Why Patagonia is Still an Outlier

Patagonia is the leading example of a successful social impact company with consistently high ratings for sustainability leadership and high profitability (tripling its profits since 2008). In 2014, Patagonia was rated second for global sustainability leadership based on a Global Scan/SustainAbility survey that asked 887 qualified sustainability experts from across sectors and 87 countries: “What three specific companies do you think are leaders in integrating sustainability into their business strategy?”

On the same survey, Unilever took the top spot for global sustainability leadership for the fourth year in a row by a 22-point margin – the widest margin ever. But Unilever is a publicly traded company with over $67 billion in annual revenue in 2013 and over 174K employees. The other ten companies on the 2014 global sustainability leaders list are publicly traded, and most of them are multinational giants, like Nestlé, GE, Walmart, Coca Cola and Nike. The outlier is actually Patagonia, a privately held company with $600 mm in annual revenue and fewer than 1500 employees. Isn’t that a prime example of doing more with less?

Relative to other successful social impact companies, Patagonia leads the pack when viewed across both sustainability marks and revenue growth. In 2013, Patagonia grew to $600 mm in annual revenue, crossing the $500mm threshold of mid-sized companies. Patagonia, like many of the peer companies below, is a B-certified benefit corporation, accountable for social impact and profitability. Peer companies include (2013 annual revenue in parentheses): Tesla Motors ($2.1 bb), Etsy ($1.35 bb), Vancity Bank ($407.6 mm CAD), Eileen Fisher ($360 mm), Tom’s Shoes ($250 mm), New Belgium Brewing Company ($180 mm), Solar City ($164 mm), Seventh Generation ($150mm), and Method Products ($100 mm).

One reason Patagonia stands alone, particularly among first generation social impact companies, is Yvon Chouinard’s fierce commitment to staying independent. Yvon and his wife own 100% of Patagonia’s shares. Many first generation social impact companies, once peer companies of Patagonia, have since sold to multinational corporations. Examples include: Kashi sold to Kellogg (2000), Ben and Jerry’s sold to Unilever (2000), Odwalla sold to Coca-Cola (2001), Stonyfield Farms sold to Dannon (2001-2003), Tom’s of Maine sold to Colgate-Palmolive (2006), The Body Shop sold to L’Oreal (2006), and Honest Tea sold to PepsiCo (2008-2011). But the most comparable company to Patagonia that sold is The North Face, which sold to VF Corporation in 2000.

Many social impact company fans are waiting to see whether companies like Ben and Jerry’s can be the tail that wags the dog. Since buying Ben and Jerry’s in 2000, Unilever has certainly taken its commitment to sustainable business practices farther than any of its peers. Paul Polman has only accelerated this commitment in the last four years. But social impact companies still lose their independent entrepreneurial luster when they sell to large multinationals, because at the moment of the sale, profit appears to trump purpose.

The more important question is: how to grow more successful social impact companies like Patagonia and transform more multinational corporations into sustainable corporations like Unilever? Well-timed disruptive new products, exceptional leaders, and the benefit corporate structure are certainly great ways to start. But what about examining how else the outliers are embedding impact DNA into every element of their companies? This is how highly successful social impact companies and sustainable multinational corporations can become business-as-usual, not the exception.

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