Patagonia: Taking Corporate Responsibility to the Next Level


After I read a number of class examples about unethical clothing companies, I wondered if there were clothing companies in today’s society that genuinely care about the environment and the future instead of short-term profits. There is so much news lately about businesses cutting corners and using immoral business practices because they are profit driven. I did find, though, that there are a handful of companies that actually care about their employees, customers, environment, and products. After much research, I eventually stumbled upon the clothing company called Patagonia. I owned a sweatshirt from the company, but I never knew much about it. I was intrigued with the company because of its mission statement and the low environmental impact it makes without sacrificing the high quality of its products. After all of this, I wondered if the company could even turn a profit.

Originally founded in 1973 by Yvon Chouinard, Patagonia is a privately owned company based in Ventura, California (Chouinard). Chouinard started the company in the back of his pickup truck by selling hand-forged mountain climbing gear (Chouinard). He combined his love for the outdoors, business, and the environment in order to create Patagonia. The company now “designs, develops, and markets clothing and gear for a wide range of outdoor sports, travel, and everyday wear (Chouinard).” Their products are currently sold in the 88 wholly owned retail outlets and other retail stores the company has teamed up with throughout the world (Associated Press). This growing company has doubled its revenues and tripled its profits since 2008 while running an advertising campaign to encourage customers to buy less (Associated Press). Patagonia is a pioneer corporation in today’s society because it values social responsibility and sustainability instead of profit margin. Management does not have to focus so tightly on the bottom line because it does not need to please shareholders. This unique company culture started with the founder and top management sticking to their values instead of compromising to increase their profit margin.

A truly ethical company starts from the commitment of the top managers. What sets Chouinard apart from the typical CEOs of multinational corporations is that he started Patagonia with the mindset of an environmentalist. He loves the outdoor and grew up with a passion for rock climbing and surfing (Chouinard). He never wanted to work in the corporate world, but he saw that his business could be an important resource for environmental activism. He set out to make high standards for ethical practices “in order to create the best quality products with the least environmental impact (Chouinard).” Chouinard is not afraid to decrease the company’s profit margin if the company is switching to a more sustainable practice that will benefit the company and the environment in the long term. The company’s mission statement best portrays Chouinard’s founding principles. The mission statement is to “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis (Patagonia site).” Patagonia also has a specific code of ethics to make sure that the company “promotes fair labor practices and safe working conditions throughout their supply chain (Holmes).”

Yvon Chouinard wanted to create an environment that fosters the well being of employees in order to further enrich the company. Employees receive handsome salaries, parental and health benefits, maternity and paternity leave, paid internships with non profit environmental groups, surfing breaks, employee discounts and much more (Associated Press). At the main office in Ventura, workers even receive on-site day care and school for children ranging in age from 8 weeks to 14 years. Chouinard thinks that the day care center is “ a profit because it keeps five to ten people a year from having to quit (Chouinard).” Employees are very loyal to the company because they also love the corporate culture and mission. As a result of the overwhelming employee satisfaction, the company’s employee turnover is in the single digits compared to other apparel retailers who commonly see turnover of over 100% annually (Associated Press). The company also has a specific workplace code of conduct that “states what is ethical and acceptable in regards to a variety of topics both inside and outside the workplace.” This code of ethics helps to create an environment where workers are appreciated and work very hard at the same time.

Patagonia’s sustainability is portrayed the best through their supply chain management. Yvon Chouinard wanted to create a company that did not sacrifice environmental impact for high quality. Even though Patagonia does not make any of their products, the company is committed to working with factories that share their same values. However, Patagonia is not a perfect company. Like most clothing companies, Patagonia got caught up in outsourcing to new factories when they were rapidly expanding that they knew nothing about except the very cheap price. But what separates Patagonia from most other companies is how they responded to the problem. The company quickly hired a manager of social responsibility and a third party auditor to visit and review every single factory the company works (Chouinard). The customers are fully informed about every step of the clothing process. The company created a life cycle product study called “Footprint Chronicles” (Holmes). This allows customers to trace a product from design to development, manufacturing, production and transportation of the product (Holmes). Patagonia also discloses a list of its entire suppliers, which is very rare especially in the clothing industry (Holmes). The company is not required to disclose all of this information to its customers, but management felt like they have a duty to its customers to keep them informed about all of the company processes.

One sizable cost that Patagonia endured in order to make their supply chain more green was to convert to organic cotton in order to make less of an environmental impact. Patagonia is headquartered in California, but the lack of an organic cotton industry in the state did not stop Chouinard from making the decision to switch to the material in 1996 (Holmes). When a lot of employees starting getting sick, the CEO ordered an environmental assessment on the material to see what was causing the problem. The results of the environmental assessment showed that the regular cotton was the largest source of conventional pollution (Holmes). According to Rob Bondurant, the VP of marketing at Patagonia, management came to the conclusion that they would “rather go out of business than continue to use conventional cotton (Holmes).” That is a very bold stance that is not regularly taken by businesses in the clothing industry today. The corporation saw all of the negative impacts that cotton pollution had on the local water supply and wildlife so change was imminent. In order to develop an organic cotton industry in California, management had to convince farmers and spinners to go organic and agreed to subsidize them (Holmes). The company took many new risks associated with supply and performance by converting to organic cotton including a low profit margin for many months. These risks were justified according to Setnicka, the CFO, because the company is more concerned with the environment than having the company grow rapidly. According to Setnicka, “we sort of look at growth in this company the way we look at a life cycle. If any one component grows too much or too fast, it throws the system out of balance (Holmes).” This is a unique perspective to approach growth in a business because usually top management is only concerned with growing the company and the stock price as quickly as possible to reap the extra benefits. Surprisingly all of the risks paid all. Most of the customers agreed to pay the premium so Patagonia could afford to use organic cotton because customers really liked the concept (Holmes). This example shows that a company can act ethically while still earning a significant profit and keeping a loyal, strong customer base.

Probably the biggest company initiative towards helping the environment is through a program it co-founded called 1% for the Plant. The company started this program in 1995 and has contributed over $33 million and counting (Holmes). Patagonia donates 1% of their total sales to environmental organizations worldwide every year (Holmes). This program reflects Patagonia’s commitment to the environment and sustainability. Giving this one percent of total sales was not seen as a philanthropy in the eyes of management. It is viewed as part of the cost of doing business in order to try to balance the impact the company has on the natural systems (Chouinard). Since the program was growing too quickly and could no longer be managed by the company, it turned into a non-profit organization. Today the organization has a membership of over 1,000 companies.

Thanks to Patagonia’s mission statement and code of ethics, the company has not had to deal with any major controversy or critics. Probably the biggest criticism of the company is the cost of the products. Using environmentally safer material causes the retail prices of the products to be more expensive. Patagonia realizes that it produces are for the upper middle class. The CEO, Casey Sheahan, also realizes that consumers are very willing to pay a couple more dollars because they know that Patagonia inflicted less damage on the environment while making the product than their competitor clothing makers (Associated Press).

To examine how ethically the company really is, I will refer to Norman Bowie’s work called A Kantian Approach to Business Ethics. Bowie states that, “Kant’s ethics is an ethics of duty rather than an ethics of consequences (Bowie 4). The ethical person is the person who acts from the right intentions (Bowie 4).” Long before much of corporate America embraced “green business,” Patagonia was creating clothes from recycled soda bottles and installing solar panels at its corporate headquarters (Gardiner). Chouinard felt a duty to create durable, long-lasting products and be environmentally responsible at the same time. He did not do it for the awards or the recognition; he did it for the right intentions. To examine Kant’s argument, Bowie examined and applied the three formulations of the categorical imperative to business ethics.

The first formulation is “act only on the maxims which you can will to be universal laws of nature (Bowie 4).” A world in which every corporation acted socially responsible and focused on long term sustainability would be logically coherent. If a maxim of being socially responsible was universalized, managers would be required to focus on the impact of their business ventures on the environment. Even though managers would adjust their mindset to be focused environmentally, they would still be focused on making a profit. So the two maxims together are not self-contradicting. They can exist together because people are acting ethically and business practices are possible. The second formulation is “always treat the humanity in a person as an end, and never as a means merely (Bowie 7).” Patagonia treats its employees exceptionally well by going above and beyond the standard amount of employee benefits. The company does not use other people to satisfy or further their own interests or profits (Bowie 7). Patagonia even makes sure that the factories it outsources its labor to treats its workers just through third party auditors. Patagonia is very transparent and believes that its customers and employees should have the opportunity to know all of the important information of the company. The company give all employees the opportunity to attend monthly meetings with executives in which they review the financial statements and customers are given the entire list of suppliers Patagonia works with (Chouinard). The last categorical imperative is “so act if you were a member of an ideal kingdom of ends in which you were both subject and sovereign at the same time (Bowie 10).” Patagonia does a lot of planning before implementing a rule or process to make sure that the impact is very minimal for the environment and that the corporate culture is not negatively affected. The switch to organic cotton is a great example of this. Patagonia discovered that its employees were getting sick from the pollution of the cotton and the cotton had a major effect on the environment. As a result, management quickly took action and ultimately changed from regular to organic cotton. Also, Yvon Chouinard believed that since the company was so profitability because of the environment then the company had a duty to give one percent of its total revenue to environmental organizations every year. By looking at Patagonia through a Kantian approach, I can conclude that the company is definitely an ethical corporation as is passes the three categorical imperatives with flying colors. The company goes above the industry standards to make sure every aspect of its business structure is socially responsible.

The ethical analysis of Patagonia can also be looked at in the view of Deontology, which is very similar to Kantianism. Edwin Micewski and Cermelita Troy wrote Business Ethics: Deontological Revisted (Micewski). These authors wrote an extension of Kant’s second categorical imperative that says that the ends never justify the means. According to these two authors, “the deontological approach states that the ends of any action can never justify the use of any or all means (Micewski).” Micewski and Troy state that the “real test of our code of ethic conduct is whether we are willing to do the right thing even when it is not exclusively in our self-interest (Micewski).” This is the main principle of Patagonia. The executives realize that they have to make a profit in order to stay in business, but they incur major costs in order to lessen the impact on the environment and help the future of the environment. The company even ran an advertising campaign on Black Friday that advised consumers not to buy their product with the hope of cutting down on consumerism. This advertisement was not benefiting them in anyway, it was actually hurting their profits. The company did not care because they wanted to help stop the epidemic of the public over consuming. Patagonia is dedicated to helping the environment and the future even at the cost to their profits.

Patagonia is not the perfect company and it occasionally makes mistakes that do affect the environment and the public. Although, Patagonia is an ethical company overall whose level of corporate responsibility and sustainability should be imitated by other major companies. Chouinard’s unique management style has attracted big time corporations, such as Walmart, to partner with Patagonia since they see a major benefit in becoming more socially responsibility. Patagonia is an unique company that is morally driven to better the future of the environment instead of the future of their profits.

https://www.youtube.com/watch?v=9aRIrbY2ITY

Bibliography

Associated Press. “Keeping Employees Happy : Sportswear Firm Beefs Up Benefits to Boost Worker Contentment.” Los Angeles Times. Los Angeles Times, n.d. Web. 06 Apr. 2013.

Bowie, Norman E. “A Kantian Approach to Business Ethics.” (n.d.): n. pag. Print.

Case Western Reserve University. “Patagonia Founder Yvon Chouinard to Receive Inamori Ethics Prize.” NewsWise. N.p., 18 Feb. 2013. Web. 06 Apr. 2013. <http://www.newswise.com/articles/patagonia-founder-yvon-chouinard-to-receive-inamori- ethics-prize>.

Chouinard, Yvon. Let My People Go Surfing: The Education of a Reluctant Businessman. New York: Penguin, 2005. Print.

Gardiner, Lisa. “Patagonia and Corporate Responsibility.” Mark Kula Center for Applied Ethics. N.p., n.d. Web. 06 Apr. 2013. <http://www.scu.edu/ethics/publications/iie/v8n1/synchilla.html&gt;.

Henneman, Todd. “Patagonia Fills Payroll With People Who Are Passionate.” Workforce. N.p., 07 Nov. 2011. Web. 06 Apr. 2013. <http://www.workforce.com/article/20111104/NEWS02/111109975/patagonia-fills-payroll- with-people-who-are-passionate>.

Micewski, Edwin R., and Carmelita Troy. “Business Ethics – Deontologically Revisited.” Journal of Business Ethics 72.1 (2007): 17-25. Print.

Steveson, Seth. “Patagonia’s Founder Is America’s Most Unlikely Guru.” The Wall Street Journal. N.p., 26 Apr. 2012. Web. 6 Apr. 2013. <http://online.wsj.com/article/SB10001424052702303513404577352221465986612.html&gt;.

Social Ethics vs Business Ethics


So here is a news article about a bartender from Ohio who was fired for calling the police on a customer who was intoxicated and driving home. The owner stated that it was “bad for business” for a bartender to call the cops on its drunk customers. Here’s the link:. I thought this article was very relevant to our class. It clearly demonstrates the boundaries placed between businesses and society when it comes to certain issues. A bar is in the business of serving alcohol. Society has a very rigid opinions on drinking and driving, with good reason. So did the bartender deserve to be fired? Is the reasoning legitimate? Personally, I believe that she was morally obligated to stop the customer from driving away. Perhaps calling a taxi service and taking away the customer’s keys should have been attempted first before allowing the customer to just waltz out and being forced to call the authorities. Firing her may have been a little extreme. Her past actions should have played some role in the decision. I doubt she has a habit of calling the cops on her customers. Please add comments as your thoughts on the whole issue.

Tim vs Steve


Tim v. Steve

 Until Steve Jobs’ death in late 2011, Apple had always employed a policy of secrecy when it came to what information, about the company, they released into the outside world.  This policy was pioneered by Jobs, and was a cornerstone of company policy during his time as CEO.  Jobs thought that if they kept all of the details of their business model successfully hidden, then they could continue to stay ahead of the competition.  The problem is that we live in the 21st century and that is not how stakeholders like to see businesses run.  In a time that has seen the downfall of major corporate powerhouses like Enron and Lehman Brothers, the public has grown weary of what a businesses’ true intent actually is. 

            While I understand the theory behind Jobs’ policy, and agree that keeping R&D under a veil of secrecy is important, I still believe that businesses should be required to release statistical information about their business practices.  We need a way to keep these companies honest and progressive.  While gains are definitely being made on that front in terms of enacting more legislation, we have not seen a huge change in the situation within the past 10 years. So, while I agree that Jobs was probably the most innovative person of his time, he did not do much to show the public that Apple was a socially responsible. 

Apple_logo_Think_Different

            So where is the company today?  Well for one thing they have a brand new CEO, Tim Cook.  Tim Cook replaced Jobs after Jobs passed away from pancreatic cancer in late 2011.  Most Apple followers were terrified what this would mean for the company’s future, seeing as it was Jobs’ innovative vision that had brought the company so much success.

So what about this Tim Cook, what is he doing for Apple?  Since Cook took the position as CEO he has already started a renovation of the company’s image. Cook, having worked as Apple’s COO before becoming CEO, was well aware of the company’s previous policy of secrecy and agreed the company needed an image makeover.

            Cook has began this process by reviewing the way that the company treats its employees.  Cook realized that they needed to be able to attract the best young minds in their fields in order to remain competitive and innovative.  An attractive working environment will not only incentivize employees to want work for the company, but it also helps retain employees, which promotes productivity.  This effort to address and take steps to make Apple a better place to work shows that Apple cares about their employees and is taking efforts to improve this relationship. 

            Another stakeholder Cook has reached out would be the community at large.  Under Jobs’ reign Apple “didn’t do charity”.  Jobs believed that, that money would be better spent on R&D.  Well guess what?  The public cares are community service, and admires corporations that work with charities.  Cook saw this weakness as an opportunity to improve and recently announced that they will now be participating in a charity-matching program.  What this means is that Apple will now match, dollar for dollar, employee donations of up to $10,000 per year.  For a company that “didn’t do charity”, this seems like a pretty positive step in the right direction. 

            Cook has also addressed the issues with their suppliers overseas.  Cook was actually the individual that was sent over to China to inspect their supplier’s factories when the controversy arose.  Cook was not pleased with what he saw and hired a nonprofit auditing organization, the Fair Labor Association, to conduct regular audits of the company’s supplier’s factories.  However, according to recent reports it does not appear that too much has changed on this front.  There are still numerous violations found during every single audit.  While, I understand that Apple does not have much authority over these matters because they do not directly control these factories, they do have a certain amount of influence over the people that do.  In the future, Apple needs to take a stronger stance against supplier violations.  They need to make it clear to these companies that inhuman behavior is unacceptable. 

            Overall, Apple appears to be moving in a positive direction under new CEO, Tim Cook, but there is still room for improvement.  Cook definitely needs to do more to make sure that their Code of Ethics are actually being enforced in supplier factories, and perhaps even enforce harsher punishments for violators.  I am usually not an advocate of using “punishment” as a solution, but because what these companies are doing is unethical and inhumane they need to realize that there are consequences for treating their employees poorly. 

 

Sources:

http://www.dailyfinance.com/2012/09/14/corporate-responsibility-spotlight-apple/

http://www.imd.org/research/challenges/corporate-social-responsability-apple-opportunity-rosa-chun.cfm

http://www.cnn.com/2012/10/04/tech/innovation/apple-tim-cook

 

Pictures:

http://blog.laptopmag.com/tim-cook-vs-steve-jobs-new-ceo-acts-like-a-leader-but-wheres-the-magic

 

We DON’T make homes possible


It is clear that Freddie Mac (the Federal Home Loan Mortgage Corporation) has not learned it’s lesson from the millions they lost during the housing crash in 2008.  They have continued to act unethically and take advantage of both the government and American homeowners who wish to buy mortgages.  They have tested the government’s generosity long enough – the company is now facing many lawsuits and is facing extinction because of their mistreatment of homeowners and taxpayers money. 

For those who don’t know, Freddie Mac is a taxpayer-owned mortgage giant that was created by the government to make loans more accessible.  However, during the housing bubble they took advantage of their position by backing loans they knew were terrible.  The top executives at Freddie Mac also are being charged by the SEC for failing to disclose billions of dollars in risky subprime mortgages.  The company lost more than $30 billion and as a result the taxpayers had to pick up the pieces.  In order to bolster the economy, the Obama administration had asked Freddie Mac (and their competitor Fannie Mae) to ease conditions for people looking for mortgages and offering incentives to forgive some homeowner debt.  The company has refused.   

Regardless of one’s opinion about the company’s policies, one cannot deny the unethical behavior that was exposed earlier this year.  Apparently, the company has been betting against homeowners’ ability refinance their loans while they make it more difficult for them to do so.  Furthermore, they have bought several billion dollars of inverse floater securities (which made up of the interest from the mortgages) and saved it for themselves while selling the far less risky principal.  This is the opposite of what they should be doing, which is decrease the size of their investment portfolios.  These securities would enable the company to make more money with higher interest rates, which is why the benefit.  Of course, this entire concept completely contradicts the sole purpose of the company: to help homeowners find cheaper mortgages.  The company has taken no incentives to right the wrongs they committed during the housing bubble, and instead of making strives to boost the economy they have been digging in their heals. 

http://www.nytimes.com/2012/01/31/business/freddie-mac-investments-under-scrutiny-by-treasury-dept.html?ref=business&_r=0

Play Ball! Prompt 5- Sports


For this week’s blog post we will be revisiting the topic of ethics.  We have talked about ethics in business during our class time, but ethics goes beyond the realm of business into nearly every aspect of our lives.

When it comes to sports, ethics also play a major role.  Whether it is the conduct of a single athlete, the coach, or the organization, ethical decisions are constantly being contemplated.

For Blog 5, write about your own experiences or opinions on ethics in sports.  Have you ever been presented with a situation where you felt you had to be “unethical” in a given play?  Is there even such a thing as ethics in sports?  Are there any sports organizations you feel are the models for ethical or unethical behavior? Can the idea of ethics in sports be tied to ethics in business?  Do people take what they learn and internalize from sports into business (or their careers in other areas), or is it the opposite?  What they learn in sports becomes the basis for understanding one’s own actions in business, work, and professional contexts.

These are a few questions to get your brain active but feel free to approach the prompt however you feel addresses the overall topic of ethics in sports.

You need not be an “athlete” to write!  Feel free to discuss other aspects of sports in society.

Also, please show us your wordpress chops.  Add images, video, a poll!  RATE any posts you read.  And comments.  Like what you wrote?  Promote it via twitter, facebook, google +.  Be proud of your writing.  Flex your muscles.

American Wallflowers


            Unsure, that’s the only word I can really think of to describe how I am feeling right now.  Listening to Mike Daisey comically recount the inhuman behavior that routinely takes place at the Foxconn factories in China horrified me.  I mean, people are literally killing themselves just so that they don’t have to work there any longer, that is absolutely shocking.  Ask yourself what would happen if this happened here in America?  Well, first of all it wouldn’t happen here because we have laws and labor unions protecting worker rights, but in any case, hypothetically, if it were to occur here the American public would be outraged.  The scandal and backlash that it would cause would be immense…so why do we not have the same reaction when we hear that American companies are encouraging such behavior by doing business with these organizations?  Sure, it was mentioned that Apple is trying to clean up their act, but in a culture where laborers barely have any rights do they really think much is really going to change?  Sorry if that is a cynical view of the situation, but the truth of the matter is that Apple still does business with Foxconn, despite all the terrible things they have been caught doing.

            But, the truth of the matter is do they really have a choice?  In a world where most manufactured goods are made overseas, for barely any cost to the company financially, companies have been forced to look the other way when it comes to how their products are manufactured in order to protect their own company’s survival.  These workers are being paid roughly $360 (link attached, NYT) a week for their work and are working twice as long, if not more, than the average American.  Can you imagine trying to survive on $360 a week and working 70-80 hours a week?  That, along with working my butt off doing the same monotonous task over and over again with no possible end in sight, I would probably want to throw myself off a building too.  So here we are stuck in one of the largest conundrums facing a rapidly globalizing economy.  What are our options?  Do we do what would be ethically right and boycott companies that allow their goods to be manufactured in sweatshops? (which keep in mind is a huge amount of the manufactured goods we rely on)  Or do we look the other way?  Out of sight, out of mind?  There has to be a better compromise than what is going on right now, its inhumane.  But then again how much can we do about the way other countries conduct business within their own boarders? Something has to give, and hopefully this will be the start of some real change, I guess that’s all we can really hope for right now until these countries decide to really take a stand against this conduct. 

 

http://economix.blogs.nytimes.com/2012/02/24/the-ieconomy-how-much-do-foxconn-workers-make/