Reference no: EM131914573

Problem: Yvon Chouinard and Patagonia

Outdoor adventurer Yvon Chouinard and his wife, Ellen Pennoyer, in 1972, founded Patagonia, Inc., the sports clothing and outdoor gear retailer. Privately owned, Ventura, California-based Patagonia with annual revenues that recently reached $540 million is the product of entrepreneurial drive and a corporate culture practicing "green" business and "management by absence." Chouinard, was an early advocate of doing business in an environmentally friendly way, including for example, placing notes in Patagonia catalogs encouraging customers to buy only what they need. Chouinard's 2005 memoir, Let My People Go Surfing, explains his commitment to a workplace where capitalism, ethics, and fun can coexist. Chouinard minimizes workplace monitoring, believing lightly supervised employees will complete their work responsibly. Good surf and fresh snow are embraced at Patagonia where employees are free to take breaks for fun. Patagonia is often recognized as one of the best companies to work for in America. Chouinard has become famous for his sense of social responsibility and his leadership in the environmental movement. Since 1985, Patagonia has donated 1 percent of its annual sales to environmental groups. Chouinard's 2012 book, The Responsible Company, details methods for making money while avoiding undue societal damage.

Chouinard threatened to leave Patagonia in 1994 when he learned that the cotton bought by the company often was produced by industrial farming that used toxic chemicals and was having, he felt, a devastating effect on the Earth. That cotton figured in 20 percent of the company's sales, but Patagonia changed over to organic cotton and persuaded others such as Nike and Timberland to begin to do the same. Chouinard said that Patagonia went a year without making a profit while the company found organic suppliers, overcame bankers' resistance, and found new gins and mills. The bigger point is that the switch was profitable and the right thing to do, a concept often missed by corporate America, he said. Patagonia clothing is made in China, Thailand, Vietnam, and a number of other countries along with limited production in the United States. In establishing ties with a new manufacturing partner, Patagonia's Social and Environmental Responsibility team does a comprehensive analysis and follows up with constant audits, visits, and corrective measures to assure a safe, healthy, environmentally sound operation. Patagonia refuses to contract with companies employing workers under the age of 15, the minimum age acceptable to the International Labor Organization. All workers must be paid "a legal minimum wage," but Patagonia admits to falling short of its goal of a "living wage" for all those who make its products. [For more detail about Chouinard and Patagonia, see, e.g., Seth Stevenson, "America's Most Unlikely Corporate Guru,"The Wall Street Journal Magazine, May 2012, p. 86.]

Questions

1. Is Chouinard correct that companies can treat workers well, respect the environment, and still make money? Explain.

2. If he is correct, why aren't all companies following the Patagonia model?