Patagonia

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Colorado State University, Global Campus *

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5440

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Management

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Feb 20, 2024

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docx

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1 Patagonia, founded in 1973 by climber Yvon Chouinard, is a pioneer in sustainable practices. They started using organic cotton and recycled materials early on, as noted by Gelles in 2022. Despite growing into a $600M brand, Patagonia has stayed true to its core values of quality, environmental sustainability, and corporate activism. The company’s CEO, Rose Marcario, leads the company in donating 1% of sales towards preservation efforts, repairing and reselling used gear, advocating politically for the planet, and auditing fair labor conditions. Patagonia strives to use its business as a force for good, campaigning for solutions to the global environmental crisis. They serve as a model for companies on how to scale while maintaining high integrity around social and ecological accountability. Patagonia's Environmental Commitment: A Critical Analysis of Mission and Ethical Values After conducting a thorough evaluation of Patagonia's mission and values statements, my analysis indicates that their overarching goal is to protect the environment. This goal is evident in their mission statement, which emphasizes the importance of preserving the planet. Additionally, their core values focus on crafting high-quality products, minimizing any avoidable harm to the environment, and utilizing their business as a tool to encourage and implement solutions for the ongoing environmental crisis. Clausen et al. (2023) have cited this information, highlighting the company's commitment to environmental sustainability. Patagonia is a company that demonstrates an unwavering commitment to ethical values that center around environmentalism and conservationism. The company's mission is laser-focused on safeguarding and preserving the environment, with the ultimate goal of saving our planet. To achieve this, Patagonia employs various strategies to operate sustainably, such as using eco-friendly materials,

2 reducing waste generation, and minimizing any negative impact from its production and operations. Patagonia's dedication to responsible consumption and production is evident in its long-lasting products, which are designed to minimize environmental impact through reduced resource use and energy consumption. The company also encourages repairs and reuse of its products, which not only reduce waste but also promote responsible consumer behavior. Additionally, Patagonia adopts environmentally-friendly manufacturing practices, such as using renewable energy sources and minimizing water consumption. As a responsible, activist-oriented corporate citizen, Patagonia donates 1% of its sales to conservation causes and actively supports environmental advocacy and awareness campaigns. The company is transparent about its practices and shares information about its supply chain, manufacturing processes, and environmental impact with its customers. Overall, Patagonia's unwavering commitment to environmentalism and conservationism sets an admirable example for other companies to follow. Patagonia's mission statement effectively summarizes the company's ethical values, with a focus on environmental sustainability throughout their supply chain and advocacy efforts. However, to provide a more comprehensive understanding of their practices, partnerships, and operations, additional details could be included. For example, Patagonia could outline their specific initiatives and strategies aimed at reducing their environmental footprint, such as using recycled materials or implementing renewable energy sources in their facilities. Additionally, providing more information on their partnerships with organizations and communities working towards environmental sustainability would enhance their transparency and accountability. I suggest including the following elements to ensure a comprehensive approach to sustainability. Firstly, it's important to acknowledge that sustainability is

3 intertwined with social responsibility and fair labor practices. Secondly, explicit commitments regarding sustainable materials, targets for reducing carbon emissions and waste over time, or transparent disclosure of performance in these areas would be beneficial. Lastly, it would be useful to acknowledge any partnerships with NGOs, certifications obtained, or adoption of reporting frameworks to validate sustainability initiatives. Patagonia's Ethical Framework: Assessing Policy and Alignment with Mission Patagonia lacks a formalized code of ethics or ethical policy statement that is distinct from their mission and values statements. Instead, the company's commitment to responsible business practices centers on their environmental sustainability mission. Specifically, Patagonia focuses on ensuring that their materials, manufacturing processes, supply chains, operations, and culture align with eco-conscious ethics and conservationist advocacy. However, the company appears to place less emphasis on areas such as workplace conduct, governance protocols, or accounting procedures, which are typically addressed in formal codes. Patagonia's dedication to ethical and sustainable business practices surpasses mere legal obligations. They uphold high standards for material sourcing, including responsible down production and fair-trade certification, and prioritize carbon neutrality and a reduced reliance on virgin plastic, even in the absence of regulations mandating it. In addition, they are transparent about their labor and environmental practices, sharing audits, assessments, and insider details. Lastly, they actively engage in lobbying, mobilization, and charitable contributions to support causes beyond their commercial endeavors. It appears that Patagonia's ethical approach is primarily centered around activism rather than a clearly defined code. However, given the company's rapid growth,

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4 adopting a code of conduct could serve to unify external expectations and establish best practices. Moreover, a code could help to mitigate any concerns that may arise if Patagonia's anti-capitalist image is ever called into question publicly. In addition to reinforcing existing commitments, I would recommend that Patagonia's code of conduct incorporate several key components, including: a commitment to local communities where the company operates, a focus on diversity, equity, and inclusion for employees, protocols for addressing ethical violations, and guidelines for product marketing and advertising. Patagonia's Ethical Framework: Integrated Approach and Cultural Emphasis. Patagonia doesn't have formalized ethics-specific organizational structure or dedicated ethics personnel such as an ombudsman or chief ethics officer. However, they distribute responsibility for ethical issues in a few keyways. Rose Marcario, their CEO, and Vincent Stanley, their Director of Philosophy, embed Patagonia's values across the company, driving strategy and culture to uphold their environmental and social commitments. Regional and functional leaders own the execution of sustainability initiatives that align with overall corporate goals. For instance, every major department oversees the reduction of materials usage relevant to apparel design, retail spaces, or corporate offices. Furthermore, they have a Social & Environmental Responsibility team that handles program development, partner relations, and reporting on matters like fair trade certification and supply chain audits. Finally, their Board of Directors includes long-time executives alongside external corporate responsibility experts, providing a governance perspective on enacting their ethics- driven mission. Patagonia's executive leadership takes on the responsibility of ensuring corporate responsibility and sustainability priorities are met throughout the company, even though they do not have a dedicated ethics chief. Compliance is

5 ensured through training programs for new hires on the company's values and key operational policies, as mentioned by Kim & Ferguson in 2014. With their rapid growth, Patagonia should consider appointing a dedicated compliance leader or forming an ethics advisory committee to better balance their anti-corporate image with scaling ethical accountability structures appropriately. However, the CEO's stewardship is crucial in taking responsibility for ethics. Examining Patagonia's Ethics Training: Employee Perception and Program Effectiveness Patagonia doesn't rely on formal training programs to instill its mission and values in its employees. Rather, it deeply embeds sustainability practices in day-to- day operations and empowers staff to take the lead in implementing initiatives. Employee reviews consistently praise Patagonia's meaningful culture and impactful work, which stands in stark contrast to typical corporate policy lectures. The company's focus is on inspiring buy-in to its ideological vision of seeking environmental solutions, effectively turning employees into activists. This approach, which emphasizes on-the-job reinforcement, resonates more strongly with employees, even as the company experiences fast growth. To sustain its culture amid expanding complexity, Patagonia could supplement this approach with some supplemental case analyses as they scale. Instilling Ethical Values at Patagonia: Communication and Compliance Monitoring Patagonia has several effective methods of instilling its ethical values in its employees. These methods include onboarding and training programs, where new hires are introduced to the company's mission and sustainability practices through informal orientation and workshops led by experienced staff members. The company's

6 leaders also regularly communicate the importance of environmentalism through meetings, strategy cascades, and by setting an example through their own actions. Patagonia also organizes company events such as volunteering activities, speaker sessions, and milestone celebrations that focus on important issues and educate and motivate employees. Finally, the company's commitment to corporate responsibility is ingrained in its daily work execution, which includes collaborating on materials innovations, manufacturing improvements, product design, and customer engagement. Ethical Violations Reporting at Patagonia: Whistleblower Protection and Procedures Patagonia is a company that is known for its strong commitment to environmental and social responsibility. However, it has been noted that the company lacks formal published procedures for reporting internal ethical violations or providing whistleblower protections. Currently, the company handles such issues informally due to its small, private structure and open culture. However, as the company continues to grow, it becomes increasingly important to introduce more institutionalized accountability mechanisms to uphold its values in the long run. For instance, an anonymous ethics hotline could be established to enable employees to report any unethical behavior without fear of retaliation. Additionally, external validation of processes could be introduced to ensure that all internal procedures meet the company's high ethical standards. While direct communication pathways are currently in place, they may not be sufficient to surface all problems, especially as the company continues to scale. Therefore, it is essential to consider adopting more formalized accountability mechanisms to ensure that any ethical violations are identified and addressed promptly. Finally, it is worth noting that audits of supply chain partners can also help to identify any potential ethical issues. However, as the company's

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7 operations become more complex, it is imperative to upgrade the accountability mechanisms to keep pace with the expansion. This will ensure that Patagonia's commitment to ethical and social responsibility is upheld, even as the company continues to grow. Reflecting Ethical Values: Patagonia's Promotional Communication Approach Patagonia excels in communicating its ethical values, which revolve around environmental conservation, corporate accountability, and social responsibility, to both current and potential customers. The company employs various channels to convey these values, including its website, which showcases an extensive array of content highlighting sustainability initiatives, supply chain transparency documents, activist campaigns, partnerships, and more. Furthermore, Patagonia incorporates information on fair trade sourcing, recycled materials, carbon footprint, and ethical production in their product descriptions and messaging in catalogs. Retail stores also contribute to reinforcing the brand ethos by hosting events, showcasing visuals, and training sales personnel. The company also issues impact reports, press releases on CSR milestones, executive speeches, and media interactions to further underscore their dedication to stewardship, as observed by (Du & Yu, 2021). The tone from top leadership combined with integration across Patagonia's emphasis on creating a positive impact is evident in their approach to business. The company's top leadership sets a tone that is both clear and authentic, and this is reflected in the way they integrate their commercial and operational touchpoints. By doing so, they ensure that their message is consistent and aligned with their values, making it easier for both loyal and incoming patrons to understand and support their mission. In a world where many companies prioritize profits over people and the planet, Patagonia stands out as a beacon of hope. Their dedication to making a positive

8 impact on society is an inspiration to all, and their success proves that doing good can also be good for business. Commercial and operational touchpoints makes their focus abundantly clear and authentic for both loyal and incoming patrons. While smaller brands allow more direct interface with founders, Patagonia distinguishes itself by mobilizing its much wider reach for concentrated impact - letting its 'activist company' ethos permeate all consumer communications. Addressing Controversy: Patagonia's Response to Public Scrutiny Through thorough research of news archives, it is apparent that Patagonia has encountered numerous obstacles throughout the years. Among their most notable challenges are supply chain issues, environmental shortcomings, and workplace grievances. Like many clothing brands, Patagonia has faced supply chain issues and has conducted ethical audits, which have revealed instances of excessive overtime and improper wage practices at certain partner sites. However, the company has been open and transparent in addressing each case by implementing corrective policies, ending partnerships with irresponsible manufacturers, and providing compensation to affected workers. Patagonia has also recognized the problems associated with waste management from their facilities and operations, leading to environmental shortcomings. In response, Patagonia has made significant investments in recycling, innovative materials, and sustainable packaging to stay ahead of regulatory changes. Lastly, Patagonia has faced a few lawsuits related to compensation policies and manager relations, resulting in discreet settlements. It is reasonable to assume that the company has updated problematic HR processes to prevent similar issues from occurring in the future. Patagonia has established itself as a leading brand in the apparel industry, but the company's journey hasn't been smooth sailing. Global apparel supply complexity has resulted in controversies, but Patagonia has always

9 been quick to address the issues and take action. This has helped the company maintain a positive public perception and brand reputation. What sets Patagonia apart from its competitors is its commitment to upholding its culture and values. Being privately owned allows Patagonia to make decisions that align with its core principles, rather than being influenced by external factors. This has enabled the company to navigate pressures that public rivals often face, such as the need to prioritize shareholder interests over social and environmental responsibility. Despite the challenges that Patagonia has faced, the company has remained steadfast in its commitment to sustainability and ethical business practices. Through its various initiatives, including the 1% for the Planet program and the Worn Wear program, Patagonia has made significant strides in reducing its environmental impact and promoting a circular economy. These efforts have not only helped the company build a loyal customer base but also inspired other businesses to follow in its footsteps. In summary, Patagonia's stewardship and integrity in addressing supply chain issues have played a crucial role in shaping its brand identity and public perception. The company's private ownership has allowed it to remain true to its values while navigating the complexities of the apparel industry. Bridging Principles, Policies, and Practice: Identifying Gaps at Patagonia Patagonia appears to be strongly committed to sustainability principles across its operations, policies, and objectives. However, there are some areas where the company can improve. Firstly, while the company aims to achieve carbon neutrality by 2025, with only two years remaining, they still have 15% of emissions left to offset which makes it difficult to achieve the desired goal. Secondly, less than 50% of the materials used by the company are certified fair trade, which presents an opportunity to ensure that standards are maintained as the company scales and works with more

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10 partners. Furthermore, the company needs to increase minority representation and inclusion, as reviews have highlighted a lack of diversity in the workforce. Finally, Patagonia is not B-Corp certified, and they do not fully report per leading ESG frameworks, which limits transparent benchmarking against policies and ethics commitments in some areas. Are the organization’s ethical values mere ideals, or are they a living reality? The company's sustainability initiatives, transparency efforts, and supply chain investments, it is apparent that their values are of utmost importance. The following concrete examples illustrate how these values are reflected in their day-to-day operations: Over the course of the last decade, they have enhanced water usage efficiency by 33% and energy efficiency by 25%, even in the face of twice the sales growth. They have contributed over $100 million toward environmental NGOs and grassroots activism, in addition to their commercial endeavors. The company has strict animal welfare standards, certification requirements, and audits that ensure responsible down and wool production practices. They are at the forefront of the industry in terms of recycled material usage, with their apparel sector products incorporating the greatest volume of recycled fabric in 2022. Their drive to actualize a circular economy is evident in their initiatives, such as converting old garments into fibers for new clothing. Although there are still areas to improve, Patagonia has taken significant steps towards equitable trade, carbon reductions, waste elimination, and ecological preservation. The company's top executives have tied performance incentives to sustainability KPIs and have been pioneers in product recycling for decades. Patagonia has made social and environmental priorities the true driver of its business, rather than just secondary attributes for profits. The values instilled by the founder,

11 Yvon Chouinard, are deeply rooted in the company's operations, from supply sources to retail experiences, making them a prime example of ethical business practices at scale.

12 References Clausen, G., Kelly, M., Reeser, B., Seper, L., & Zhang, A. (2023). Patagonia’s Identity: Balancing Mission and Growth. Du, S., & Yu, K. (2021). Do corporate social responsibility reports convey value relevant information? Evidence from report readability and tone. Journal of business ethics , 172 , 253-274. Gelles, D. (2022). Billionaire No More: Patagonia Founder Gives Away the Company. International New York Times , NA-NA. Kim, S., & Ferguson, M. T. (2014). Public expectations of CSR communication: What and how to communicate CSR. Public Relations Journal , 8 (3), 1-22.

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Patagonia

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