COPENHAGEN, Denmark — Patagonia CEO Ryan Gellert has been mulling a peculiar drawback for a high government at a billion-dollar model: Can a enterprise achieve success if it’s not rising?
Whereas it’s develop into modern for enterprise leaders to speak about “stakeholder capitalism” — the notion that companies ought to be oriented to serve society as an entire — shareholder supremacy stays a dominant precept within the overwhelming majority of boardrooms, that means corporations are primarily measured on how a lot cash they’ll return to traders and whether or not this quantity is growing yearly. For trend, that usually means promoting extra stuff to extra folks, extra typically.
This “extra is extra” mannequin has proved wildly profitable, spawning a multi-trillion-dollar {industry} led by a number of the world’s wealthiest households, from LVMH’s Arnaults to Zara-owner Inditex’s Ortegas. It’s additionally fueled extra consumption and the rise of an environmentally destructive system of overproduction that sucks up pure sources and spews out air pollution.
This has at all times been a supply of rigidity for Patagonia. For greater than half a century, the outerwear enterprise based by rock climber and environmentalist Yvon Chouinard has forged itself as a live-action case research in “acutely aware capitalism.” It’s acknowledged goal: to show corporations can steadiness revenue with function.
Gross sales that hit $1.5 billion in 2022 have enabled the enterprise to donate greater than $200 million over time by its One P.c for the Planet programme, which devotes one p.c of every 12 months’s gross sales to causes that shield and restore the setting. Chouinard took this to a brand new degree in 2022, when he made “earth” the company’s “only shareholder.” The enterprise is now practically wholly owned by a nonprofit whose mandate is to make use of any earnings not reinvested within the firm — some $50 million in 2022 — to guard the setting and struggle local weather change.
There’s a rigidity round development … the largest magic trick in enterprise [is figuring out how to] be impactful and ascendant whereas standing nonetheless.
That places Gellert, who turned chief government in September 2020, in command of working a enterprise that’s one thing of a paradox: Whereas its earnings are meant to protect and shield its greatest stakeholder, the planet, its technique of producing them — making and promoting extra stuff — do precisely the alternative.
“There’s a rigidity round development, and positively round development for development’s sake,” Gellert mentioned throughout a current interview in Copenhagen, the place he was resulting from attend the World Trend Summit, an annual {industry} convention targeted on sustainability. “The largest magic trick in enterprise [is figuring out how to] be impactful and ascendant whereas standing nonetheless.”
That doesn’t imply the corporate desires to shrink. Although this line of pondering flirts with a number of the concepts put ahead by the more and more stylish anti-capitalist degrowth motion, there’s no “let’s get smaller mandate,” Gellert hastened so as to add. However development, not less than as a operate of promoting extra new merchandise, is just not going to be on the high of the manager’s agenda.
The ‘Largest Magic Trick’ in Enterprise
Precisely how Gellert plans to steadiness these competing priorities continues to be just a little murky. “Resale is high of the checklist for me,” he mentioned. “At scale, I want to actually make it a central a part of the enterprise.”
That’s a daring wager on a fancy mannequin that has proved challenging to operate profitably and has but to show its environmental profit; the speedy rise of third-party and branded resale initiatives in recent times has to date performed nothing to decrease the manufacturing and consumption of latest merchandise. In some circles, it’s even been pitched as a strategy to entice first-time shoppers to a model and encourage them to make “funding” purchases they know they’ll later flip.
Patagonia’s resale programme, Worn Put on, has been round longer than most and has at all times been linked to the model’s long-standing messaging encouraging shoppers to purchase much less. It launched in 2013, with the addition of used clothes sections in choose shops. In 2014, the corporate invested in resale-as-a-service platform Trove, debuting its personal re-commerce providing three years later.
Immediately, it presents hundreds of pre-owned Patagonia fleeces, jackets and flannels at a neat low cost to new gear. Customers are incentivised to promote again their previous Patagonia merchandise for as much as 50 p.c of the retail value in retailer credit score, whereas customers on the corporate’s foremost web site get a immediate to browse used after they click on to purchase a brand new garment.
Not like restore, which Gellert described as a “full value centre” with “karmic worth,” the resale enterprise is worthwhile and rising. However the CEO acknowledged it’s nonetheless a “tiny” slice of Patagonia’s total enterprise. A Reuters report final 12 months pegged it at simply $5 million, or lower than 1 p.c of the corporate’s complete gross sales.
Gellert doesn’t need to be pinned down on precisely what quantity of the enterprise secondary gross sales may finally develop into, or when. The corporate mentioned it’s nonetheless a piece in progress.
“We’ve labored by the small issues,” mentioned Gellert. (These embody shifting the corporate’s cotton provide to natural and ratcheting up its use of recycled supplies and Fairtrade-certified suppliers). “We’re now on the greater issues. Restore was a daring step. Resale is the following frontier.”
Curbing Consumption
However even when Patagonia by no means made one other new product, a wholesale shift to secondhand would solely ever be a drop within the huge expanse of trend consumption. That’s why Gellert is as eager about what his firm can do to affect the best way folks store as he’s in altering the best way it operates.
“The only greatest query,” he mentioned, “is how does an organization within the client items house, that makes stuff folks need however don’t have to survive, affect consumption?”
That’s as tricky because it sounds.
Although the CEO mentioned the corporate is “not within the enterprise of telling folks to not purchase our stuff,” it has, the truth is, informed them to just do that. It famously took out a full-page advert in The New York Occasions for Black Friday in 2011, displaying a picture of one among its fleeces underneath the strapline “Don’t purchase this jacket.” The upshot: It offered extra jackets.
Final month it launched “The Shitthropocene,” a 45-minute mockumentary that was half instructional PSA, half advertising and marketing. The title was a tongue-in-cheek nod to the Anthropocene — a time period generally used to explain the period wherein people have had a major influence on the planet. The rise of quick trend and overconsumption, for his or her half, have resulted in an age “characterised by issues which can be shitty,” the movie’s narrator explains because it opens.
The humour, which took goal at Patagonia in addition to the {industry} at massive, was meant to deal with a steadily cited drawback with manufacturers’ sustainability messaging: It’s typically boring, preachy and forgettable. However for some pundits, the movie landed flat, studying like performative and promotional advantage signalling.
“There was loads of criticism,” Gellert acknowledged. What reduce deepest was the sense some viewers took away that Patagonia was positioning itself above the problems plaguing the remainder of the {industry}. In Gellert’s view, the corporate’s by no means tried to counsel it doesn’t get issues mistaken. It’s simply always making an attempt to get extra proper.
The chief’s favorite saying — one he’s quoted typically sufficient to generate eye rolls at any time when it will get repeated internally — is that the reward in life for fixing an issue is a much bigger drawback.
The Patagonia Paradox
A number of the issues dealing with Patagonia aren’t simply massive, they’re seemingly intractable.
The corporate campaigns towards oil pipelines whereas making jackets out of plastic; its anti-consumption messaging typically ends in extra gross sales; and its path to new enterprise fashions is unsure.
It has been vocally essential of massive companies that advocate for extra climate-friendly insurance policies whereas remaining members of foyer teams which can be campaigning towards them. This is a matter the corporate has largely managed to sidestep itself, as a result of till just lately trend has confronted so little regulatory scrutiny. Nevertheless it’s changing into a extra dwell consideration. Patagonia sits on the American Attire and Footwear Affiliation’s working group on the New York Trend Act, a landmark piece of fashion-focused sustainability regulation that the corporate has publicly endorsed, however that the AAFA says pushes too far, too fast.
The only greatest influence we’ve had … is modelling a extra progressive model of a enterprise and proving it may be ascendant. I feel that’s made just a little dent.
Navigating such contradictions is changing into more and more complicated and more and more fraught. Options, resembling exist, are invariably imperfect in a world that’s ever extra polarised. More and more savvy shoppers are additionally extra essential of sustainability messaging they view as inauthentic or missing credibility. Within the US specifically, company local weather motion has develop into a political difficulty, with Republican politicians taking goal at so-called “woke capitalism” — a motion for which Patagonia is likely one of the most outstanding poster kids — forward of elections in November.
“I don’t suppose folks might be too cynical about what they hear from enterprise,” Gellert mentioned, acknowledging that every one the efforts Patagonia makes to align its values and its enterprise operations include trade-offs and new challenges.
The corporate has mentioned it stays supportive of The New York Trend Act however shares a number of the AAFA’s considerations concerning the invoice to make sure consistency in environmental reporting necessities. How that shakes out is more likely to develop into clearer subsequent 12 months, because the New York legislative session led to June with the proposed laws nonetheless pending. A compromise on the invoice wouldn’t essentially be a “divorce-level dialog,” Gellert mentioned.
Relating to plastic, the corporate is aiming to solely use recycled polyester by subsequent 12 months, a transfer that’s extra of an enchancment than an answer. At current, most recycled polyester on this planet comes from plastic bottles, which suggests it does nothing to deal with textile waste and as an alternative turns gadgets that could possibly be recycled a number of instances into materials which can be more likely to wind up in landfill. Patagonia is eyeing alternatives in textile-to-textile recycling, however improvements on this house have but to achieve industrial scale. It’s additionally invested in analysis to deal with microplastic air pollution. The tiny plastic particles that shed from most of the artificial materials Patagonia and different trend manufacturers use have been discovered in every single place, however characterize yet one more problem with out a clear, passable resolution.
Finally it comes all the way down to high quality and sturdiness for Gellert. “It’s too simplistic an argument that every one natural is sweet and all plastic is unhealthy; we’re a technical out of doors attire firm and we need to construct the very best product,” he mentioned. “How can we steadiness that? It’s exhausting to think about a world the place synthetics should not part of what we do and in addition one the place virgin synthetics are any a part of it.”
A brisker difficulty is the industry-wide downturn buffeting Patagonia’s backside line. Its final monetary 12 months, which led to April, was “tough” Gellert mentioned. However with no banks or monetary traders respiration down his neck, the CEO mentioned he has the liberty to suppose extra long-term than most opponents. He’s trimmed the corporate’s advertising and marketing price range and slowed hiring to assist navigate the sluggish setting, quite than pulling again on sustainability initiatives.
Over time, these have persistently put Patagonia on the forefront of efforts to craft a extra climate-friendly type of capitalism. “[The company] is an genuine sustainability paragon,” mentioned Ken Pucker, professor of the apply on the Fletcher College at Tufts College. “On the identical time, any enterprise that’s a a number of of its measurement a decade in the past goes to have a nastier environmental footprint.”
Maybe the simplest strategy to perceive Patagonia’s place is to take its mission assertion on face worth. The corporate is “in enterprise to save lots of the planet.” It’s acutely aware capitalism tinged with Realpolitik; not revenue at any value, however there should nonetheless be revenue.
“The only greatest influence we’ve had … is modelling a extra progressive model of a enterprise and proving it may be ascendant,” mentioned Gellert. “I feel that’s made just a little dent.”
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