It was standing room only in Aldrich 8 as Michael Crooke, President & CEO of Patagonia, addressed a group of approximately 150 students during the latest installment of The Sustainable Development Society’s speaker series.
Crooke spoke about what he calls “The Re-evolution of Business: Strategies for the 21st Century.” In his view, the traditional approach to doing business, focusing on quarterly earnings and GAAP, is not sustainable. The failure to account for negative externalities, such as environmental degradation and social ills, creates an unrealistic view of economic performance and is bound to lead to an environmental crisis if something does not change. Crooke proposes an alternative “ecosystem model” for sustainability. Just as the elements of an ecosystem must work in harmony, a sustainable business model relies on the synergies between the environmental, social, and financial elements of a business. This synchronization creates a virtuous cycle: the company’s environmental and social commitment attracts loyal customers and employees, which improves the financial performance of the firm, which facilitates further commitment, and so on. Conversely, if one of the three elements is ignored, the entire system can fall apart.
The three elements of sustainability are clearly intact at Patagonia. Environmental sensitivity has been a source of differentiation for Patagonia ever since its founding. Outdoor enthusiast and expert climber Yvon Chouinard founded the company in the 1970’s as a climbing equipment catalog specializing in “climbing clean”, or minimizing environmental impact. The environmental message resonated with customers then as it does now, and enabled Patagonia to become a premium retailer and wholesaler of high-end outdoor gear and apparel. The company’s continued commitment to the environment is best illustrated by its Purpose Statement, which reads: “Patagonia exists as a business to inspire and implement solutions to the environmental crisis.”
Innovative fabric fibers are just one example of how Patagonia is “implementing solutions” for the environment. In 1993, Patagonia was the first company of its kind to adopt a new fleece material manufactured from recycled soda bottles. By converting to Post-Consumer Recycled (PCR(r)) fleece, the company has diverted 40 million soda bottles from landfills and saved 42 million gallons of oil. Recognizing the intensive use of pesticides in cotton farming, Patagonia pioneered the large-scale use of organic cotton in its sportswear apparel. In fact, the company was so far ahead of the curve that it had to vertically integrate in order to attain a large-scale supply. Within a single season, they converted their entire sportswear line to organic cotton, and blazed the path for other companies to follow. According to Crooke, Nike is poised to surpass Patagonia as the world’s #1 consumer of organic cotton.
“Green” buildings are another manifestation of Patagonia’s commitment to the environment. The company employs the latest sustainable building techniques, such as straw bale construction, to minimize environmental impact. The main distribution center in Reno, Nevada, which was built using recycled materials, is solar powered and uses innovative technology to channel the sun’s rays for interior lighting. Its 13 buildings in California are wind powered. With a goal of reducing its greenhouse gas emissions by five percent per year, Patagonia is holding itself to a higher standard than the Kyoto Protocol.
Patagonia’s work with environmental non-profits is another component of its environmental mission. Through its self-imposed “Earth Tax”, Patagonia contributes one percent of sales or 10% of pre-tax profits (whichever is greater) to environmental grassroots organizations. In addition to financial support, the company sponsors a four-day training program for executives of environmental organizations to share best practices and develop new strategies. Employees are encouraged to take up to two months of paid leave to participate in the Patagonia Environmental Internship program, in which employees join the environmental organization of their choice as a full or part-time employee. In 2000 alone, 38 Patagonia employees spent 688 days in the field.
In keeping with Crooke’s “ecosystem model,” Patagonia gives equal attention to the social and financial elements of the business. Flexible work schedules and on-site day care have made Patagonia a perennial member of the Working Mother’s list of family-friendly companies. The company was also included in Fortune’s list of The Best Companies to Work For in 1999, 2000, and 2001. From a financial perspective, the company turns a healthy profit and currently boasts $225 million in annual sales, 1,000 employees, 31 retail stores, and 700 wholesale accounts.
Crooke concluded his presentation by pointing out the powerful synergies between authentic social and environmental commitment and financial success. He explained that by harnessing the passion of employees and customers, the ecosystem model creates “flow” – that elusive feeling of effortless ease that we get when we are doing something we love. An avid sportsman, Crooke compared flow to “the feeling that comes when you’re doing your sport… or when you’re doing business for more than just the bottom line.”