Can Patagonia be a “Very Strong Sustainability” company?
1 Introduction
The apparel industry has a huge impact on the earth. Clothing production accounts for 10% of global carbon emissions (Chang, 2017) and 93 billion cubic meters of water is used every year in the fashion industry to meet the consumption needs of five million people (World Bank Group, 2019).
The underpinning problem comes from how fast the clothing life cycle is, called fast fashion. Fast fashion trends lead worldwide by providing low-cost clothing with new designs every week and accelerating consumption. This consumerism exacerbates the fast-growing rates of water and natural resource for apparel products and waste leading to an environmental crisis (Renner, 2012).
Corporate sustainability plays a huge role in this crisis. Landrum (2018) uses the term “Sustainability Spectrum” to describe a new unified model of stage of corporate sustainability, “very weak, weak, strong and very strong”, and discovers that the current majority of corporate sustainability models fall into ‘weak sustainability, which is based on neoclassical economic value principles and market-based.
This paper examined Patagonia, Inc., (hereafter Patagonia) sustainability actions through their website, journal, and web-based article and absorb the sustainable concept and methodology including life cycle perspective, B Corp, CSV, and circular business model to propose how Patagonia can become “Strong sustainability” company, which is a medium for creating new economic model (Landrum, 2018).
2 Critically assess the factors which prompted the Patagonia to adopt sustainable practices
Patagonia is a worldwide outdoor-clothing company for sports including surfing, climbing, fly fishing, skiing and trail running. Founded in 1973 in Ventura, California, the company remains privately held. Products are sold in over 40 countries through our stores, retailers and online, and its supply chain of finished goods factories and material suppliers spans across 25 countries.
Although CSR and CSV become the orthodox approach for Multi-National Companies (MNCs) as imperatives for sustainability business model, Patagonia takes a different approach. “Earth is now our only shareholder.” is a messages from its founder, Yvon Chouinard (hereafter, Chouinard). Patagonia changed the company’s purpose to: “We’re in business to save our home planet” in 2018 (Patagonia). In addition, Patagonia announced founder’s family has transferred all ownership to ‘social entities’; Patagonia Purpose Trust and the Holdfast Collective (Patagonia, 2022b). These two entities now own all the stock of the company and have authority to control and seek their purpose without being distorted by other shareholders. They also pledged 1% of sales to the preservation and restoration of the natural environment since 1985 (Patagonia, no date-a). The illustration of “Patagonia Purpose Trust (Figure 1)” indicates that fulfill a level of satisfaction for its employees, customers and its community by making money now and into the future (Matthew, 2022).
Patagonia took the anti-consumption campaign with the message ‘Don’t Buy This Jacket.’ during Black Friday in 2011, literally urging consumers to think their actual needs before purchasing. However, it was controversial as this campaign was an advertisement on newspapers and it could grab public attention and thereby raise sales (Karpova at all, 2016). Whether this anti-consumption activity was effective or not, Patagonia’s creative sustainable strategy attracts attention and becomes a topic of discussion.
In addition to this philanthropic approach, Patagonia also tackles the internal sustainability issues including, but not limited to, recycled material, organic cotton growing, regenerative organic practice, and care for workers among their value chain (Patagonia, no date-b).
Superficial information is disclosed on Patagonia’s website, but it shall be examined that Patagonia is truly contributing to sustainable future. Three product life cycle stages of apparel industry (Figure 2) are used as a model to classify the issues referring to the Textile and clothing production life cycle (Muthu, 2015). This product life cycle divided into upstream, manufacturing, and downstream. Patagonia sells clothes as well as outdoor gear, and this framework is applicable to explore the detail which life cycle stage needs improvement and doing well.
The product life-cycle stage Material sustainability issue Upstream ü Water ü Energy ü Chemicals ü Labor force Manufacturing ü Raw material operation ü Textile production ü Waste management Downstream ü Retailing/distribution on the end user ü Waste emission ü Recycle/Reuse/ ü Product life span
3 Analyse the sustainability practices of the Patagonia
Patagonia starts the story with how they can change clothes are made; recycling to lower emissions, organic agricultural materials including cotton, care for workers, and product life span (Patagonia, Undated). It is evidential that the 2022 Fashion Transparency Index ranked Patagonia 44%, meaning that Patagonia is not top tier in this industry for sharing information (Fashion Revolution CIC, 2022). However, Patagonia is a certified “BCorp”, meaning that Patagonia is certified by the not‐for‐profit B Lab to meet rigorous standards in relation to environmental and social performance, accountability, and transparency (Long et al., 2018). Patagonia’s overall B Impact score of B Corp is 151.4 while the median score for an ordinary business who complete the assessment is currently 50.9. Patagonia is also entitled the “Best For The World: Community and Environment in 2022” (B Lab).
Rattalino (2018) researched Patagonia as case study from sustainability-driven innovation and circularity perspective. The case study confirms the importance of business model and products for sustainable future and Patagonia’s experience paved the path forward so that others will follow the practice of circularity. Given the information found on Patagonia’s website used in the case study, it showed that circular business-model initiatives were facilitated by Patagonia: circular supplies, resource recovery and product-life extension and sustaining circular initiatives. This research identified five advantages of Patagonia’s circularity. Most notably, unique advantage apart from environmental management system, is that Patagonia understand customers’ willingness to pay for sustainable products or services for durable and sustainable but costly. Another unique advantage is that top management can always lead any new initiatives in person owing to shareholder scheme. Unlike other MNCs, Patagonia is a forementioned private company, and it can protect against capitalism’s flaws through financial shareholders and be able to take action flexibly.
Patagonia took unique shareholder systems that max profits go straight into social action through new entities without intervention. In this sense, Patagonia cannot be classified as profit-driven company, but purpose-driven or Social Enterprise seeking the pursuit of social goals with the adaptation of some form of commercial activity (Doherty et al., 2014).
Not that this is anything new, in 1986, Patagonia became the first major clothing brand to donate 10% of profits to grassroots eco-activists. In 2002, Chouinard formed “1% for the Planet” to encourage other companies to make the same pledge; it now has 4,800 business members in 60 countries. “This is not philanthropy,” says Chouinard. “It’s paying rent for our use of the planet” (Toby, 2022). 1% for the Planet alliance is one of a good example to be a private company, and his pioneered presence also fascinate other companies such as Walmart, Levi Strauss, Nike, Gap, and Adidas, are all following the example set by Patagonia, and they have joined forces in the Sustainable Apparel Coalition (Rattalino, 2018).
Patagonia also strongly committed to circular business model from material procurement to product life longevity. Cotton is major raw material for making clothing and huge impact for water and pesticide usage causing human respiratory disease and ecosystem damage. Patagonia has taken actions in 1994 that all cotton garments production are used 100% organic cotton (Rattalino, 2018). For other materials, clothing made with recycled plastic bottles and down sweater made from discarded fishing nets are Patagonia’s strengths to produce more sustainable clothing (Lucas, 2022). This elaborated material procurement attributed to expensive prices. However, the consumers who have the same compassion will still buy these products and eventually this Patagonia’s business model can last.
Patagonia also launched the “Worn Wear” initiative, which is designed to develop a partnership with customers and offers tools to enable them to keep their clothes longer by trading in and buying used Patagonia gear (Rattalino, 2018). Patagonia put another ‘R’, ‘Repair’ into existing 3Rs: Reduce, Reuse and Recycle so that users can reuse clothes longer and buy the second-hand (Bocken et al., 2016).
Weakness of Patagonia’s sustainability strategy shall be also noted here. First, the ad, “Don’t Buy this Jacket”, was criticized because the company was trying to grab public attention and thereby raise sales (Hwang et al., 2016). This unintentional and perverted message might change how someone looks at Patagonia as ‘Green Washing’. Secondly, weakness is that two sides of the same coin: Patagonia is privately held, that is subject to financial capital limitation. No matter how much Patagonia conducts business activities that are good for the environment and society, the scale of these activities can only be done within the scope of profit from product sales. This also attributes to third weakness. Patagonia’s product or business itself does not consider the enhancement of SDGs. Patagonia sells outdoor entertainment products, which are not prerequisites for human-life, and conducts social contribution activities based on profits as traditional charity. Although Patagonia’s main market is niche outdoor consumer, addressing societal needs and challenge with a business model, or …CSV shall be incorporated (Michael and Mark, 2011). CSV is the idea of Michel Porter and Mark Kramer, addressing the societal needs and challenges with a business model that create social and economic value by meeting societal needs through products (Michael and Mark, 2011).
4 Critically evaluate the potential for the Patagonia to contribute to a sustainable future
Outdoor sports that make use of nature, such as surfing and snowboarding, are inextricably linked to the nature environment. Therefore, there are many parts that resonate with outdoor activities based on the nature of the earth because they have an affinity with sustainability. Academic literatures also elaborate that outdoor experiences and education play a key role to transform the awareness of people towards understanding of sustainability (Prince, 2017; Ross et al., 2014; Hill, 2013). In this regard, people with a strong outdoor orientation may be able to change their mindset through Patagonia's philanthropy and/or products, but the scale is too small. The expansion of outdoor sports, and by extension, the transformation of awareness that leads to environmental education, has great potential to bring about social change. In that respect, Patagonia has the power to change consumer awareness and hence can use that power to take on the challenge of becoming a pioneer that encourages transformation. Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) also proselytize transformative change…to economic structures and profound shifts in society (IPBES, 2021). Transforming business model is critical, but also changing the mindset of consumers profoundly is paramount.
If this perspective that transformative promotions from outdoor education and activities become the core value for Patagonia, in other words, ‘Change the world from outdoor sport’, one weakness of Patagonia - ‘charity from their profit’ - could change to CSV. The finding shows the hypothesis Patagonia’s CSV like below.
The world can be changed through the interaction of outdoor activities to enable people to think towards a sustainable world.
Outdoor apparel and gear product are essential for outdoor activities.
Patagonia makes the core concept and business model to expand the market of outdoor activities.
Product sales of Patagonia’s products could be KPIs for expanding sustainable awareness globally.
Profit also goes to charity foundations through their current shareholder's system.
This conceptual approach corresponds with ‘Outside-in’ perspective that true sustainable business can contribute effectively to solving the global challenges (Dyllick and Muff, 2016).
How to guide Patagonia to achieve a sustainable business model?
Building sustainable business model are widely processing in both academic and practical field interdisciplinary. However, understanding of sustainable business models and the options available for innovation for sustainability seems limited at present (Bocken et al., 2016).
Bocken et al., (2016) apply a business model with three main elements: the value proposition, value creation and delivery and value capture; 1) intending product/service, customer segments and relationship, 2) key activities, resources, channels, partners, technology, 3) cost structure & revenue management, respectively.
‘Repurpose for society/environment’ is one of the sustainable business model architypes, and it is consistent with that the potential and challenges for Patagonia’s sustainable business model proposition.
This archetype intends prioritizing delivery of sustainable benefits rather than economic profit. Likewise, Patagonia’s shareholder system is not limited by financial investors at present, thus decision making on this direction would be relatively flexible than traditional companies.
‘Social enterprises’ is a good example for this archetype. ‘Social enterprise’ is alternative solution, in place of typical business organization, that trade for a social and/or environmental purpose (Austin et al., 2012). ‘Hybrid’ business model is also alternative solution proposed by Bocken et al., for this business model architype, one entity remains as a traditional profit-driven and another operates as not-for-profit enterprise with using the profit earned by the entity. Even though the shortcoming of the ‘Hybrid’ business model does not embed sustainability into the core concept of the primary business, this could be incorporated within the core concept by hypothesis Patagonia’s CSV which is proposed in this paper.
Patagonia’s progressive anti-consumption campaign is frequently used as a particular example in both academic and practical field (Varley et al., 2018; Rattalino, 2018; Hwang et al., 2016; J.B. MacKinnon, 2015).
“Green marketing” is another key to leading sustainable future for Patagonia, and it has a positive effect on generating citizens who seek sustainable lifestyles and sustainable change, and Patagonia’s aforementioned “Don’t Buy this Jacket” inspired the change in terms of citizen behaviour.
“Green marketing” is promotional activities that are increasingly being influenced by changes in consumer attitudes towards the environment and reflect a firm’s commitment to sustainability (Kopnina and Blewitt, 2018).
Based on the green marketing theory of Kopnina and Blewitt (2018), Patagonia must have confidence that what they are doing is not green-wash and ponder how Patagonia and consumers together reshape brands and lifestyles through their responsible green marketing.
Based on the information, Patagonia’s sustainable business model are made as follow.
Table 2 Conceptual business model framework. Adapted from Bocken et al. (2016)
| Value proposition · Outdoor products · Sustainable consumables with long life span · Charity program outcome | Value creation & delivery · Consumer education by green marketing · ‘Hybrid’ business model, that profits go to charity. | Value capture · Reducing waste: ‘Worn wear’ program · Use waste to create the products, and reduce virgin materials use | | --- | --- | --- |
5. Conclusion
The apparel industry greatly impacts ecological footprint and exacerbates consumerism by fast-fashion trend. Corporations have huge impact and responsibility on this and must transform the sustainable business model from weak to strong.
Although the reliability of the information is somewhat limited, Patagonia's efforts are advanced according to external evaluation, BCorp.
Patagonia's shareholder system is unique, and it's worth noting how the ‘hybrid’ organization will commit to it in the sustainable future. However, sustainable future could not be achieved by a mere company. Individuals need change their awareness of the environment from the current consuming practices to services instead of products, and Individuals have agency to evolve the macro pattern emerge from micro behaviors and interaction (Velenturf and Purnell, 2021; Foxon, 2011). Patagonia's sustainable business model can be the first step towards a sustainable future based on CSV with the aim of changing this consumer consciousness.
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