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Individual Report PATAGONIA Vfinal

Patagonia is an outdoor clothing company known for its strong commitment to sustainability. It integrates sustainability into its business model, culture, and all activities. This helps create value for stakeholders through initiatives like Common Threads, which encourages reusing and repairing clothes. Sustainability is embedded in Patagonia's value creation processes and contributes to competitive advantages over other brands through benefits like an improved brand image and reputation. Patagonia's approach demonstrates how sustainability can be profitable in the long-run while benefiting the environment and society.

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0% found this document useful (0 votes)
261 views9 pages

Individual Report PATAGONIA Vfinal

Patagonia is an outdoor clothing company known for its strong commitment to sustainability. It integrates sustainability into its business model, culture, and all activities. This helps create value for stakeholders through initiatives like Common Threads, which encourages reusing and repairing clothes. Sustainability is embedded in Patagonia's value creation processes and contributes to competitive advantages over other brands through benefits like an improved brand image and reputation. Patagonia's approach demonstrates how sustainability can be profitable in the long-run while benefiting the environment and society.

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Cecilia
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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UNIVERSIDAD ESAN

MASTER IN BUSINESS ADMINISTRATION


MBA TP 59
Grupo 3

COURSE:

SUSTAINABILITY AND COMPETITIVE ADVANTAGE

PROFESSOR:

PAOLO TATICCHI, Ph.D.

TITLE:

INDIVIDUAL REPORT - PATAGONIA

El presente trabajo ha sido realizado de acuerdo a los reglamentos


de la Universidad ESAN por:

1206831

Puente Mansilla, Cecilia

Surco, 15 de Julio de 2016

Individual Report: Case of Patagonia


Patagonia is an American company specializing in outdoor clothing. Since their
beginnings, they have always been concerned about the impacts their activities may
cause to the environment and tried to reduce them to the minimum. Along with the
growth of the company, the commitment to the environment and society has also
become stronger, which is reflected in Patagonias mission statement: Build the best
product, cause no unnecessary harm, use business to inspire and implement solutions to
the environmental crisis.
In order to achieve this, they have explored new business models that are aligned with
their values, goals and principles of sustainability and responsible growth. The findings
in this report show, in my opinion that Patagonias business model is based on
Sustainability and by doing this, it lets the company to create value for all the
stakeholders and a competitive advantage from its competitors.
1. How do you assess Patagonias approach to sustainability?
Patagonias organizational culture integrates sustainability thinking in all the
activities and processes, starting since the definition of values, principles and goals
which are transmitted to all the members of the organization, clients, suppliers,
shareholders, that lead them to be considered an ethical and eco-conscious company
and the second one in the Sustainability Leaders Report 2015.
From all the researched sources, it is clear that Patagonia has taken a wildly
innovative approach to sustainability, for which it carries out a variety of actions,
initiatives and campaigns (Appendix 1). The most interesting of all these, is the
advertising campaign: Dont buy this jacket, in which it encourages customers to
buy less of Patagonias new apparel, by explaining the impacts that producing a
garment causes to the environment.
In this context, they started the Common Threads Initiative, which consist of
Reducing by not buying what you dont need, Repair, by helping customers repair
the gear and fix what is broken, Reuse, by sharing with someone who may need the
product, Recycle the products that are not useful, and establishing a partnership with
Ebay, in which someone can buy used Patagonia products over new ones. By
enabling customers to replace old products in a sustainable manner they can also
trade in wearable used products for store credit.
One of Patagonias sustainable strategies is 1% for the planet, in which it donates 1%
of its annual sales or 10% of its profits (whichever is greater) to environmentalist
groups.
In this case for example, society, environment, NGO environmentalist groups,
shareholders, are affected in a positive way, because the money will be used in good

environmentalist practices and shareholders will have a better performance for


improving the brands image and reputation.
According to the concepts presented in Journal of cleaner production 112
(Formentini - Taticchi, 2016)1, the analysis identifies Patagonia as a sustainability
leader, because the majority of its initiatives consider the three dimensions of
sustainability: economic, social and environmental.
This way of doing business, at first sight, could be against the logical purposes of a
business which is to generate profits. However, if we look at the financial results,
Patagonia has doubled its operations and revenues since 2008, tripled its profits in
the last five years and earned over $600 million in 20132. They have also opened 40
new stores all over the world since 2011.This probably reflects that the company has
succeeded in its efforts to communicate their added value and has established a
distinctive position of quality and good environmental practices.
Analyzing the negative points of Patagonia, we could mention the following:

They have done many efforts to be as transparent as they are, however, there are
still some aspects left, for example certification standards related to the organic
cotton they use in the production of the garments are not registered for a
certified company, or it is not mentioned in their reports.
The sustainability and Corporate Social Responsibility Reports are not made
according to the Global Reporting Initiative (GRI).
The green marketing they use could be considered only as a way to show
customers how responsible they are and to attract attention from new users
concerned about the environment, which ultimately would result in winning new
customers and getting more sales.

In conclusion, Patagonias business approach has demonstrated to be a sustainable


company from the triple bottom line perspective, Economic, social and
environmental aspects, reflected in most of the actions carried out by the company.
However, there is always space to improve the results maintaining sustainability as
the base of the new business model.
2. Is sustainability embedded in value-creation processes?
Sustainability is embedded in all processes and activities that create value for
stakeholders.
To illustrate how sustainability is involved in value-creation processes, we can take
some of the actions and initiatives carried out by Patagonia (Appendix 1), for
1

Formentini, M. y Taticchi, P. (enero,2016). Corporate sustainability approaches and governance mechanisms in sustainable supply
chain management. Journal of Cleaner Production, 112 pp. 1920-1933.
2
http://csrcentral.com/patagonia-the-clothing-company-with-a-revolutionary-approach-to-csr-sustainability/

example the Common Thread Initiative, and identify how the stakeholders are
affected in the value-creation processes and the relation with sustainability:
Customers benefits because they get products of a higher quality which have a
larger duration (increases life period), so they save some money reducing
purchases. = Value creation for customers based on sustainability
Environment is benefited with the reduction of garments considered as waste,
before starting to reuse and recycle the products for other people or other users.
= Value creation for environment based on sustainability
Suppliers are affected because they would reduce their purchase orders, and
decrease sales. = Value destroyed for suppliers
On the other side, if this initiative considers suppliers as part of the program, they
could get the recycled products as part of the new production process, reducing
costs in some materials. = Value creation for suppliers based on sustainability.
Society benefits from a better environment, better ways of living for people who
dont have access to buy a new product and now can buy a used one. = Value
creation for society based on sustainability.
Employees could benefit because this program improves the image and the
reputation of the company, and the people who work there feel more satisfied.
They could also have more job positions in the different locations = Value
creation for employees based on sustainability.
Shareholders will also be affected in a positive way, because of the good
reputation of the company with this initiative. = Value creation for shareholders
based on sustainability.
As we can see, in all the value-creation process identified for Patagonia,
sustainability is embedded and takes a very important role becoming a critical
success factor in todays business models.
3. Is sustainability contributing to build a competitive advantage?
According to Michael Porter (1985), competitive advantage is the ability gained
through attributes and resources to perform at a higher level than others in the same
industry or market.
For Patagonia, there are many factors that contribute to build a competitive
advantage, but the most important is sustainability.
The main benefits of an organization addressing sustainability is the impact on the
companys image and brand, but it is also to deliver new sources of competitive
advantage, as the results from the survey to the first 500 companies in fortune are
shown3.

MIT Sloan Management Review, Sustainability and Competitive advantage. Maurice Berns, Andrew Townend, Zayna Khayat,
Balu Balagopal, Martin Reeves, Michael S. Hopkins and Nina Kruschwitz. Fall 2009. Vol. 51 N 1.

Patagonia is famous for putting sustainability ahead of profit, and this strong
commitment to the environment and society and the future of the planet brings along
crucial strategies which lead the company to have better financial performance.
For example becoming a B corporation releases the company from getting the
highest returns only for shareholders and instead managing their business
considering all the stakeholders including society, environment, customers,
employees, suppliers, etc.
In order to become sustainable, Patagonia is following the five stages proposed by
Nimudolu4, in viewing compliance as opportunity to experiment with sustainable
technologies, making value chains sustainable, as well as the design of their
products, developing new business models and creating next-practice plattforms.
Patagonia takes action to achieve its mission in every part of the value chain scheme.
Their programs and initiatives are effective mainly because of their ethics related to
environmental conservation and corporate responsibility which is integrated into the
companys marketing communications. They enroll the customers and make them
part of a community to strengthen the bond between company and customer,
Patagonia has to live the published values and the customer is committed to act and
consume ethically. Being ethic its a new source of competitive advantage.
In a highly competitive industry, where increasing costs of raw material and
specialized processes to have a more efficient use of resources, improving labor
conditions, among others, lead to increase prices of the products for over 20%.
Nevertheless, Patagonia has increased its revenues and profits, taking advantage of
all the attributes and resources that allows having a better performance than the
competitors.
4. What is your evaluation of the sustainability reporting offered by Patagonia?
Patagonia does not report according to the Global Reporting Initiative (GRI).
However, it elaborates a report named: Environmental + Social initiatives, published
on the internet, in which they display all the activities, programs, initiatives, and
relevant facts for the company during one year.
Contrasting the Patagonias Report to The Global Reporting Initiative:
It does not include all the four principles for defining report content:
4

Stakeholder inclusiveness
Sustainability context
Materiality
Completeness

Nidumolu et Al, HBR, September 2009]

There is some information missing to the shareholders relating to economic


indicators, so it is not complete.

In terms of principles for defining report quality:


Balance: the report only presents positive aspects.
Comparability: the report does not make comparisons against the performance of
other organizations.
Accuracy: there are not economic indicators; the information is too general for
the stakeholders.
Timeliness: The report is based on the results of the year before. They publish
the report annually.
Clarity: is clear but need more detail.
Reliability: based on real initiatives.

About the general standard disclosures:


-

Strategy and analysis: it analyses the performance of the company, but the report
does not include target for the next years and goals for the coming 3-5 years, it
only reports the actions made during the reporting period.
Organizational profile: Not included
Identified material aspects and boundaries: not included
Stakeholder engagement: not included as specific
Report profile: not included
Governance: not mentioned directly but is involved in some of the actions and
programs carried out by the company
Ethics and integrity: Its not mentioned directly but is involved in all of the
actions and programs carried out by the company.

In conclusion, although the Patagonias report has relevant information about all the
practices, activities, initiatives and results of programs developed during the reporting
period, it is not complete about displaying more accurate information for all the
stakeholders. It is important to identify to all the stakeholders and material topics to
reflect economic, environmental and social impacts to assess the performance of the
organization. Also, it is necessary to have a balance to get a general view of the business
and not only the good practices. In my opinion, it would be important that this kind of
report would include some failures or difficulties that the company had passed through
in order to learn from them or emphasize the efforts on those aspects and continue
improving their processes to keep sustainability as part of the competitive advantage.

Conclusions and recommendations:


Patagonias case is an interesting example of a company that promotes corporate
sustainability since the early beginning, by executing good practices in labor
conditions, ensuring efficient use of resources, and leading initiatives for customers
to consume only the necessary items in order to preserve the environment.
The finding results show that Patagonias approach has been leading to growth as a
result of the alignment of sustainability to the business success.
Being ethical could be a source of competitive advantage: customers recognize that
their commitment to sustainability is not only a statement as part of the green
marketing, Patagonia has demonstrated to be a truly belief-based business, inspired
by the owner Yvon Chouinard.
Positioning as a green company in the mind of the customers that concerns about
sustainability brings a lot of benefits to be considered as a competitive advantage.
As a private held company, the information to financial statements was not
accessible.
There was limited information to negative aspects of Patagonia, beyond the lack of
reporting according to the GRI. Hence the report that the company presents only
includes the positive aspects, facts, practices and other initiatives for some
stakeholders.
It is important to set clear targets to compare and measure the results with other
companies in the industry or last periods results.

Appendix 1:

1% for the Planet: Patagonia donates 1% of the either 1% of annual sales or


10% of annual profits (whichever is greater) to environmentalist groups.
Common Threads Initiative: Reduce, Repair, Reuse, Recycle and Reimagine:
Worn wear
Footprint Chronicle, put supply chain info to the product pages for maximum
transparency.
Sustainable Apparel Coalition, an alliance of 30 companies from the clothing
and footwear industries, that measure their environmental impact throughout
their respective supply chains, benchmark their performances against each other,
then publish the results in a social and environmental performance index. This
index serves as a tool that clothing industry executives can use to make more
sustainable decisions when sourcing materials and developing products.
$20 Million and Change, a Patagonia-backed fund set up to assist like-minded,
responsible start-up companies bring about positive benefit to the environment.
B Corporation, status that frees American companies from their legal
requirement to deliver maximum returns for shareholders, releasing the firm to
pursue a mission for the betterment of the environment or wider society.
Good labor conditions
Supply chain value FLA
Use of more environmentally friendly materials, such as Organic cotton,
recycled polyester, etc.
Taking off for good: Employees can leave the jobs up to 2 months to work with
an environmental NGO, receiving the same wage.

BIBLIOGRAPHY
1. Formentini, M. y Taticchi, P. (enero,2016). Corporate sustainability approaches
and governance mechanisms in sustainable supply chain management. Journal
of Cleaner Production, 112 pp. 1920-1933.
2. MIT Sloan Management Review, Sustainability and Competitive advantage.
Maurice Berns, Andrew Townend, Zayna Khayat, Balu Balagopal, Martin
Reeves, Michael S. Hopkins and Nina Kruschwitz. Fall 2009. Vol. 51 N 1.
3. Nidumolu et Al, HBR, September 2009
Internet sources
http://www.patagonia.ca/company-info.html
http://www.patagonia.com/on/demandware.static/Sites-patagonia-us-Site/Library-SitesPatagoniaShared/en_US/PDF-US/patagonia-enviro-initiatives-2015.pdf
https://danielsethics.mgt.unm.edu/pdf/patagonia.pdf

http://csrcentral.com/patagonia-the-clothing-company-with-a-revolutionary-approachto-csr-sustainability/
https://www.youtube.com/watch?v=WexueycQgmY
https://bizgovsoc4.wordpress.com/2012/11/11/paper-2-patagonia-a-kantian-perspective/
http://www.expoknews.com/caso-de-exito-de-rse-patagonia/
https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principlesand-Standard-Disclosures.pdf
the 2015 sustainability Leaders GlobeScan-SustainAbility-Survey-.pdf
http://www.revistaestrategas.com.ar/noticia-787.html

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