University of the District of Columbia Patagonia Case Study 1- State the extent to which you agree with the following: Patagonia should build the proposed

University of the District of Columbia Patagonia Case Study 1- State the extent to which you agree with the following: Patagonia should build the proposed used clothing market with Ebay. Choose One!

-Agree .  -Strongly Agree .  -Neither Disagree or Agree .  – Disagree .  -Strongly Disagree 

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2- What is the #1 way in which Patagonia’s CSR (corporate social responsibility) aims support their  goals?business strategy

3- Milton Friedman, the famous economist said, “The business of business is business” meaning that companies don’t have social responsibilities beyond maximizing profit (within the law). In what business types or industries are effective CSR efforts *least* likely to contribute to firm profits? Why?

4- Consider the company or organization that you work for and then state the extent to which you agree with the following:             “Our CSR program is aligned with our overall business strategy.”  Choose One!

-Agree .  -Strongly Agree .  -Neither Disagree or Agree .  – Disagree .  -Strongly Disagree .  -N/A


Corporate Social Responsibilities:…

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case W92C30
March 16, 2012
Patagonia: Encouraging Customers
to Buy Used Clothing (A)
There is no business to be done on a dead planet.1
—David Brower, also etched into the front door of Patagonia’s headquarters2
Patagonia will never be completely socially responsible. It will never make a totally sustainable
nondamaging product. But it is committed to trying.3
—Yvon Chouinard, founder of Patagonia
As Yvon Chouinard, founder and owner of Patagonia, sat at his desk in Ventura, California, he pondered
the possible impacts of a new business venture. His Vice President of Environmental Initiatives, Rick Ridgeway,
was proposing that Patagonia partner with eBay and launch a revolutionary program that would encourage
its customers to purchase used Patagonia apparel through eBay instead of buying new clothing.4 Ridgeway
had argued that this partnership would complete Patagonia’s environmental mantra of reduce, repair, reuse,
recycle, and reimagine by providing a mechanism for its customers to sell or trade used Patagonia attire.
Chouinard knew that this would be a radical move for a retailer, as it directly threatened to undermine
the company’s revenue base. However, Chouinard also knew that the partnership could serve as a unique
opportunity for his company to influence the consumer apparel industry for the betterment of the planet.
Although Chouinard had a successful history of incorporating sustainability into the heart of Patagonia,
this new partnership would go further than any prior effort. Would promoting secondhand purchases
undermine his company’s source of revenue? Would doing so have little effect because his affluent customers
shun used clothing? Would it open a new customer base with those who had less disposable income but
who could now afford Patagonia attire? Or would it revolutionize the consumer industry by starting a
movement to decrease consumption, which would ultimately benefit the planet at the expense of Patagonia?
As Chouinard looked around the office at the bicycles, surfboards, solar panels, and Tibetan prayer flags,5
he wondered how this venture would affect his loyal customers, employees, and the company’s status as an
industry leader in environmental sustainability.
Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan.
©2012 William Davidson Institute. This case was written by graduate students Allyson Johnson, Courtney Lee, Steven Rippberger, and
Morgane Treanton, under the supervision of Andrew Hoffman, Holcim (US) Professor of Sustainable Enterprise at the Ross School of
Business at the University of Michigan, as the basis for class discussion rather than to illustrate either effective or ineffective handling
of an administrative situation.
Unauthorized reproduction and distribution is an infringement of copyright. Contact us for permissions: or 734-615-9553
This document is authorized for use only by Malik Kayal in BADM Strategy Summer 2020 taught by DAVID HALLIDAY, George Washington University from May 2020 to Nov 2020.
For the exclusive use of M. Kayal, 2020.
Patagonia: Encouraging Customers to Buy Used Clothing (A)
The Outdoor Gear and Clothing Industry
Since the backpacking and camping craze in the 1960s and 1970s, the outdoor equipment and gear
market exploded. Many hippies and outdoor adventurers founded companies in university towns such as
Berkeley, Seattle, and Boulder.6 Well-known companies in the market, including Patagonia, The North Face,
Columbia Sportswear, Recreational Equipment Inc. (REI), Marmot Mountain Ltd., and Mountain Hardware,
were founded by avid hikers, climbers, and mountaineers who valued nature and the environment. These
companies “were dedicated to making good products, but weren’t profit-oriented.”7
It was not until the market flooded in the 1980s with prominent companies supplying hard-core
expedition and climbing gear that outdoor companies shifted to produce apparel and fashion to accompany
their products.8 The apparel part of the industry attracted a much broader market, and the most attractive
aspect to the public was the functional innovations aimed at making outdoor sports easier and safer.9
The outdoor industry grew steadily over the years. The core customer base was people in high-income
brackets, but since the economic recession in 2008, it expanded to include a broader range. According to
Frank Hugelmeyer from the Outdoor Industry Association (OIA), more people seemed to want to get away
from the recession by exploring the great outdoors. While people cut back on spending during the recession,
one area remained strong—sales in outdoor gear and apparel.10 The outdoor industry dipped 2% in 2009 but
increased more than 8% during 2010, topping overall retail sales.11
The OIA provided trade services for over four thousand manufacturers, distributors, suppliers, sale
representatives, and retailers in the outdoor business.12 Prompted by the changing market toward sustainable
practices, the OIA, coupled with companies interested in improving their environmental performance,
established the Eco Working Group. The group consisted of more than one hundred outdoor businesses,
including Patagonia, The North Face, REI, and Columbia. Collaborative efforts to develop a standard
environmental assessment eco-index for apparel, footwear, and gear would allow companies to incorporate
environmental considerations into product design and manage supply chains.13
Competitive Shifts toward Sustainability
While Patagonia was the first to lead an effort toward more sustainable industry operations, competitors
were not far behind. The North Face was passionate about protecting the environment and recently began
conducting life cycle assessments on its product manufacturing process. The company found that a significant
portion of operations was negatively affecting the environment. Energy reduction and efficiency initiatives
helped improve the manufacturing processes, and the company established corporate goals and strategies to
continue reducing its environmental impact.
REI was the nation’s largest consumer co-op and most trusted retailer for manufacturers of outdoor
gear. The business was passionate about outdoor recreation and was equally enthusiastic about protecting
and maintaining the environment. REI continued to stay true to these roots, as the co-op had extensive
commitments to environmental stewardship. It gave back to communities through donations to nonprofits
and coordinated restoration service projects across the nation.
REI conducted sustainable operations in its manufacturing process. In 2007, the co-op began producing
products that contained organic cotton, organic wool, hemp, recycled materials, and bamboo fabric. The
REI ecoSensitive label was established to inform customers about product contents. The label indicated if
REI ecoSensitive products consisted of 50% recycled materials, 85% renewable materials, or 95% organic
cotton. The company pursued such additional sustainability practices as being more energy efficient and
incorporating the phrase “reduce, reuse, and recycle” into all of its business operations.14
Unauthorized reproduction and distribution is an infringement of copyright. Contact us for permissions: or 734-615-9553
This document is authorized for use only by Malik Kayal in BADM Strategy Summer 2020 taught by DAVID HALLIDAY, George Washington University from May 2020 to Nov 2020.
For the exclusive use of M. Kayal, 2020.
Patagonia: Encouraging Customers to Buy Used Clothing (A)
Columbia Sportswear Company was committed to mitigating its environmental impact across its business
operations, but it had more to do before becoming fully sustainable. The company had ongoing sustainability
projects, e.g., installing solar photovoltaic panels on the roof of its headquarters, practicing energy efficiency
at facilities, and earning Leadership in Energy and Environmental Design (LEED) certifications at some of its
retail stores. The company also had a limited eco-conscious product line whose materials and manufacturing
processes caused less environmental damage than conventional materials and manufacturing processes.15
A relatively new company called Mountain Hardware aimed to create products that would “stay in
your kit longer—and out of the landfill.”16 About 65% of its cotton products used organic yarns, while
other products used recycled polyester and reclaimed ethylene-vinyl acetate foam cores. The company was
constantly researching new sustainable materials and processes to reduce its environmental impact.
ARC’TERYX, however, was unwilling to sacrifice technical performance for environmentally sustainable
business practices. Its products were made with synthetic materials derived from nonrenewable, petroleumbased resources, e.g. oil.17 The company’s core values lay within building the finest products possible that
would perform and outlast other companies, but it was becoming more aware of sustainable practices.
It thereby pursued a partnership with Wisent Environmental Inc. to evaluate operations and reduce its
environmental impact.
The Founder of Patagonia
Growing up in Southern California, Chouinard spent most of his youth exploring the outdoors. As a
member of the Southern California Falconry Club, he learned how to rappel down from raptors’ cliff-top
nests.18 This instantly excited Chouinard and his peers, as they began climbing all over Southern California,
eventually reaching the big walls of Yosemite.19
He joined the famed ’60s subculture base camp, Camp IV, where climbers tackled Yosemite’s 2,000to 3,000-foot granite walls.20 At Camp IV, the culture was anti-establishment with an absolute reverence
for nature and a genius for climbing.21 Their heroes were Muir, Thoreau, and Emerson.22 By his twenties,
Chouinard was a world-class climber, making first ascents of some of the world’s most notorious faces.23
Chouinard’s life quickly became a tour of passions with minimal time for school or work but ample time
for climbing, surfing, fly-fishing, and other outdoor activities.24 To Chouinard, this minimalistic lifestyle
was freedom.25 Climbing was ideal except for the fact that the standard soft-iron pitons were left behind in
the rock by each climber’s ascent. After meeting a Swiss mountaineer, Chouinard learned of the possibility
of hard-iron pitons.26 He decided to make his own chrome molybdenum steel pitons and purchased the
necessary equipment from a local junkyard.27,28 Word quickly spread of his new pitons, and demand followed.
Before Chouinard had time to process it, he was a businessman, making two pitons an hour and selling them
for $1.50 each to fellow climbers.29
Before long, demand for pitons exceeded Chouinard’s capacity to make them by hand.30 In 1965, he
partnered with aeronautical engineer and fellow climber Tom Frost to form Chouinard Equipment. During
their nine years as partners, Chouinard and Frost redesigned and improved on almost every climbing tool to
make it stronger, lighter, simpler, and more functional.31 Their design principle was reflected by the French
aviator Antoine de Saint-Exupéry, who stated that “in anything at all, perfection is finally attained not when
there is no longer anything to add, but when there is no longer anything to take away, when a body has been
stripped down to its nakedness.”32
Unauthorized reproduction and distribution is an infringement of copyright. Contact us for permissions: or 734-615-9553
This document is authorized for use only by Malik Kayal in BADM Strategy Summer 2020 taught by DAVID HALLIDAY, George Washington University from May 2020 to Nov 2020.
For the exclusive use of M. Kayal, 2020.
Patagonia: Encouraging Customers to Buy Used Clothing (A)
By 1970, Chouinard Equipment became the largest supplier of climbing hardware in the United States.33
As climbing became more popular, Chouinard and Frost reflected on the extensive damage done to rocks by
their pitons and decided to phase out the equipment.34 This was risky and radical, as pitons comprised the
majority of their revenue. The business partners agreed on replacing them with chocks and promoted this
new product in their 1972 catalog, accompanied by an essay written by Sierra climber Doug Robinson:
There is a word for it, and the word is clean…Clean because the rock is left unaltered by
the passing climber. Clean because nothing is hammered into the rock and then hammered
back out, leaving the rock scarred and the next climber’s experience less natural. Clean
because the climber’s protection leaves little trace of his ascension.35
Within months of the catalog’s release, Chouinard and Frost revolutionized the climbing industry. As
the piton business dwindled, demand for the alternative skyrocketed, and a new movement called “clean
climbing” took off.36
After a climbing trip to Scotland in 1970, Chouinard came back to Yosemite wearing a colorful team
rugby shirt.37 Fellow climbers instantly wanted one, as it was not only aesthetic but also more functional.38
Chouinard Equipment ordered shirts from England, New Zealand, and Argentina, which quickly sold out.39
Clothing sales helped support the company’s marginally profitable hardware business.40 Not wanting to sell
their clothes solely to the mountain climbing community, Chouinard and Frost needed a new name for their
clothing line.41
With fond images of glacier-topped mountains and gauchos riding on windswept peaks, Chouinard and
Frost settled on the name Patagonia.42 As the company grew, it experienced several events that were as
eccentric and unorthodox as its founders (see Exhibit 1). Although Chouinard was embarking on a business
venture, he knew that he could never be happy playing by the normal rules of business. His decision to operate
outside the standard business model to maximize profits was deemed radical, but Chouinard saw another
opportunity for Patagonia—encourage customers and other companies to become more environmentally and
sociably responsible by proving that “business can make a profit without losing its soul.”43
A Company Built on Values
Although Chouinard wanted to build a company that was not solely focused on maximizing profits, he
recognized that Patagonia was a product-driven company. If Patagonia was going to make a difference, the
company had to sell products and make money. Drawing on lessons that he had learned when climbing,
Chouinard also knew that reaching the summit had nothing to do with where you arrived, but everything to
do with how you got there.44
Build the best product, cause no unnecessary harm, use business to inspire and implement
solutions to the environmental crisis.45
—Patagonia Mission Statement
Patagonia’s mission statement was formed around four core values: quality, integrity, environmentalism,
and innovation, which formed the basis for all strategic and operational decisions.46 In its essence, Patagonia’s
goal was to sell the highest-quality product possible that was multifunctional, and, as Chief Operating Officer
Ed Schmults explained, “environmental aspects are part of that [goal].”47
Unauthorized reproduction and distribution is an infringement of copyright. Contact us for permissions: or 734-615-9553
This document is authorized for use only by Malik Kayal in BADM Strategy Summer 2020 taught by DAVID HALLIDAY, George Washington University from May 2020 to Nov 2020.
For the exclusive use of M. Kayal, 2020.
Patagonia: Encouraging Customers to Buy Used Clothing (A)
Despite the criticism of many, deeply rooting Patagonia’s environmental and social impacts into the
overall culture and strategy of the company was something that Chouinard never considered up for debate.
He acknowledged that every company has an environmental footprint and that Patagonia could never be
completely socially responsible. Nonetheless, he affirmed that the company would be committed to trying.48
Significant Growth Challenges
In the 1970s, Patagonia started to face challenges stemming from the rapid success of the company.
The rugby shirts were selling so quickly that Patagonia could not keep them in stock. The product almost
brought the company to bankruptcy in 1974 when Chouinard’s monthly order of three thousand shirts from
Hong Kong arrived late and proved to be of poor quality. The shirts shrank, and some did not even have fulllength sleeves.49 Chouinard sold the shirts at a loss to redeem as much revenue as possible. Severe cash flow
problems emerged, and Chouinard started to buy products on credit. The business was not functioning well,
and the Chouinard-Frost partnership ended in 1975. Chouinard and his wife became the sole owners of both
Chouinard Equipment and Patagonia.
As they grew, Chouinard’s companies became more susceptible to lawsuits. Chouinard Equipment was the
focus of several in the 1980s. Its insurance company settled all of them out of court, and Patagonia’s insurance
premiums increased by 2,000% in a year.50 The lawsuits weren’t based on faulty equipment, but rather on the
lack of proper warnings for uses that the company could not have foreseen. One person, for example, sued the
company because he broke his ankle while playing tug-of-war with one of the climbing ropes.51 Another suit
came from the family of a man who died in a beginning climbing class because he did not properly tie himself
into one of the harnesses.52 Due to these lawsuits, Chouinard Equipment filed for bankruptcy in 1989.
Patagonia was facing serious challenges from its rapid growth. Chouinard decided to break up the
line into eight product divisions, each one headed by a different manager. This new organization was not
effective because the lack of proper training hindered the managers from working in unison. The company
restructured five times in five years, but each reorganization proved as ineffective as the last.53
During the recession in 1991, Patagonia’s bank recalled its revolving loan.54 To pay off the debt,
Patagonia drastically cut costs, dumped inventory, and laid off 20% of its workforce.55 Patagonia managed
to stay in business by removing several layers of management, merging inventories into a single stream, and
consolidating the sales channels under a main control.56 From this experience, Chouinard learned the lesson
of sustainable growth. He would never again pursue 40% to 50% annual growth, but instead would aim to
achieve a more modest, natural rate of 20%.57 Since this painful experience, Patagonia has been committed
to an agenda of modest borrowing and controlled growth.
A Leader in Corporate Social Responsibility
Despite the changes Patagonia faced, the company realized that an environmentally responsible business
model—a core company value—was as important as ever. In the early 1990s, Patagonia managers explored
the life cycle impacts of the four major fibers used in the company’s products: polyester, nylon, cotton, and
wool. The managers were surprised to learn that cotton had significant environmental, social, and economic
costs (see Exhibit 2). Cotton was important to Patagonia; 20% of its products were made of the material.58
Chouinard knew his product line needed to change.
Aware of the environmental damage associated with conventional cotton, Chouinard gave managers
eighteen months to substitute conventional cotton for organic cotton starting in 1994. To raise awareness
and gain support for this new initiative, Patagonia sent over 350 employees and suppliers to different
manufacturing sites that used conventional cotton. This allowed the employees and suppliers to see the
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