Cases
Strategy Documents
C03/2011
Public Affairs
La Patagonia: Integrating
CSR into business model
creation and strategic
management
What makes a firm that sells sportswear and outdoor gear so successful in its
environmental integration of business strategy? Can a socially responsible
organization be built from surfing - a life-style that is very different - and create its
own community?
When Yvon Chouinard, the American son of
French-Canadian parents, decided to create a
sportswear manufacturing and sales business in
California in the early 70s, he was sure of one
thing: he wanted to keep climbing mountains
and soaring over waves in his business life too.
That is why the firm is named after the mountain
region between Argentina and Chile and why it is
involved in the protection of the nature parks in
southern Patagonia, the Natural Austral Parks.
Although he began by selling sports clothes for rugby
teams (the money to start the firm came from the
sale of rugby shirts bought in Scotland), the business
now sells every type of sportswear, for skiing, surfing,
rock climbing and alpine climbing, as well as the
equipment necessary for these activities.
Its customers are sportsmen and women with
an average age of 38 and a medium salary of
$160.000 gross a year, which situates it in a quite
high segment of the market in terms of purchasing
power. Basically it sells its customers extremely high
quality, durable products that are constantly being
improved/updated, but something more as well: it
sells them a unique life-style, practically a religion,
of which they become devotees.
At present, the firm has global earnings of almost
$300m, and a workforce of 1,400 with a turnover
of 4.5%, compared to 20% for the sector. Patagonia
owns 40 outlets and appears every year on Fortune
magazine’s list of the best and most admired
companies in the world, with the highest reputation.
It is also considered the “coolest”.
The ethos of the firm is based on integrity,
authenticity, simplicity, community, social
conscience and openness. It conducts very few
advertising campaigns because its outlets, public
relations and sponsoring (especially for its own
in-house projects in the environmental sector,
Document prepared by Corporate Excellence with reference to, among other sources, the intervention of Govert Room (Associate
Professor of the Strategic Management Department at IESE) during the sessions of the Executive Education Program “Making Social
Responsibility Work: The Cornerstone of Sustainable Business” organized by IESE Business School in Barcelona in July 2011.
A special leader for a special business
‘We see
here a
type of
leadership
centered on
responsible
values as a
means of
building the
rest of the
business
model and
of taking
coherent
decisions’.
None of this would have been possible without a
founder who was a very special person, different
from the general idea of an entrepreneur and very
different from run-of-the-mill businessmen. He
describes himself by saying: “I would never be happy
following the routine rules of the market. I wanted
to get as far away as possible from those faces of
people in corset-like garments that I used to see in
the business advertisements in airline magazines”.
n
issio
he m
Sha
re t
the
futu
re
Model of inspirational leadership
s
dea
of i
tion
,
lica
ures s
Ap p
ruct esse
s, st proc
Plan s and
em
syst
But if there is a constant in the history of the company
it is to be found in its commitment to “green” issues,
the fact is that in essence and by definition it is “green”
through and through. Since the 80s 1% of sales or
10% of profits have been devoted to projects for the
care and recovery of nature, and the business uses only
organic cotton in the clothes it manufactures. This is
the main reason it opened its own cotton production
factory in California in the 90s and is in line with the
company’s mission statement: “Build the best product,
cause no unnecessary harm, use business to inspire and
implement solutions to the environmental crisis”.
• For him, unremitting innovation is a religion.
• He promotes creativity and experimentation.
• He makes everyone feel involved
and creates confidence.
• He implements ideas and brings them to fruition.
• He makes business and work fun.
ing
for example 1% For the Planet, the World Trout
Initiative, Environmental Internships or The
Footprint Chronicles and projects by other bodies
such as the Conservation Alliance and the Organic
Exchange), serve as the main window for its brand.
Cre
at
La Patagonia:
Integrating CSR
into business model
creation and strategic
management
VALUES
Managing
people
Involve other
Source: MRJ Consulting, 2010.
There are a lot of ways to be
‘green’ but only one right way
Chouinard was an ‘outsider’ in the business world:
his ideas were not aimed at earning a lot of money
but at making things that were good, because then
the profits would come of their own accord. He did
not want to flush toxins into Canada’s rivers, cause
nervous breakdowns in his workforce or go for crazy
growth all over the world.
The reason for changing the way that organizations
are managed is because their purpose has changed:
sustainability is now at the center of what we do.
Resources (especially natural ones) are getting scarcer and
this situation will get worse (Patagonia has concentrated
on the surfing sector rather than on skiing because
they know that snow is getting scarcer due to global
warming). This is why business companies are becoming
more careful, and not least because, otherwise, the cost
of sourcing these materials will become prohibitive.
As he said once, “everyone tells me that the company
is undervalued, that we could have exponential
growth (which in fact it has, with an annual growth
of 6%) and then expand and launch our company
on the stock exchange. But that would be the end of
everything I have wanted to do, and would destroy
everything I believe in”.
The question is this: To what extent do companies
really contribute to the care of the environment by
implementing programs that are truly ‘green’? Are
they prepared to see their profits reduced in the
short-run in order to obtain long-run sustainability?
Is going green a marketing ploy or is it really on the
company agenda, as in the case of Patagonia?
This shows we are in the presence of a real inspirational
leadership (as there is in other companies with a
strong social conscience, such as Starbucks, The
Body Shop, Ben & Jerry’s, Honest Tea, Ethos Water
or Hallmark), centered on an ethos of responsibility
underlying the construction of its business model and
with coherent decision-making. That is one with its
activity in its own sphere of action.
Because these questions are a very good description
of a certain business environment, that of green
politics, and in this we can appreciate and see
the true dimension of how effective, and yet how
unusual, Chouinard’s model is. Its success is based
on the organization’s high level of commitment and
dedication to the environment. There are three
different types of approach to this subject:
Chouinard’s profile fully coincides with an
inspirational leader’s characteristics:
1. Green ‘paint’: cooperating in only some
campaigns and giving a few donations
so that it ‘looks like’ the company is
really involved with this cause.
2. Green activities: basically, initiatives that are
in the right direction but which only affect
the business’s ethos in a superficial way.
• He brings vision and inspiration
and sketches out the future.
• He brings together his own goals
and those of the company.
Cases
2
La Patagonia:
Integrating CSR
into business model
creation and strategic
management
Patagonia: Built the best product, cause no unnecessary harm, use business
to inspire and implement solutions to the enviroment crisis
Financial:
Improve Profiability
Grow Revenue
Increase Market Share
Customer:
Create Customer Value
Provide Extreme
Gear
Internal
Process:
Improve
Eficiency
Enviromental Goodwill
Protect our Clients
Solve their
problem
Fight to Save
Community
Inspire
Innovation
Reduce Impact
& Footprint
Product
Leadership
Environmet
Stewardship
Understand
the customer
‘Patagonia
has not
used its
values as
a means of
making its
products
more
widely
known but
rather these
are at the
heart of
its strategy
and are not
just a result
of it’.
Operational
Excellence
Learning
& Growth:
Customer
Intimacy
Create Lifetime
Employees
Maintain Patagonia
Culture
Enable Technology
Source: Patagonia 2011.
3. Green strategy: developing a green business
model throughout the company, integrating
it into all the company’s activities, and
taking part in related projects.
Obviously, Patagonia’s place is in the third
category, and it goes even beyond this, because in
its commitment to the environment it involves
both customers and staff in the management in its
commitment to the environment: for Patagonia both
these groups are an integral part of the environment,
and form part of its surroundings. From the company’s
view, it cannot create high quality products without a
high quality working, social and natural environment.
As Yvon Chouinard says: “If you miss out on one of
the pieces in this puzzle, it’s highly likely that you’ll
lose the lot”.
Responsible values as a
source of innovation
The way in which Patagonia approaches the production
of high quality products means that it has to make
clothes that do not involve processes that damage the
environment. This, of course, makes its work harder.
The continual process of obtaining quality products,
and how they use and deal with raw materials implies
development and innovation in new technologies - as
in the case of the organic cotton mentioned above and this, in turn, increases operational costs.
The company is carrying out a project called
‘Common Threats’ to allow the cover of its
clothing products to be recycled. The impact on
the environment of converting worn coverings
into new polyester fiber is lower than making it
straight from previously unused raw materials, with
savings of 76% in economic costs and of 72% in Co2
emissions. Patagonia has succeeded in reducing the
impact on the atmosphere by producing polyester
wool from recycled soft-drink bottle ends. As of
now, it has salvaged 86 million units, which would
have otherwise ended up in waste disposal.
There is an initial cost and barrier for Patagonia
in environmental innovation, technology, but
which has an important advantage not only for the
company but also for the rest of society, fulfilling
its promise to provide solutions from business for
environmental issues and climate crisis.
Conclusions: total integration
of CSR and strategy
Patagonia’s values are clearly aligned with what its
customers expect of it: love of nature and adventure.
The company has not used these values as a means
of making its product brand better known, but
instead it has sought to invent new ways of showing
that these values are at the heart of its strategy and
are not just a result of it.
Unlike its closest rivals, Patagonia has succeeded in
becoming more than a mere manufacturer and seller of
clothes for sports and outdoor activities. The company
feels part of an economic system which must exercise
care and responsibility towards the environment and
surrounding nature. The link between its mission, its
vision and its CSR values to its business activity and
strategy is really exceptional.
Cases
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