SELL LESS: A SUSTAINABLE STRATEGY?
How Patagonia has shifted from minimizing its environmental impact to improving how customers consume
By IMD Professor Francisco Szekely and Zahir Dossa Ph.D. - March 2015
To become more sustainable, many companies try to curb emissions and eliminate waste to reduce their carbon footprint. However, there are other strategies that firms can adopt to become more sustainable, including increasing profitability, changing their business model, challenging the customer, and even selling less. Patagonia, an outdoor clothing and gear company, embraced all these strategies to become a sustainability pioneer.
Yvon Chouinard, a rock climber, founded Patagonia in 1970 to provide outdoor enthusiasts with technical clothing. An environmental activist, Chouinard committed Patagonia in 1986 to donate 1% of sales or 10% of profits (whichever was greater) towards environmental causes. In 2002 Chouinard co-founded "One Percent for the Planet" to encourage other companies to contribute at least 1% of sales towards environmental causes. By 2012 it had more than 1,200 member companies across 48 countries and had donated more than US$100 million to over 3,300 nonprofit organizations.
Over the years, Patagonia has become a sustainability leader in the apparel sector. After doing an impact assessment in 1994 (well before other players in the industry), it realized that of the materials it used, cotton did the most damage to the environment. The chemicals used in growing traditional cotton can be extremely hazardous to the soil, air and water, and therefore to wildlife and humans. So Patagonia decided on a complete switch to organic cotton within two years. It was a costly decision: in 1996 Patagonia spent three times more on cotton than in 1995. But by reducing its margins, the firm ensured that consumers only had to pay 2% more.
However, it has been its Common Threads Initiative, the five "Rs" strategy – reduce, repair, reuse, recycle, and reimagine – that has made it a pioneer, not only in the apparel sector, but in the entire consumer goods industry.
In the 'Black Friday' edition of The New York Times in 2011, Patagonia published a daring campaign to curb consumerism. Above a picture of a Patagonia fleece "R2 Jacket" appeared the words, "Don't Buy This Jacket", in large, bold font. The text underneath attacked the "culture of consumption", pointing out that we are "using the resources of one-and-a-half planets". Patagonia urged readers "to buy less and to reflect before you spend a dime on this jacket or anything else". It also described how "it required 135 liters of water" to produce the 60% recycled polyester jacket pictured in the advertisement, which is "enough to meet the daily needs (three glasses a day) of 45 people. Its journey from its origin as 60% recycled polyester to our Reno warehouse generated nearly 20 pounds (9 kg) of carbon dioxide, 24 times the weight of the finished product. This jacket left behind two-thirds its weight in waste."
Very few companies have the audacity to tell consumers to think twice about their purchase decisions and to buy less. Even fewer explain in excruciating detail the negative environmental impact of a product. Most intriguing is that Patagonia did not boast of its industry-leading environmental and sourcing practices. Some critics will argue that Patagonia's "buy less" campaign was a public relations strategy or marketing gimmick and point to the increase in sales that followed the advertisement. But Patagonia's more recent efforts suggest otherwise.
Even more aggressive
Patagonia's upcoming move is even more aggressive. Chouinard plans to limit sales by curtailing production. Moreover, Chouinard aims to limit the actual number of items Patagonia sells to further decrease its environmental impact and combat consumerism. In addition, Patagonia has expanded on the Common Threads Initiative by repurchasing used articles of Patagonia-produced clothing from its customers, repairing them and reselling them in its stores. This new "Worn Wear" initiative has become part of the brand. In an advertisement published in The New York Times during Fashion Week in 2013, Patagonia called a torn pair of surf trunks from 1994 "better than new". The company also features Worn Wear stories on its website, encouraging customers to show off their used rather than new clothes. It has free online manuals for fixing clothes and is building a repair truck to travel the United States refurbishing damaged articles of Patagonia clothing.
Patagonia's efforts to become a sustainable company, minimizing its environmental impact and improving how consumers buy, may not silence all critics. Some will still point to the profits Patagonia is earning through these efforts. But that's OK—sustainability does not preclude profitability. It is important for sustainable companies to make money, just so long as they do so in the best manner possible.
Francisco Szekely is Sandoz Family Professor of leadership and sustainability and Director of the IMD Global Center for Sustainability Leadership (CSL). He directs Sustainability Leadership in Action (SLA), a talent development initiative targeted at leaders committed to discovering new ways to increase their performance and deliver exceptional results.
Zahir Dossa is a postdoctoral fellow at the CSL. He earned a Ph.D. from MIT in Sustainable Development and is the founder and president of The Argan Tree.