How Patagonia became the B Corps poster child

Scale up.
Scale up.
Image: Reuters/Simon Gardner
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You don’t have to spend much time in the corporate sustainability world before someone mentions Patagonia. The US outdoor-wear brand seems to have achieved an alchemy of purpose and profitability that others, hopeful they can keep making money while also doing good, avidly seize upon.

Patagonia is a B Corporation, a class of companies set up to eschew traditional accountability solely to shareholders, in favor of a more diffuse and inclusive set of stakeholders including customers, employees, communities, and the planet. Patagonia’s story appears to fit perfectly with the vision of B Lab, the nonprofit that guides companies through the B Corp certification process. At conferences or in articles about B Corps, Patagonia almost invariably comes up; it’s often the first B Corp anyone names.

So it comes as a surprise to hear that there was a time when Patagonia, the poster-child for purpose, didn’t want to become a B Corp at all.

“We initially resisted,” says Vincent Stanley, the company’s “chief storyteller,” who has been with Patagonia off and on since its founding in 1973. More than three decades later, a new outfit called B Lab was trying to get its sustainable-business certification off the ground. “The founders approached us right after they got started,” Stanley recalls. “And we said no, we do a lot of things—we are audited for our labor practices,” for example. And the company already had taken a raft of other measures related to materials and chemicals used in its clothing, he says. “Why should we go through this extra step?”

The about-face which took place between then and now has seen Patagonia become not only one of the foremost examples of a B Corp, but one of the movement’s biggest drivers. A large part of Stanley’s job today is to talk to other businesses about becoming B Corps, both locally and internationally. (Parma, Italy, is a particular hotbed, he says.)

The B Corp movement was founded in 2006, with the first companies certified in 2007. The early adopters were mostly like Patagonia—niche brands with purpose-infused missions. Now, Rose Marcario, Patagonia’s CEO, sits on an advisory committee dedicated to helping massive multinationals make the transition to B Corp status. The first such global business, French food giant Danone, is about a third of the way through transforming its subsidiaries, one-by-one, into individual B Corps. (Each entity under the corporate umbrella requires its own certification.) Rumors swirl about which big brand will be next.

So what changed Patagonia’s mind? And how have the company and the B Corp movement gone on to change one another?

An eventual meeting of minds

One big thing that changed for Patagonia came via the legal advocacy work that went along with B Lab’s mission to certify companies. B Lab’s founders, three businessmen and former college mates, had identified a problem with US law: While companies weren’t explicitly forbidden from taking stakeholders into account in their decision-making, the only entities they had to satisfy, according to the wording of previous laws, were shareholders. The language had the effect of suggesting that if companies were to broaden their remit, they’d be in breach of their fiduciary duties.

State by state, B Lab and others campaigned for a new designation. California, where Patagonia is headquartered, passed a measure in 2012 making way for public benefit corporations, which have in their charters an explicit mandate to operate for purposes of the public’s benefit. As of 2020, 36 states have passed such legislation, including Delaware, where a large proportion of companies incorporate.

Stanley says Patagonia was persuaded by the thinking that a legal change could protect its purpose in perpetuity. But once it made the decision to certify as a B Corp, which layers a rigorous certification process on top of the benefit-corp model, Stanley and his colleagues discovered unexpected benefits for Patagonia itself. For the first time, he said, the company was forced to look at sustainability across the entire operation, and was held to account by a third party. Companies are only certified if they attain a minimum score on the B impact assessment, which measures sustainability practices in five areas, including governance and the environment. Companies must re-certify every three years to maintain their B Corp status.

“What we found is that the impact assessment is the only holistic look at the whole of our practices,” Stanley says. “The verification forces us to question ourselves…That was an advantage that we weren’t expecting.”

Another virtue of the decision: The certification process helped enfranchise more of its staff.

“We have a lot of different people who touched different parts of the assessment,” says Hilary Dessouky, Patagonia’s top lawyer, who was instrumental to the company’s transition to B Corp status. “We kind of have a core team, but we really get to pull people in from throughout the company, so they can just see the impact of what they’re doing, and what their work does every day.”

Purpose at the outset

Patagonia is privately held, meaning it has more leeway than a public company to make big decisions. But with Danone and other publicly traded companies like Natura, Brazil’s largest cosmetics firm, certifying as B Corps, there are beginning to be precedents for B Corp success outside of private ownership.

Of course, for all that becoming a B Corp may have sharpened Patagonia’s thinking, perhaps the main reason it wears the concept so well is that the company was, from the outset, built differently than most corporations.

Founder Yvon Chouinard famously said he wanted himself and Patagonia’s employees to be able to combine a love of outdoor pursuits like rock-climbing and surfing with work. Recognizing that its early employees were becoming parents and needed childcare, Patagonia built its own onsite facility.

This was 35 years ago, when most companies weren’t much thinking about the needs of working parents, and of mothers in particular. It’s still in operation. Dessouky, among the many Patagonia parents to have used the facility over the years, says today there are 135 kids enrolled. Patagonia has been using organic cotton since the mid-1990s; it has sued the president of the United States in a bid to protect public land; it hires activists, with the hope that they’ll remain crusaders while in the company’s employ.

Half of Patagonia’s product line “comes out of an oil well,” Stanley readily admits, referring to the plastics and other synthetics which the company still uses in many products. (Patagonia says that 80% of the materials it uses by volume are “preferred” materials, meaning they are either recycled or renewable.)

And not every Patagonia employee gets to work at the homey headquarters office.

Many of the more than 200 reviews for Patagonia on the website Glassdoor, where people can anonymously review employs and submit salary data, are from people who identify themselves as current or former retail staff. Among these, a common thread is low pay.

Sentiments about this vary from the fatalistic—”I’d say the only downside is the pay, but it’s retail”—to the accusatory: “Support your workers. Advocate for your staff for adequate compensation.” Patagonia says it pays all full- and part-time retail employees at least a living wage or minimum wage (whichever is higher), using the MIT Living Wage Calculator to determine fair pay, and offers retail workers a suite of benefits.

The dust-up over Patagonia’s pay is minor compared with the blowback against other companies that are newer to the realm of corporate responsibility. Purpose is quickly becoming the go-to word for company self-promotion.

What makes Patagonia stand out from others that make big claims about their sustainability or equity efforts is that the words are often backed up with concrete changes that make the brand an industry outlier. A good example of this is the story about cotton.

Can purpose scale?

Patagonia discovered the trouble with conventional cotton when employees at its Boston offices stopped being able to breathe properly. There seemed to be a ventilation issue, and people kept calling in sick. When the company had the building surveyed, it discovered the problem emanated from the formaldehyde in piles of cotton clothing stored in the Boston basement.

Formaldehyde is used in clothing to prevent wrinkles and mildew, and to preserve organic matter on lab shelves. It’s also an irritant—formaldehyde was recently blamed for causing problems at WeWork co-working spaces after it was found in high concentrations in the enclosed spaces of some office phone booths.

At Patagonia, the discovery of the issue spurred the company to decide, back in 1994, “We’re going organic or we’re getting out of sportswear,” Stanley said. “It was a huge internal struggle.” The organic growers didn’t have the global trade links—with cotton spinners and mills, for example—that the industrial growers had spent decades building. Staff were battling to design the line and at the same time build a whole new infrastructure. In an effort to motivate the employees during the difficult transition, they bused people out to the cotton fields in California’s San Joaquin Valley.

“In the bus you could smell the organophosphates [used as pesticides]…which have basically the same components as nerve gas used in World War I,” Stanley said. “You’d notice the absence of birds, or that the soil was basically dead, there was no life in it. And people would come back from the trips and say, ‘Ok. This is a pain but we’ve got to do this. We’ve got to make this work.’”

The switch to organic cotton paved the way for Patagonia’s more recent moves in farming. It’s now pushing for a radical overhaul of the entire agriculture system, arguing that in order to secure a workable future for the planet, farmers must re-establish soil health. Together with other companies including Dr Bronner’s, a 150-year-old soapmaker and a fellow B Corp, Patagonia has helped establish the Regenerative Organic Certification, which it hopes will catch on.

“The idea is that this will be an established and widely adopted certification when it comes to any kind of organic regenerative practices that hopefully will transform the food supply chain [and] the fiber supply chain,” Dessouky says. “The larger goal that we’re working towards is that we ultimately live in a world where agriculture sucks in more carbon than it actually releases.”

We’re very far from that goal, Dessouky acknowledges. Agriculture currently accounts for 10 to 12% of the world’s anthropogenic carbon emissions, according to the Intergovernmental Panel on Climate Change, with higher trends likely unless the sector is constrained.

And in the past, where Patagonia has pioneered, in some cases few others have followed. The company’s Footprint Chronicles, an online narrative of its sustainability efforts, note that one hoped-for outcome of the difficult shift to organic cotton—namely, making a bigger industry change—hasn’t happened. “[The] last goal—influencing other clothing companies to also convert to organic cotton—has been mostly a failure,” the company admits.

When the organic cotton line launched in 1996, organic cotton was less than 1% of all cotton grown, the company notes, “and it still is today.”

A consumption paradox

What’s the lesson here? Was the organic cotton play a good move, because it differentiated Patagonia as being legitimately better for the planet than other brands? Or a failure, because it’s only a drop in the ocean of chemical-steeped cotton on which the global garment industry sails?

The answer might come down to consumers.

Cara Chacon, vice president of social and environmental responsibility at Patagonia, says many of Patagonia’s sustainability efforts were developed in response to the customer base it has acquired over 40 years, first as a niche maker of climbing equipment, and later as a popular clothing label professing to maintain high ethical standards. “They expect it of us,” she says.

Dessouky concurs. “We’ve seen this in our success. Over the past seven years since we became a B Corp, our profits have quadrupled,” and every time the company does something to highlight its efforts, it sees a jump in sales. “We are a good test case that customers respond,” she adds.

But in this, too, Patagonia is an outlier.

There’s been talk for years about ethical consumption. In the last couple of years, it’s developed into more mainstream discussion, with burgeoning trends like “flygskam“—the ethical decision to cut down on flying—and public discourse about everything from single use plastic bags and straws to big life changes like veganism.

But none of this yet translates into detectable consumer behavior. Last October, Morgan Stanley reported that after two decades of consumers buying ever-cheaper clothes in increasingly high numbers, demand seems to be “plateauing”— but most likely because, if people are already buying 65 pieces a year (the average according to one US estimate), their wardrobes have become saturated.

The same month, the International Air Transport Association reported upticks in international passenger numbers, including an almost 4% year-on-year increase in Europe, where the “flight shame” discourse was strongest. The OECD’s Agricultural Outlook for 2017 to 2026 predicted increased per capita consumption of beef, chicken, pork, and lamb in developed countries.

Consumers, meet purpose

In April 2018, Danone’s North American business certified as a B Corp. According to Stanley, Danone CEO Emmanuel Faber said at the launch that he was inspired to join the process after seeing a clever ad for a Patagonia jacket in the New York Times. It convinced him that a brand could appeal to customers on the basis on purpose.

But many customers don’t trust corporations. And with good reason. For decades, they’ve had to sift through a barrage of greenwash to discover what companies are actually doing about the environment, to say nothing of the data breaches, privacy scandals, and outright frauds that have heaped harm upon consumers.

Christopher Marquis, a professor of management at Cornell University and the author of a forthcoming book on B Corps, says that in the years he’s been observing the movement, there have been two major shifts that make putting purpose at the heart of a business more viable. The first comes from lawmakers, who have been paving the way for companies to make changes to their charter purposes. Second is the rise of impact investing, and the effort of investors who hope to drive change by putting money only into companies that can demonstrate ethical practices.

“The next phase is consumers,” Marquis says. “I do think that there is an interest in purchasing from ‘good’ companies. But I think also that there are so many examples of ‘bad’ companies, or greenwashing, that consumers are a little bit wary. They don’t know how to tell which company is actually authentic.”

Both the B Corp certification process and the benefit corporation legal structure are part of a potential fix. But if they’re going to be a way for consumers judge to where to spend their money, the movement will have to stay rigorous, and become ever more so. There already have been a number of challenges to this. Ben & Jerry’s, a Vermont-based ice-cream maker and a B Corp, has a longstanding reputation as an ethical brand that sources its dairy from “happy cows.” But in January 2020, the Unilever-owned brand was forced to remove those words from its packaging, after it was sued by environmentalists who said much of the company’s milk came from regular industrial farms.

Stanley says that the Sustainable Apparel Coalition (SAC)—which Patagonia co-founded with Walmart ten years ago—is working on a tool that could help consumers make better choices. He describes a smartphone app which would allow a shopper to scan a garment tag and get instant information about the item’s provenance and the ethics of the company marketing it. “Currently, it’s very difficult to know how sustainable a company or its products truly are,” SAC’s executive director Amina Razvi, said in an email. “There’s a lot of confusing jargon and greenwashing when it comes to sustainability, and claims aren’t necessarily backed by science.”

To that end, the coalition has developed the Higg Index, “a suite of tools that measures social and environmental impacts across the apparel and footwear value chain,” Razvi said. It is currently testing the best ways to communicate the “tens of thousands of data points” contained in its assessments to consumers.

When that kind of power is in the hands of people making choices on what to buy every day, maybe the next phase of enlightened consumption will really get underway.

This story has been updated to reflect Patagonia’s use of recycled synthetic materials.