“Leading an examined life is a pain in the ass,” Yvon Chouinard, founder of outdoor clothing company Patagonia, cautioned HBS students.
The renowned climber, businessman and environmentalist described Patagonia’s journey from an outdoor clothing start-up, growing 50 percent per year, to a more considered, mature company growing at a “natural growth rate.” The company’s rapid growth collided with the recession of the early 1990s when the company’s bankers called in their debt, nearly crippling Patagonia.
The company’s near-extinction prompted Chouinard and his closest associates to take a long trip through the wilderness of Patagonia to redefine the mission of the company. They decided to focus Patagonia on “making the best product, causing no unnecessary harm, and using business to inspire and implement solutions to the environmental crisis.” As such, the company only “makes more when customers want it” and only mails catalogs to people who request them.
Chouinard described his eye-opening personal examination of the industrial cotton- supply chain saying, “Most of the damage to the planet comes from ignorance.” He took tours of cotton fields around the world, viewing aerial sights of the “killing fields” where nothing could survive because of the heavy pesticide residue. Cotton comprises 3 percent of global cropland acreage, but 25 percent of global pesticide use. Chouinard described DDT (long banned in the U.S.), arsenic, and defoliants used in cotton production that Patagonia sourced globally. Chouinard said, “I didn’t want to be in business if it meant making killing fields.”
Switching to organic cotton was not easy for Patagonia. The company had to create its supply chain virtually from scratch. Patagonia has not used industrial cotton since 1996. With such bold moves as the switch to organic cotton, the use of plastic bottles as raw materials for polar fleeces, and the recent introduction of a recycling program for the company’s Capilener and Nylon 6r garments, Patagonia is holding its lead on breakthrough innovation and high quality. This quality means more expensive clothes and slower growth than its rivals, which fulfills Chouinard’s goal of having a “small, great company.” He noted, “Every time I made a decision because it was the right thing to do, I’ve ended up making actually more money.”
Patagonia could be worth hundreds of millions of dollars as a public company, but the Chouinards are loath to give up control of the company and become beholden to shareholders who may disagree with the vision for the company.
“Overall it was extremely interesting to see 100 HBS students listen carefully to a tremendously successful entrepreneur telling them the opposite of what we are being taught here everyday,” said Lionel Bony (OI) describing business concepts such as “natural growth rate” and “hiring friends.” Chouinard also urged: “Let your employees go surfing;” “Do what’s right, and it will be good for the company;'” “Think about what your company will be 100 years from now;” “Don’t take on debt;” and “Know what goes inside your product.” “‘Give one percent of sales to great causes’ would be heresy at HBS, and yet it worked wonders for Patagonia,” Bony concluded.