Patagonia’s Bold Activism Offers Lesson for ESG Movement

Joseph Dana

Image courtesy of Scott Olson / Getty Images North America / Getty Images via AFP

Few other companies have been so closely associated with environmental causes than Patagonia. When the company announced this month that it would donate all its profits – averaging more than $100 million a year – to the Earth, consumers around the world saw the move as confirmation of its principles and values. The outdoor apparel company has made environmental protection and activism core to its operating procedure and company principles since the beginning. While the decision is certainly historic, the details are a little more revealing. What’s clear is that corporate responsibility initiatives have been flipped on their head in the wake of this bold gesture.

Environmental protections have long been core to Patagonia’s brand. The company has revolutionized the clothing industry through the use of recycled fabrics and other environmentally-friendly manufacturing standards. Such standards come with a cost and that has led to prohibitively high price tags for many of Patagonia’s items, which include everything from fleece tops to surfing wetsuits (using special environmentally friendly natural rubber, of course). The cost for items is so high that many joke the company should be called “Patagucci.”

Bucking the trend of excessive consumerism, Patagonia recently started pushing customers to repair their existing Patagonia clothes instead of buying new ones. The repair and reuse campaign falls neatly into the company’s iconoclastic business approach. In an interview with Fast Company Magazine, Yvon Chouinard, the billionaire founder of the company said he was “an avowed socialist. I’m proud of it. That was a dirty word just a few years ago until Bernie Sanders brought it up.”

Selling $400 jackets to wealthy consumers while aspiring to socialist values is a fascinating position. What’s more interesting in terms of Patagonia’s branding is the company’s long-standing contracts with the US military. The company has a dedicated team, supporting the US Special Operations Command (USSOCOM) with delivering US-made technical cold weather and combat uniforms. It doesn’t stop there. The company, which has been vocal on a variety of political issues in the US, has a special tactical clothing division called Lost Arrow, which works closely with various US police departments. The company has gone to great lengths to conceal details of Lost Arrow and its revenue, according to investigations by GQ.

There is nothing wrong with selling equipment to militaries and police departments. In some ways, it demonstrates just how tough the products are. In Patagonia’s case, however, it reveals the genius of the company’s branding. The company has made billions selling clothes that make its customers feel empowered from a social and environmental standpoint. By now, many consumers are aware of the challenges of climate change and how social structures allow corporate greed to flourish. Patagonia enables the consumer with enough money to buy a garment that will last a lifetime and be easy on the Earth.

There is a story that Slovenian philosopher Slavoj Zizek likes to share about Starbucks. When you get to the cash register there are often expensive bottles of water that brand themselves in a socially conscious way. The company will build a well in an impoverished community when you buy a bottle of expensive water. The logic here, Zizek points out, is that the consumer is aware that the coffee she is about to drink has come to her by some form of exploitation. The coffee farmer in some other corner of the world is living in an impoverished community and worked hard so that she could have a cup of coffee. Instead of changing the system that allows this to happen, the bottled water company offers the consumer a way to feel better about their decisions by purchasing a product inside the system. Buy something and we will help that far away place.

Patagonia’s announcement that all profits will go to a specially created trust designed to invest in various environment and climate-related charities is another realization of this thinking. Many have heralded Chouinard for his principled stance in taking this decision for good reason. It’s a bold act but one that must be understood in the context of the vast fortune that he has already made and the untold tax benefits that this decision will rain down on his family.

There are lessons from Patagonia’s brand pivots for the corporate environmental, social, and governance (ESG) movement. Over the last decade, major international corporations have adopted various forms of ESG standards designed to calm investor and consumer concerns about the ethical behavior of companies. There are even ESG funds traded on stock markets worldwide. In recent years, vocal critics like Elon Musk have said that ESGstandards are effectively meaningless in terms of the real-world behavior of companies. He might have a point but the larger issue is why ESG standards were created in the first place.

Patagonia’s bold decision and the struggles over ethical corporate governance are two sides of the same coin. There is a rot at the core of the global capitalist system that consumers and some investors are becoming obsessed with. That rot manifests in poor environmental projections to the growing inequality that defines many societies and deepens political divisions in countries like the US. On some level, we all know this is happening and we are complicit in the system.

Patagonia has found a way of positioning itself as a counterweight to that system while benefiting handsomely from it. ESG goals attempt largely to do the same thing but have missed the mark. Make no mistake, Patagonia’s divestment decision is a great one for environmental causes. One is left wondering, however,  if the Earth is now Patagonia’s only shareholder, does she have any ethical concerns about clothing the US military and police departments?

Joseph Dana is the former senior editor of Exponential View, a weekly newsletter about technology and its impact on society. He was also the editor-in-chief of emerge85, a lab exploring change in emerging markets and its global impact. Twitter: @ibnezra.