part of it . . . and they are doing what they can to change it. It’s hard
to even imagine Mylan taking out an ad in The New York Times
explaining that they knew they were taking advantage of people
with life-threatening allergies by raising the price of EpiPens by 500
percent, claiming they did so to highlight the unethical and legal
abuses in the pharmaceutical industry.
The postmortem after any scandal or case of ethical fading nearly
always reveals a failure of leadership. Companies with cultures like
Mylan and Wells Fargo are almost destined to suffer some sort of
ethical fading. With the words of Milton Friedman by their side,
their leaders think they are there to drive results, and their
incentive structures reinforce that belief. As a result, they prioritize
near-term financial results above any sense of Cause (if they even
have one). Operating with a bias toward resources before will, the
leaders willingly adjust their cultures to meet their priorities. At
Patagonia, like any other infinite-minded organization, they turn to
their Just Cause to help set their priorities and the behavior follows
accordingly. It’s not just about how much money they can make this
year. “We plan to be here in the next one hundred years, so we think
about long-term results,” says Dean Carter, vice president of Human
Resources and Shared Services at the company. Operating with an
infinite mindset, Patagonia’s intention is not to win or beat anyone
else in their market. Rather, Patagonia is driven by a vision of the
future in which they make high-quality products while causing the
least harm and “use business to inspire and implement solutions to
the environmental crisis.”
Patagonia is by no means a perfect company. They make
mistakes and individuals within the company still suffer ethical
lapses. Patagonia recognizes this and understands that its pursuit of
the Just Cause is a journey of constant self-improvement. At too
many companies, the term “constant improvement” often means
improving process and enhancing efficiency. At Patagonia and other
infinite-minded companies, where the currencies of will and
resources are both on the radar, constant improvement refers to
every facet of their organization, including their culture and the
standards by which their culture operates. This is what helps them
maintain a culture of high ethical standards. Patagonia is not driven
to be the best, they are driven to be better.
Even if the headline fell flat to some, the “Don’t Buy This”
campaign was not a one-off gimmick. It was typical of Patagonia’s
relentless effort to hold themselves accountable and constantly
improve. As their website says:
Patagonia is a growing business—and we want to be in
business a good long time. The test of our sincerity (or our
hypocrisy) will be if everything we sell is useful,
multifunctional where possible, long lasting, beautiful but not
in thrall to fashion. We’re not yet entirely there.
The copy goes on to admit that not all of the company’s products
meet these criteria, but then they go on to introduce their Common
Threads Initiative, a program they hope will help advance them
toward their goals. The initiative includes a commitment to make
high-quality clothes that will last a long time, so they don’t have to
be routinely replaced (which reduces waste); a promise to repair
their products for free, so that people don’t throw them out (which
reduces waste); a partnership with eBay, so that people can “reuse,”
buy and sell secondhand products (which reduces waste); and when
a product finally does come to the end of its life, Patagonia will take
it off your hands to recycle it rather than have us throw it in the
garbage (which reduces waste).
While some companies go out of their way to find loopholes they
can exploit to enhance their performance, Patagonia goes out of its
way to close loopholes that enhance their values and beliefs. For the
past decade, for example, the company has been working with the
NGO Verité to uncover and correct labor abuses within its first-tier
supply chain, in the factories that produce their goods. As a result of
separate internal audits in 2011, the company found that despite
their efforts to create a socially responsible supply chain, there were
still a number of violations, including multiple cases of human
trafficking and exploitation, at the second-tier level, the factories
that turn raw materials into fabrics and other parts needed for
production. It is remarkable that Patagonia was even looking at, let
alone trying to improve, conditions in its second-tier suppliers.
“Even the Fair Labor Association (FLA), which conducts spot
audits of factories abroad and helps companies improve their
corporate-responsibility programs,” wrote Gillian White for an
article in The Atlantic, “only requires that affiliated brands audit,
monitor, and report on their first-tier suppliers—a level at which
issues of human trafficking are easier to spot and respond to.”
Rooting out forced labor is a difficult and complex undertaking that
requires a major commitment of time and investment of resources.
Most companies wait to tackle it only when they are forced to,
either out of embarrassment or legal trouble. Patagonia, of its own
accord, has made the commitment and the investment, knowing
that it may never completely solve the problem. But it will damn
well keep trying. Which is the whole point of constant improvement
and ethical action. Indeed, it is the very standard of an effective Just
Cause—that we may never reach the ideal we imagine but we will
die trying. This gives purpose and meaning to the work we do at the
companies we work for and inspires us to keep fighting the good
fight.
Finite-minded companies might worry that this kind of approach
may cost too much, hurt profits, lose customers or ruin their
reputation (few companies want to proactively admit they do
anything wrong these days). Patagonia is not worried about those
things and they’re not afraid to get out ahead of the crowd and take
big risks. Of course the company has a huge advantage that it freely
admits. It’s a private company. “The pressure of a public company to
drive profit on a quarterly basis for people who only have a financial
vested interest in the outcome of the company is significant,” Dean
Carter reminds us. “So it does help to be private when our vested
interest is certainly to make a bigger impact.”
Though Patagonia is a certified B Corp—a company that practices
“stakeholder capitalism”—it is not a charity. It is a for-profit
organization that wants to make more money this year than they
made last year. However, they also recognize that making money is
not the reason they exist. Like all good infinite-minded companies,
they see money as the fuel they need to continue to pursue their
Just Cause. To certify as a B Corp, companies are required to
identify their most deeply held social and environmental values,
then abide by them, honoring their responsibilities to their
employees, customers, suppliers and communities—as well as to the
financial health of their investors. Patagonia knows that the more
successful their business, the more they can uphold that standard
and the greater the positive impact they can have in the world. They
know that in the long term, if they keep their eye on the Just Cause
and continue to guard against ethical fading, they will attract and
lead those who share their vision and values and they will thrive as
a result.
Ethical decisions are not based on what’s best for the short-term.
They are based on the “right thing to do.” Whereas short-termism at
the expense of ethics slowly weakens a company, “doing the right”
thing slowly strengthens it. Patagonia’s pattern of trying its hardest
to do the right thing and put people and planet before profits has
earned the company fierce loyalty from employees and customers
alike. This, combined with the good will and trust they have built in
the market, has helped them become one of the most successful,
innovative and profitable companies in their category. The company
has experienced a quadrupling of revenue over the past decade, with
profits tripling. In the words of Patagonia’s CEO Rose Marcario,
“Doing good work for the planet creates new markets and makes
[us] more money.” (Notice the order in which she presents her
priorities).
“As far out on the horizon line as we can see right now,” says
Rick Ridgeway, Patagonia’s VP of Environmental Affairs, “we’re
continuing to produce products that allow people to live a more
responsible life with the apparel that they choose. As long as there’s
a lot of other people out there that don’t do that . . . then we should
be growing.” Still, Ridgeway acknowledges, “There is a point out
there where our own growth is going to likely create more problems
than it does solutions.” It remains to be seen how Patagonia will
deal with that point if and when they arrive at it. But the very fact
that they are thinking about it, and talking about it (publicly no
less), is yet another sign of their ethical strength.
As a result of leading with an infinite mindset, Patagonia has not
only created a company more resistant to ethical fading, but has
also set the bar for what acting ethically can look like in business.
And that’s by design. “If we can show the business community that
we’re successful,” says COO Doug Freeman, “we think we’re holding
ourselves as a great example for how business can be done
differently.” Patagonia acts in a way that is not just good for them,
it’s good for the game . . . and it’s working. Other companies now
follow their lead.
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