Patagonia — Sustainability and the Product Lifecycle Initiative
What is Patagonia
For those of you who are not familiar, Patagonia is an outdoor apparel company that offers a wide range of products suitable for different activities including: mountaineering, climbing, skiing/snowboarding, surfing and casual wear. Patagonia was officially established in 1972 as an apparel line for Chouinard Equipment. The parent Company, which was based in Ventura, California, was named after its founder, and current Patagonia board member, Yvon Chouinard. Patagonia focused on developing high quality products that could withstand the rigors of extreme outdoor environments. In order to ensure that all products met the Company’s stringent quality requirements, it employed a number of expert outdoor athletes to do testing and provide feedback. Chouinard and his colleagues at Patagonia also had a strong commitment to the environment and this became a core philosophy of the Company. By promoting environmental idealism and developing high quality products, Patagonia was able to become one of the most successful outdoor apparel companies in the world. However, in order to continue this success, Chouinard knew that Patagonia would need to continually innovate to stay ahead of its competitors.
Product Lifecycle Initiative
Patagonia is considering implementing a new Product Lifecycle Initiative (PLI), which will encourage customers to consume less and thus generate less waste. Core to the PLI was a 4-R Philosophy: Reduce, Repair, Reuse and Recycle. Patagonia would encourage its customers to consume less, facilitate the repair of damaged products, encourage the reuse of products through swap or resale and recycle a product if it could no longer be used. This program is both ambitious and environmentally conscious, however it could impact the Company’s ability to be profitable. In order to successfully implement the new PLI initiative, Patagonia must develop solutions to increase earnings while staying true to the Company’s core values and business philosophy. In the words of Yvon Chouinard, Patagonia’s founder, “If we wish to lead corporate America by example, we have to be profitable. No company will respect us, no matter how much money we give away or how much publicity we receive for being one of the ‘100 Best Companies,’ if we are not profitable”.
The Problem
As previously mentioned, Patagonia is concerned that its PLI initiative could impact the Company’s ability to be financially successful. In order to repair and recycle clothing as part of the PLI, significant staff and facility expansion would need to occur in order to accommodate the influx of returned clothing. Also core to the PLI is, “Reduce”, and Patagonia would have to encourage consumers to purchase less in order to stay true to its mission. If Patagonia’s efforts were not considered genuine, it could permanently impact its relationship with customers who value the Company’s integrity and environmental commitment.
Stakeholders
Patagonia is a private company and therefore Chouinard and the rest of the board do not have to appease shareholders. This provides Chouinard, Patagonia’s board and its management team with a degree of flexibility to dictate the strategic direction of the Company. Still, Patagonia has several key stakeholder groups that need to be acknowledged, and considered, when implementing a new strategic plan. Stakeholders include:
• Customers of Patagonia products (Primary)
o Use level (Hardcore, Enthusiast, Casual)
o Geography (North America, Japan, Europe, South America)
• Employees and their families
• Third-party retailers
• Manufacturers
• NGO’s and other environmental organizations that receive donations from Patagonia
• Sponsored athletes
• Governments (Indirectly through tax revenue)
Each stakeholder group has an impact on Patagonia’s operations, but customers must remain the primary concern of the company. Also, each stakeholder group (except possibly manufacturers) demands that Patagonia remain true to its environmental goals and continue to provide high quality outdoor apparel.
Recommendation
Increase Price
If Patagonia pursues its PLI strategy, sales volume might decrease. The simplest way to increase revenue, and meet Company targets is to increase the prices of its products. Based on statistics regarding the income of Patagonia customers and the Company’s extremely loyal following, it may be possible to raise prices without any negative consequence. Conversely, the Company may upset some of its more hardcore or, ‘dirtbag’ customers who likely remain price conscious.
Recycling
Recycling is already one of the 4-R’s and a key component of the Product Lifecycle Initiative. By accepting clothes that are beyond repair and recovering reusable components, Patagonia can recycle components in its own supply chain. This would be particularly useful with components such as zippers, draw cords, and premium fabrics like Gore-Tex. For example, if a jacket was largely worn out, the zipper could be fitted to another jacket and the material from the sleeve could be used to form a hood or a pocket. Other materials could be used for stuffing (insulation) or lining. For example, a piece of a fleece jacket could be fitted to the inside of a jacket pocket for added warmth and comfort.
Resale
If Patagonia can reuse components of recycled products, they could also potentially sell them to other manufacturers. If a color or style was discontinued by Patagonia, but is now being used by North Face, for example, the Company could resell that material. After all, Gore-Tex is Gore-tex, regardless of who puts the label on it.
Third Party Repair Services
Patagonia should not bear the burden of repairing every single product that is returned. In certain cases the expertise of seasoned Patagonia employees may be needed. However, in other cases, Patagonia should be able to contract out to third party repair services. These specialized services could also manage logistics for shipping and further reduce Patagonia’s overall expenses.
Charge for Repair and Recycle Services
If Patagonia is unable to meet revenue goals, the Company may have to charge for services such as repair and recycling. This action should be a last resort as it’s likely to anger loyal Patagonia customers.
Customer Engagement
Patagonia must also realize there will be a certain amount of lag time in establishing new protocols as part of the PLI initiative. Repair centers will take time to get up and running, newly hired staff will be on a learning curve and unanticipated inefficiencies must be tackled as they arise. Therefore, the Company must launch a strong marketing campaign that should include either incentives or discounts for customers who become frustrated. This could occur if items are lost, or take too long to repair.
Conclusion
I believe that the PLI is a game changer. It is a very positive step, both in terms of environmental responsibility and engagement with a loyal customer base. It will also generate a significant amount of PR that can help the Company gain new customers. Having known a number of hardcore Patagonia customers, I believe that they will respond very well to the PLI initiative. After all, who does not want to save that lucky jacket which has kept them warm and safe for so many years?
That said, the Company must also remain realistic. It needs to recognize that it is a business that needs to be run profitably. As stated by Patagonia’s Rick Ridgeway, VP of Environmental Initiatives, “Sustainability is a bullshit term unless you live in a cave. We’re never going to get down to zero environmental impact — if you think we’re making clothing and saving the planet, you’re wrong. There are no perfect solutions. We don’t want to externalize the harm that we’re producing, but continue to do our part in reducing it as much as possible”. With that in mind, PLI is a great step in the right direction.
