Patagonia, a Role Model for Corporate Social Responsibility
Abstract
Corporate Social Responsibility, or CSR, is a relatively new concept that encourages companies to do business in a socially desirable way or get involved in activities that bring more social values to the society. Companies cannot neglect this idea anymore as consumers have greater access than ever before to information about companies and products they consume. Despite the increasing importance of CSR, many companies are engaging in it superficially, rather than really caring about the related issues. These companies can learn how to effectively manage CSR from Patagonia, a global outdoor clothing and gear manufacturer praised worldwide for its passionate CSR. Patagonia has always been involved in saving the environment. Activities carried out by Patagonia include “100% traceable down”, “Patagonia’s Footprint Chronicles”, “the Patagonia Environmental Internship Program”, and the “Worn Wear” program. There are also two major examples of activities that are not business-related, which are “the Patagonia Actions Work Program”, and “the Earth Tax”. Patagonia works hard both inside and outside its business value chain and keeps its movements transparent to the public. These are the key steps other companies should follow in doing their CSR.
I. Introduction
Milton Friedman wrote in his article “there is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays in the rules of the game, which is to say, engages in open and free competition, without deception or fraud.”[1] It is impressive that Friedman was thinking of corporate social responsibility in 1970, while most others were engrossed in money-making and expansion of business. Such explanation, however can no longer embrace the concept of CSR, or corporate social responsibility. In the past, CSR was often regarded as a waste of money that could otherwise be spent on R&D or improving business. Companies used to participate in CSR because they were afraid of developing bad reputations. However, CSR has changed dramatically over the years. Consumers have easy access to limitless information through the Internet, and they started caring more about the ideas companies stand for. They are willing to spend money on products that promote social values, and are ready to decline products from companies that are not being socially responsible. One example of a company enthusiastically adopting the concept of CSR is Patagonia. This article aims to briefly introduce the CSR concept, illustrate how Patagonia is doing its CSR activities and its results, and discuss how other companies can follow in the footsteps of Patagonia.
II. Definition of CSR and its application
While there is no one singular definition of CSR, the most widely known version is the one suggested by Carroll. Carroll explained that “corporate social responsibility encompasses the economic, legal, ethical, and philanthropic expectations that society has of organizations at a given point in time.”[2] People expect companies to bring more social values to the society, ultimately making it a better place for them to live in. Even though CSR is a relatively new concept, companies – especially large sized companies – are spending mind-boggling amount of money on CSR. With the amount growing every year, top 100 companies of Korea spent over 1.7 trillion won for CSR in 2019 alone[3]. They spent around 0.18 percent of their annual sales, while top 30 companies allotted around 0.28 percent. Though it is laudable that companies are investing a lot of money in doing good for the society, they still have a long way to go in how this money is spent. A research by the Korea Chamber of Commerce and Industry (KCCI) found out that CSR was done mainly in the form of donation, taking up 20 percent. Education was the second most common form, followed by volunteering. The top three beneficiaries of CSR activities were monetarily and socially vulnerable groups, children, and youth. It is apparent companies are separating CSR and business, and this lowers the likelihood of companies to continue and to benefit from doing CSR. This is where Patagonia differentiates itself from most other companies.
III. Case of Patagonia
- Company description
Patagonia is a global outdoor apparel company founded by Yvon Chouinard in 1973, Ventura, California. The company manufactures outdoor clothing and gear, footwear for various outdoor sports such as climbing, surfing, hiking, skiing, snowboarding, and many more. Patagonia is a rapidly growing company. The estimated annual revenue for 2013 was $570 million, and it has grown to $800 million in 2016, and over $1 billion in 2017[4]. Patagonia strongly stands for the idea of protecting the environment. Its mission statement is “build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”[5] Meanwhile, main values of the company include transparency, collaboration and improvement, and the company is doing a good job in keeping these values.
- CSR activities
Patagonia has been involved in saving the environment since day one, both within and outside its business value chain, and had much success so far. Activities within the value chain include “100% traceable down”, “Patagonia’s Footprint Chronicles”, “the Patagonia Environmental Internship Program”, and the “Worn Wear” program. Two major examples of activities outside the value chain are “the Patagonia Actions Work Program”, and “the Earth Tax”.
i. Activities within the value chain
One major activity carried out by Patagonia is the “100% traceable down” program. The program aims to trace down every single supplier of Patagonia’s down to make sure ducks and geese are not force-fed or plucked alive. Patagonia thoroughly examined all seven levels of its supply chain to make sure their down was produced in a humane way. It took them seven years, but they were able to achieve their goal a hundred percent.
Customers can look up Patagonia’s Footprint Chronicles to see which suppliers and what processes a product went through before its arrival at the shelf. It provides information about Patagonia’s suppliers, a map with their location, as well as their environmental and social assessment.[6] It also informs customers of the distance a product traveled, carbon released, energy consumed, and waste generated from its production. Unlike most clothing companies that refuse to disclose such detailed information about their suppliers and products, Patagonia is pursuing the value of transparency. Customers realize how responsible Patagonia is regarding its business and products, and enjoy the fact that they are consuming products that are produced in a humane, environment-friendly way.[7]
Patagonia also makes sure its employees get involved in CSR as well. Not only does the company look for people who are enthusiastic about saving the planet in the hiring process, but it also runs the “Patagonia Environmental Internship” program. Through the program, employees from all parts of the company are given the opportunities to work for environmental groups of their choice for up to two months, while receiving the same paycheck and benefits. As of 2019, 34 individual employees, 12 stores and one department joined this program, putting in almost 10,000 volunteer hours for 43 environmental groups. Through the program, Patagonia hopes that employees would develop new commitments to saving the environment and return with stories and inspiration to share with the company and colleagues.[8]
Last CSR activity to introduce is the “Worn Wear” program. It reminds consumers of the waste created and energy required in making new clothes. Patagonia encourages people to extend the life of its products by fixing and wearing old, used clothes or by recycling. The company asks consumers to bring used Patagonia clothing to the store, and consumers receive Patagonia credit in return, with which they can buy more Patagonia products. It washes and amends the used products and sells them again both online and offline for a lower price. Consumers can purchase products with stories, and sometimes these products become more special and unique after being amended with bits of scraps from other clothes. Patagonia first started the program as a pop-up, traveling across the country and repairing old Patagonia clothing and holding DIY workshops. After its huge success, Patagonia made it a regular part of its business. So far, Patagonia sold more than 120,000 repurposed items and this number is expected to grow at a much faster speed. Secondhand clothing market grew 21 times faster than the overall clothing industry in the last three years, and this industry is expected to reach $51 billion by 2023.
ii. Activities outside the value chain
Although Patagonia is already working hard within its value chain and is doing so much more than other companies, Patagonia does not stop there. The company constantly looks for other opportunities where it can bring even greater social values. This effort can be seen outside its business value chain as well.
First example is the “Patagonia Action Works” program. Patagonia’s director of environmental initiatives said in an interview that “we have lost faith in world leaders to act on the climate crisis in time. The public want to know what they can do, and this platform allows them to take action, in the communities where they live.” In other words, Patagonia enables and facilitates people to fight for the environmental issues they are passionate about through the platform of “Patagonia Action Works.” The company does so by selecting environmental NGOs and providing platform through which people can find out events happening in their areas, donate, sign petitions, and volunteer.[9] Patagonia is constantly receiving applications from environmental organizations that “identify the root causes of problems and approach issues with a commitment to long-term change.” After just three months of the program’s release, it created a total value of over $1.1 million, over 1.2 billion impressions were made, 79,500 meaningful advocacy actions were taken, and more than 4,900 hours of high-value skills were donated.[10]
In addition to providing the platform for NGOs and interested individuals to connect, Patagonia has been donating one percent of its sales every year since 1985. Founder of Patagonia, Yvon Chouinard, started a program called “1% for the Planet”, or “the Earth Tax” with Craig Mathews, the owner of Blue Ribbon Files. It is an alliance of businesses “that understand the necessity of protecting the environment” and participating companies pledge to donate 1% of their sales to grassroots environmental groups. With this program, the total amount of money donated by Patagonia adds up to over $89 million, given to domestic and international environmental groups making a difference in their local communities.
iii. Sharing of the activities
As transparency is one of Patagonia’s main values, Patagonia shares much of the information about products and activities through its blog, “the Cleanest Line”. There are other brands running their own blogs to communicate with customers. These blogs mostly share articles on topics such as tutorials, DIYs and fashion. The Cleanest Line differentiates itself from the rest by sharing ideas about Patagonia’s mission and pressing topics, and stories on outdoor sports. For example, the post “Introducing Woolyster” introduces Patagonia’s innovation of a new fleece fabric, the woolyster, which utilizes recycled fibers and is less harmful to the environment[11]. There are many other posts on environmental activities such as “30 by 30: A Bold Vision to Save the Natural World”, “Earth Day Goes Digital”, “Gardening Corals before They Are Gone”, and posts on sports such as climbing, kitesurfing, and mountain biking[12]. Consumers can easily see Patagonia really cares about the environment and is taking real action, not just words.
- Results of CSR
A research by the Institute for Operations Research and the Management Science found out that companies engaging in CSR activities have higher valuation and profit margins, while having lower risks. In addition, companies doing well in CSR tend to have more stable returns on assets, and systematic risk is economically and statistically significantly lower[13]. Patagonia does not regularly publish sales or profit figures, but it is evident that Patagonia is one of the most well-known and successful outdoor clothing manufacturer worldwide, along with the North Face. It is also evident that Patagonia has been, and is expected to, grow at a faster speed.
IV. How other companies can follow Patagonia
The way Patagonia does its CSR is quite simple: truly care about a social value it stands for and show it to its consumers. Rules are simple. It is apparent most companies need change in their ways of doing CSR, because the current method of mere donation does not show that they really care. However, putting this into action is the hard part. Patagonia has been working on promoting its beliefs since its establishment in 1973. It is obvious that it will take time for other companies to be able to do what Patagonia is doing. While giving much thought to what they could do to increase social values, they can first look at the social values they are currently harming. Just as Patagonia traced down every single supplier to make sure they are not harming employee rights or animal rights, other companies can thoroughly look into their value chains and minimize the damage being done. Had Apple inspected its supply chain closely, it would have been able to deal with its manufacturer, Foxconn, and its worker violations before it became publicly known[14]. Companies should then each choose a particular social value they want to uphold and work out ways to promote it inside and outside the business.
V. Conclusion
Corporate Social Responsibility is not only beneficial to the entire society, but to the businesses as well. While companies should be encouraged to participate in CSR, they cannot be forced. In order for them to voluntarily engage in such activities, company owners first have to see how CSR can help their businesses and learn how successful companies are doing it. Patagonia, one of the best-known companies for successful CSR, can be a great example other companies can study and copy. Patagonia comes up with creative and effective ways of supporting green movements and improving business at the same time. Even the activities which are not directly related to business ultimately help the company become more profitable because people love what Patagonia is doing and are willing to consume its products.
References
Friedman, Milton. “The social responsibility of business is to increase its profits.” Corporate ethics and corporate governance. Springer, Berlin, Heidelberg, 2007. 173-178.
Carroll, Archie B. “Carroll’s pyramid of CSR: taking another look.” International journal of corporate social responsibility 1.1 (2016): 1-8.
한국사회복지협의회, 대한상공회의소, 2019 사회공헌백서, 2020
“Patagonia Revenue.” Craft, https://craft.co/patagonia/revenue
“Our Core Values.” Patagonia, www.patagonia.com/core-values/.
Sustainable Minds. “Patagonia Footprint Chronicles – Step in the Right Direction or Sneaky Sleight-of-Foot?” Sustainable Minds, www.sustainableminds.com/industry-blog/patagonia-footprint-chronicles-%E2%80%93-step-right-direction-or-sneaky-sleight-foot. Accessed 26 July 2020.
“Environmental Internship Program.” Patagonia Employee Internship Program, www.patagonia.com/environmental-internship-program.html.
Beam, The. “Patagonia Launches Patagonia Action Works, a New Digital Platform to Help Protect the Planet.” Medium, TheBeamMagazine, 25 Sept. 2019, medium.com/thebeammagazine/patagonia-launches-patagonia-action-works-a-new-digital-platform-to-help-protect-the-planet-b4ea4e5fa6bc.
“Patagonia Action Works.” Someoddpilot, someoddpilot.com/work/patagonia-action-works/.
Blakeslee, John. “3 Reasons to Love Patagonia’s ‘The Cleanest Line.’” Medium, Medium, 24 Oct. 2018, medium.com/@jblakeslee/3-reasons-to-love-patagonias-the-cleanest-line-a81734d8c5b1.
“Stories.” Patagonia Outdoor Clothing & Gear, www.patagonia.com/stories/activism/.
Albuquerque, Rui, Yrjö Koskinen, and Chendi Zhang. “Corporate social responsibility and firm risk: Theory and empirical evidence.” Management Science 65.10 (2019): 4451-4469.
Albergotti, Reed. “Apple Accused of Worker Violations in Chinese Factories.” The Washington Post, WP Company, 9 Sept. 2019, www.washingtonpost.com/technology/2019/09/09/apple-accused-worker-violations-chinese-factories-by-labor-rights-group/.
[1] Friedman, Milton. “The social responsibility of business is to increase its profits.” Corporate ethics and corporate governance. Springer, Berlin, Heidelberg, 2007. 173-178.
[2] Carroll, Archie B. “Carroll’s pyramid of CSR: taking another look.” International journal of corporate social responsibility 1.1 (2016): 1-8.
[3]한국사회복지협의회, 대한상공회의소, 2019 사회공헌백서, 2020
[4] “Patagonia Revenue.” Craft, https://craft.co/patagonia/revenue
[5] “Our Core Values.” Patagonia, www.patagonia.com/core-values/.
[6] “Patagonia: The Footprint Chronicles.” Bteam, bteam.org/our-thinking/news/patagonia-the-footprint-chronicles. Accessed 26 July 2020.
[7] Sustainable Minds. “Patagonia Footprint Chronicles – Step in the Right Direction or Sneaky Sleight-of-Foot?” Sustainable Minds, www.sustainableminds.com/industry-blog/patagonia-footprint-chronicles-%E2%80%93-step-right-direction-or-sneaky-sleight-foot. Accessed 26 July 2020.
[8] “Environmental Internship Program.” Patagonia Employee Internship Program, www.patagonia.com/environmental-internship-program.html.
[9] Beam, The. “Patagonia Launches Patagonia Action Works, a New Digital Platform to Help Protect the Planet.” Medium, TheBeamMagazine, 25 Sept. 2019, medium.com/thebeammagazine/patagonia-launches-patagonia-action-works-a-new-digital-platform-to-help-protect-the-planet-b4ea4e5fa6bc.
[10] “Patagonia Action Works.” Someoddpilot, someoddpilot.com/work/patagonia-action-works/.
[11]Blakeslee, John. “3 Reasons to Love Patagonia’s ‘The Cleanest Line.’” Medium, Medium, 24 Oct. 2018, medium.com/@jblakeslee/3-reasons-to-love-patagonias-the-cleanest-line-a81734d8c5b1.
[12] “Stories.” Patagonia Outdoor Clothing & Gear, www.patagonia.com/stories/activism/.
[13] Albuquerque, Rui, Yrjö Koskinen, and Chendi Zhang. “Corporate social responsibility and firm risk: Theory and empirical evidence.” Management Science 65.10 (2019): 4451-4469.
[14] Albergotti, Reed. “Apple Accused of Worker Violations in Chinese Factories.” The Washington Post, WP Company, 9 Sept. 2019, www.washingtonpost.com/technology/2019/09/09/apple-accused-worker-violations-chinese-factories-by-labor-rights-group/.