Company Of
The Month

Patagonia

History

Patagonia, Inc. is an American company that sells outdoor clothing. The company, based in Ventura, California, was founded when Yvon Chouinard, a young rock climber, began making and selling mountain climbing gear in 1957 through his company Chouinard Equipment. He began designing and selling Patagonia clothing for climbers in 1973. Through the years, Patagonia expanded its product line to include clothing designed for other sports and activities, such as surfing and fly fishing. The company initially used ordinary cotton, but switched to the exclusive use of organic cotton after discovering the environmental impact of the chemicals used to grow conventional cotton.

This switch to organic cotton created a sense of environmental responsibility that became an integral aspect to Patagonia’s core business. Patagonia experienced first-hand what a challenge it is for middle market and small companies to influence the supply chain; however, the company also demonstrated determination—that when a company discovers harm in its supply chain, the pursuit of a solution leads to product innovation. Today, Patagonia is an inventive company known for its dedication to making an environmental difference in the apparel industry. We spoke with Vincent Stanley, Director of Philosophy, to gain an insight on Patagonia’s sustainably built success.

Culture & Values

Patagonia consistently innovates for the betterment of the community and the environment. In April 2017, it created a website where Patagonia customers can return their used merchandise for new merchandise credits. This used merchandise is cleaned and repaired and sold on its “Worn Wear” website at a discounted price. This website encompasses Patagonia’s goal of minimizing the company’s impact on the environment. Patagonia embraces the idea of a “circular economy”: the belief that participating in a regenerative system of utilizing long-lasting designs and repairs can reduce waste and emissions and help establish a sustainable world. Worn Wear embodies the circular economy concept.

A program such as Worn Wear would not be possible without products that are built to last. While Patagonia at times has been criticized for high prices for its clothing, the raw materials are of the highest quality and built to last. For example, a pullover jacket is typically designed and produced to last at least 10 years or more.

Stanley described the modern-day attachment to items: “In today’s society, the most meaningful moment you have with an item is when you purchase it. We need to change our relationship we have to ‘things’. At Patagonia, the goal is for people to make memories with these clothing items and extend product satisfaction beyond the initial purchase.”

A commitment to quality also extends to its employees. In addition to providing safe and comfortable working conditions, employees are guaranteed on-site child care. Currently, the company operates three schools within their campus. Efforts like these represent Patagonia’s commitment to supporting families to ensure a happier workplace environment.

B Corporation

One way Patagonia measures its dedication to supporting its employees is through its status as a B Corporation: a company that consistently assesses themselves on a holistic level, not just finances. B Corps are for-profit companies certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. Today, there is a growing community of more than 2,100 Certified B Corps from 50 countries and over 130 industries working together to redefine success in business. Patagonia became a B Corp in 2011. The B Corp movement is only 10 years old, yet it proves to be a well-rounded way to measure a company because B Corp startups have higher success rates than non B Corp startups. The process involves an initial assessment, where companies answer a series of questions about the business, which are also weighted by industry, size, and geography.

Stanley states: “Becoming a B Corp makes a difference in how companies govern themselves, treat their employees, community and environment, and how quickly they learn and implement better practices. They do the right thing to strengthen the business.”

The B Corp influence is reflected by the investments Patagonia has made through its Tin Shed fund, which all have triple bottom-line goals for financial, social and environmental health. In addition, since 1985, Patagonia has pledged 1% of sales to the preservation and restoration of the natural environment. Patagonia’s efforts through maintaining B Corp status represent their desire to remain true to their purpose of providing apparel while making a positive impact on the environment.

Middle Market Challenges

Like many other middle market companies, Patagonia continually assesses its ability to stay true to company vales while experiencing growth. While business growth is considered to be positive, many companies face different challenges that must be overcome to deliver long-term success. Systems and processes must change to support expansion. Many companies struggle with adding employees and maintaining a strong company culture. Patagonia strives to avoid artificially stimulated growth, and advises other middle market companies to do the same. At Patagonia, growth is secondary, yet virtuous—the bigger the company grows, the more money they donate. Further, Stanley advises entrepreneurs to become a B Corp or 1% for the Planet organization early in the life of a company. It’s easier to establish a business culture that cares for sustainability and the environment immediately, rather than to dramatically alter the purpose of the business five years down the line. This clarifies the business’s core values immediately so investors and employees share a similar mindset from the beginning.

Conclusion

Patagonia is reflective of a growing but impactful set of companies known as B Corps. Through their culture, commitment to the community and environment, and employees, this business demonstrates a holistic approach to success in the middle market.