How Patagonia Continues to Operate As a Model of Responsible Capitalism
Aaron Gilbreath How serious are you about saving the planet? Many marketing types say that activism is the new hot advertising strategy, but some businesses actually believe in the philosophies they espouse, like Patagonia. Founded in 1973, the California-based company has always aimed to balance responsible production with environmental activism, by funding environmental causes, refining its business model and manufacturing practices, and empowering like-minds. With the Trump administration’s move to dismantle environmental protections on public land and climate change, Patagonia’s staff believes that too many companies in the outdoor industry have been too passive for too long, and the time has come to spend more company profits fighting the political forces that not only threaten America, but humanity’s future. At Outside, Abe Streep examines the ways Patagonia reaches consumers, manages its factories, thinks of its role in a revolution, and urges other businesses to step up. With power and influence comes great responsibility, which puts brands in the position to influence social good. Interestingly, this socially responsible model has quadrupled Patagonia’s profits during the last seven years. The question is: are those other companies committed to long-term political activism?
For decades, Patagonia sought to demonstrate that profitability and environmentalism can go hand in hand—to show a better way by, for example, encouraging fair-trade practices in foreign factories. The company advised Walmart, helping the retail behemoth clean up its supply chain, and worked with Nike to create the Textile Exchange, a nonprofit that encourages more sustainable practices in the apparel industry. Chouinard now believes that he was mistaken in trying to influence publicly traded companies. “I was pretty naive thinking you could do that,” he told me.
Marcario presented an alternative: grow Patagonia into a much bigger brand so that everything it did would have greater impact. She was uniquely qualified to make this argument. In her youth, she was an outspoken progressive activist, arrested during protests on issues like LGBT rights, AIDS, and women’s health. “She understands the need for revolution,” Chouinard has said. But she also understands business. Upon taking the CFO job, she streamlined distribution and shipping, installed industry-standard software, and focused on improving e-commerce. “Doing things that, you know, like, retailers do,” she laughs. During her first year, in 2008, the global economy crashed, but Patagonia—and much of the outdoor industry—didn’t: the company experienced growth in the high single digits. Casey Sheahan, Patagonia’s CEO at the time, told me that this was due to people “aligning themselves tribally” at a time of strife. It was a hint of the opportunity that would come with the rise of Trump.
Sheahan also told me that, at the time he left Patagonia, more than 50 percent of the revenue came from direct-to-consumer business via Patagonia’s stores and e-commerce. He suspects that the percentage is bigger today. (The company wouldn’t confirm or deny this.) Selling directly to a consumer, rather than through a third-party retailer like Backcountry.com or REI, increases both revenue and influence. According to Joe Flannery, a veteran outdoor-industry marketer and senior VP of technical apparel for Newell Brands, which owns Marmot and Coleman, Patagonia’s direct-to-consumer sales “represents one of the most powerful mechanisms of any brand. When you have that direct interaction, that means the consumer is digesting what you’re saying.”
