At Patagonia a view towards social outcomes, rather than charitable giving, drives bottom line results

YvonChouinard_DoGoDoSomething-700x418A legendary climber, surfer, entrepreneur and environmentalist, the story of Yvon Chouinard, founder of Patagonia, starts with the design, manufacturing, and distribution of rock-climbing equipment in the late 1950s.

By 1964, he produced his first mail order catalogue and by the end of the 1980s had built a very successful outdoor apparel company.

In the early 1990s however, after years of overambitious growth, the company was in turmoil. Chouinard recounts in a 2012 Wall Street Journal article that credit was cut off and the company was forced to make its first ever layoffs of 120 employees — one-fifth of its workforce.

Chouinard began to wonder whether he should quit. He went to a famed consultant who recommended he sell Patagonia for US$100-million and use the proceeds to do environmental good. “I seriously considered it,” Chouinard says.

“But I’d made the same mistakes every other company makes. I decided the best thing I could do was to get profitable again, live a more examined corporate life and influence other companies to do the same.”

And so he did.

Patagonia is now one of the leading environmentally responsible companies on the planet, with revenue topping US$500-million a year.

Led by Rose Marcario, who recently came on as chief executive, and marketing guru Joy Howard, the company continues to draw in an extraordinary team of passionate “cultural activists.”

On its ascent to success, Patagonia has made (and continues to make) some counter intuitive moves to drive the business forward. Actions most companies would never dream of taking because they are so counter to common business practice, have been wildly successful for Patagonia because at their core they embody the idea of “profitable good,” namely, embracing profit and purpose to drive a better bottom line.

Last week, I had the chance to chat with Joy Howard, executive vice-president of marketing for Patagonia. Here’s what I discovered:

Business is a solution to the environmental crisis There aren’t many apparel companies whose mission statement includes “using business to inspire and implement solutions to the environmental crisis” but Patagonia has baked it into its core DNA. The company values storytelling, using a long-format film like “DamNation”  to engage a loyal customer base on issues of environmental degradation to educate, build evangelists and sell their products. (Fly-fishing nets anyone?)

Give away your R&D to competitors Patagonia is a global leader in supply chain responsibility, ensuring its products are produced under safe, fair, legal and humane working conditions. From a line of fair trade certified clothing (one of the first) to moving to 100% non-live-plucked non-force-fed traceable down, the company leads in sustainability.

But what stood out for me was the counterintuitive notion of giving its technology and know-how to its competitors, be it about the farming of organic cotton or advice to Walmart on reducing packaging and water use in its supply chains.

Encourage your customers to buy less Deep in Patagonia’s embrace of profitable good is the idea people should think about consumption and its impact.

patagonia don't buyThe company created the Common Threads Partnership,to encourage people to keep their stuff out of landfills by pledging to buy only what they need, repair what breaks, reuse what they no longer need and recycle everything else.

Its Worn Wear campaign encouraged customers last Black Friday to embrace the clothes they already own rather than buy new ones. As part of this campaign, Patagonia hosted worn wear parties and launched a short film on the subject. The results were staggering.

While industry-wide retail sales on Black Friday (including the Thursday) rose 2.3% from the previous year, Patagonia’s direct Black Friday sales rose 42%. Online the company saw a 61% increase in consumer activity and the campaign generated more than half a billion earned media impressions.

Start new business lines to spur the right actions Patagonia recently launched Provisions, starting with a line of salmon sold in all its stores, to show the fishing industry how to properly farm salmon.

It also moved into venture capital, establishing “20 Million & Change” to make strategic investments in startups that embody its values and are working to improve the environment through business.

Patagonia is a pioneer in this space, led by a founder who once stated “I never even wanted to be in business but I hang on to Patagonia because it’s my resource to do something good. It’s a way to demonstrate that corporations can lead examined lives.”

Patagonia is a case in point that well-identified social outcomes and impact (rather than charitable giving) can drive bottom line results.

And as Ms. Howard reminded me, purpose has the added benefit of enabling risk-taking in business because the cause drives courage and conviction.

This article was originally published in the National Post
Phillip Haid is co-founder and chief executive of PUBLIC, a cause marketing agency and innovation lab designed to create large-scale social impact through the merger of profit and purpose. You can follow Phillip on twitter by clicking here @philhaid