patagonia as a firm that is highly engaged with its stakeholders and determined to fully implement and integrate CSV in the very fabric of its enterprise, pardon the pun.

CSR MARKETING:

If Maignan, Ferrell and Ferrell are right, marketing is about 'moving from a narrow customer orientation to managing relationships and benefits for all stakeholders.' Patagonia seek to achieve this while spending far less than most apparel companies on marketing and advertising. They seemingly add a second hurdle by aiming to avoid the traditional role of marketing and advertising, namely to increase consumption. Rather, Patagonia leverage their social media and traditional sales channels to provide educational messages and always attempt to be judicious and consistent in articulating their social and environmental impact (Patagonia, 2011). An example of this is their The Footprint Chronicles® (http://www.patagonia.com/us/footprint) which tracks the environmental impact of over 150 of Patagonia’s products from design to delivery: the good and the bad. Yet such programs are not entirely altruistic, they are also good business. An example is their Synchilla fleece, which is made from recycled soda bottles, which generated more than five million dollars of media interest for the company in 1994.

Yet not all oceans afford smooth sailing and often it is how a company manages controversy in delivering its core media message. One good example for Patagonia came in 1990 when conservative groups, in the US, boycotted Patagonia due to its support for the group Planned Parenthood. Rather than yield to the pressure, Patagonia upped the stakes and donated, in the name of the boycotter, $10 to Planned Parenthood for every picketer who showed up at one of its stores.

Having outlined some examples in the Patagonia portfolio, let us now turn to the quality of their marketing and ask, how ethical is it? Debbie Haski-Leventhal notes there are seven key aspects to ethical marketing: responsible consuming, honesty and integrity, privacy, social inclusiveness, lack of offensive images and language, packaging, ethical targeting and pricing ethics. When looking at examples of the Patagonia catalogue and advertisements, it seems clear they seek to live up to the seven ideals by demonstrating a clear commitment to inform customers, not just about Patagonia and its products, but also the broader environmental concerns at play.

In many ways this would be a good fit even if Patagonia did not display the deep commitment to CSV it does as any sports / adventure product supplier requires a clean environment for their customers to have a place to use their products. But in the case of Patagonia it is clear this is more than a convenient 'fit' for their business model as their HR practices of donating outdoor gear to conservation causes,' 'in-house' civil disobedience training training, provision of bail for employees who are arrested during expressions of non-violent activism for environmental causes, and the environmental internship programs, where participants are paid their regular salary for up to eight weeks to volunteer for nonprofit environmental organizations, all show a continuing commitment to honesty and integrity, social inclusiveness and ethical targeting.

Patagonia’s 'Common Threads Initiative' (http://www.patagonia.com/us/common-threads/) calls for responsible consuming while demonstrating ethical pricing. Finally, Patagonia’s overall approach to its marketing not only shows a commitment to privacy, but is also striking not for what it is, but for what it lacks: offensive images and language. In this way Patagonia demonstrates industry leading sustainable marketing by promoting causes, rather than corporates, by talking about the impact – not just the input, and by not being afraid to shine a light on the negative side effects of their business through their The Footprint Chronicles®.
Perhaps a key area of improvement is to do more work on understanding from where their materials come and how those materials are produced. Patagonia readily admit it is 'difficult for any company to make good raw-materials choices when its sources are not readily known,' yet their only solution is to buy recycled-content fabrics. While this is an improvement, it doesn’t address the original manufacture of the fabrics used in recycling. In other words, an unsustainable fabric model is needed as a precursor to the production of sustainable fabrics – which is something of a paradox. To that end, deeper knowledge of raw materials is needed and continued research into the production of materials which have an acceptable environmental impact and are consequently fully sustainable.

Making the Shift

The key difference between CSR and CSV is CSR only has a limited connection to the business while CSV is 'integral to a company’s profitability and competitive position.' By leveraging a reconstructivist approach, Patagonia are utilizing a Blue Ocean strategy to create not only new markets, but also new consumers for its products. Patagonia achieves this by being an environmentally friendly supplier of outdoor gear and manufacturing many of its garments with recycled material. Not only did Patagonia begin operation with a focus on the environmentally-friendly dimensions of its products, but it has persisted in this mode of operation demonstrating a firm can maintain its competitive advantage by being a first mover, by supporting its staff and by placing social and environmental responsibility at the heart of its operations.

The reduce, repair, reuse, and recycle initiative, launched in 2005, has been central to their attempts to reduce landfill waste by creating more durable products with a longer working life. What is most striking about this program, unlike many other corporate initiatives, is it requires a true partnership between Patagonia and its customers to reduce the overall environmental footprint of manufacturing products.  This partnership comes in the form of a mutual contract between the company and its customers to reduce waste through the repair, reuse and recycling of their apparel.

While the initiative offers potential benefits to the company, such as reaffirming why Patagonia products cost more than many of their competitors and through the possibility of attracting new customers who would be drawn to such an environmentally sensitive initiative, the inherent costs involved expos some tensions within the company. To begin, although the initiatives were extensions of existing services, it was estimated costs would rise by around $60,000 in the first year. There we also concerns a surge in customers swapping and repairing garments might limit additional sales opportunities and growth potential the company needed in its goal to increase profitability.  In addition, there would be increases in their inbound shipping expenses, due to the postage paid offer to customers, and their existing facilities for in-house repair were not staffed to a sufficient level to handle existing returns, let alone the anticipated surge in demand. In this context stores were being encouraged to offer replacement instead of repair to manage the wait time for customers. There were also the added R&D expenses inherent in the company’s goal of increasing recyclable products from 65% of range, in June 2010, to 90% of range by the spring of 2011.

However, for all of the concerns Rick Ridgeway, VP of Environmental Initiatives, stated that Patagonia was firm in its commitment to implementing 'Reduce, Repair, Reuse and Recycle' as the company’s financial history showed that 'making decisions in favor of environmental reasons always proved to be good business in subsequent years.' It also established Patagonia as an industry leader with other firms coming to Patagonia for advice on the use of pioneering technologies. While this puts pressure on Patagonia to constantly innovate, it means the company can continue its goal of reducing environmental harm. As Ridgeway emphasized: 'sustainability is a bullshit term unless you live in a cave. We’re never going to get down to zero environmental impact – if you think we’re making clothing and saving the planet, you’re wrong. There are no perfect solutions. We don’t want to externalize the harm that we’re producing, but continue to do our part in reducing it as much as possible.

Posted in: Leadership, Business, Digital, Long Reads