Is governance the unexplored secret behind Patagonia’s business success?
In September, the United Nations gave the 2019 Champions of the Earth award to clothing B-Corp Patagonia. The organization’s pace-setting entrepreneurial vision was recognized for upholding a dynamic mix of policies that have put sustainability at the very core of its successful business model.
Why does Patagonia continue to set itself as a bastion in the circular economy for fashion and in the business world at large?
Its exemplary practices are well-known: designing durable textile yarns from recycled fabric; upholding a commitment to 100 percent organic cotton sourced from over 100 regenerative small farms; sharing its best practices through the Sustainable Apparel Coalition’s Higg Index; paying back an "environmental tax" to the earth by founding and supporting One Percent For The Planet; donating its $10 million federal tax cut to fund environmental organizations addressing the root causes of climate change. And that’s just a shortlist.
The (idealistic) last word
Beyond such practices worthy of praise, here’s what this author concludes lays close to — if not at the heart of — Patagonia’s remarkable success. On the one side, to be sure, one finds an entire team and company culture clearly committed to do business by following lofty ethical ideals. But, at the end of the day, Patagonia’s governance structure enables the very practice of such ideals. And that’s because the last word belongs to its idealistic proprietors — as simple as that may sound.
Contrary to what one would expect from one of the world’s most progressive companies, both Yvon and Malinda Chouinard (the owners) don’t offer employee stock options. Yvon Chouinard outlines the reason in his book, "The Responsible Company":
[We] are concerned that, with shares more broadly distributed, the company would become overly cautious about undertaking risks in the pursuit of its environmental goals. So that Patagonia can continue to push back the boundaries of what business considers possible, [we] are willing to undertake risks that might give pause to broader ownership, even of employees committed to reducing environmental impact.
Put differently, even if the Chouinards are fully committed to the wellbeing and fair pay of all the company’s staff, they don’t believe in democracy. At least not in the workplace. In fact, neither did Plato nor Notre Dame’s leading moral philosopher, Alasdair MacIntyre — known for his proposals to recover virtue and meaning amidst the destructive flaws of liberalism. And, in this case, not giving the last word to democracy is a good thing.
At best, democracy can balance out self-seeking interests. But all too easily, our recent past has proven how the democratic process can pave the way for the rise of not-quite-enlightened leaders (and even less enlightened crowds, or shareholders).
The new (business) monk?
In his monumental mapping of today’s decline in moral culture, the aforementioned MacIntyre concluded that the most promising way out of our current impasse is not through the ballot box. (Shocking, right?)
Instead, MacIntyre ends his epoch-setting "After Virtue" with an even more shocking summons: to embrace (with some modifications, not least) the example of Benedict of Nursia, a sixth-century abbot known for developing a rule and then encouraging discipline and moral virtue in the monks of his monastery.
A governance structure of this sort, MacIntyre argues, is the most fitting response to sustain moral life, guiding us through what he calls "the new dark ages which are already upon us." In short, we need "new forms of community" within which the practice of morality can flourish and then nurture civility.
Is that not what Patagonia is exemplifying to a greater than lesser extent? However unconsciously, is Chouinard not a new business monk inspiring and instilling high moral commitments in the people running his entrepreneurial monastery?
I don’t want to put words in his mouth or beliefs in his mind. But consider the evidence.
In addition to Patagonia’s pace-setting accomplishments outlined above, the company’s moral leadership is grounded in the fact that the Chouinards and other top managers draw at least part of their counsel from his nephew Vincent Stanley, the company’s director of philosophy — as outlandish and bizarre as that sounds in the ears of mainline business orthodoxy.
Rose Macario, the company's current CEO and the chief financial officer who helped quadruple Patagonia's revenue over the past decade, continues to make waves with stands of her own. In April, for example, she announced that Patagonia no longer would make logoed apparel for companies that didn't share a strong commitment to its environmental and social values.
During an interview earlier this decade at Yale University, Yvon Chouinard acknowledged that he owed an important part of his business vision to E.F. Schumacher’s "Small is Beautiful" — a book by an outside-the-box Oxford economist whose views were drenched in both philosophy and theology.
The Chouinards have grounded themselves in ancient soils quite different from those of customary, utilitarian business thinking. By doing so, they have managed to nurture an enterprise that has become a robust tree in the shifting sands of short-termism. As obvious as it may sound, Patagonia remains an archetype of responsibility because it can bite the hand that feeds it.
Beyond green consumerism
Thankfully, according to the most recent Accenture / U.N. Global Compact CEO study, there is a growing recognition of the interdependencies between business and social wellbeing.
More than 67 percent of CEOs believe that business is making enough efforts to address global challenges (a figure up from just 32 percent in 2013), according to the data. Even more promising, nearly 97 percent believe that such efforts are important to the future success of their business. In turn, 79 percent see brand, trust and reputation driving action on sustainability, and 55 percent see consumers as a key influencer (the highest of any stakeholder).
And yet, one must ask: Can the onus of influence be left to the consumer? Will consumers lead the way toward sustainability? Chouinard does not necessarily think so. As he remarked by quoting Henry Ford, "If I had asked people what they wanted, they would have said faster horses."
What has made Patagonia shine is not external consumer influence or sheer reputation, but its own internal resolutions. The company does not face quarterly monetary shareholder pressures (as it turns out, only 10 percent of the 1,000-plus CEOs of the Accenture study identified pressure from investors as a driving factor to take action on sustainability). Nor is Patagonia committed to a business-as-usual, private ownership model with dimmed ethical values. Instead, the Chouinards exemplify a simple dimension often bypassed about their company: They put their mission before their money. Not sideways; not afterward.
"We’re in business to save our home planet" is the company’s new raison-d’être.
An encouragement for all
One could very well object that Patagonia is a lone ranger, catering fancy ethical products to a privileged minority. There may be some unintended truth to that. But, as The Body Shop founder and former CEO Anita Roddick once put it, "If you think you’re too small to have an impact, try going to bed with a mosquito."
Patagonia’s minuscule boldness can be the very method to its madness. What if its sustained commitments are in fact inspiring decentralized robust actions all around? And what if its example is of great encouragement for thousands of B-Corps and other enlightened companies truly willing to put values first? After all, less than 4,500 companies are publicly traded in the United States, but more than 6 million remain owned privately. Wall Street and stock markets don’t always need to have the last word.
If it is great people who make great companies, then what’s ultimately needed is a revival of higher levels of consciousness amidst final decision-makers — a move away from competition toward collaboration, from mastery and domination toward empathy and earth keeping.
In this sense, Patagonia remains a case in point for the business world to take heart. It proves that private enterprises can be led by daring business owners who are willing to elevate human dignity and the dignity of our planet above all else. Therein lies at least one secret for the recovery of virtue in the business world — and to all the shared success that can go with it.