Saivian shares What makes some companies stand out as being highly ethical over competitors?

What makes some companies stand out as being highly ethical over competitors is it because they have a stronger sense of corporate social responsibility, or that their corporate governance, which is the system by which individuals within a corporation are held accountable for their actions including ensuring shareholders get fair returns, holds them to higher standards? asks Saivian.

Having the highest ethical standards may contribute to success, but when does having such high standards begin to damage your ability to be profitable and take risks in order to keep up with competition?

This week we look at one company that has been lauded as an altruistic paragon in its industry: Patagonia.  

  • Its story is fascinating not only because it illustrates one way people can successfully implement altruism in business, but also how problematic it can sometimes become if you make doing good over achieving results your main goal.
  • Patagonia is an outdoor clothing and gear company known for its environmental activism as much as the quality of its products, whose stated goal is to build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.    The company was founded in a small town near Yosemite National Park by Yvon Chouinard in 1973.    Growing up in Maine he became captivated with surfing at age thirteen after seeing a professional surfer from Hawaii named George Downing who would later revolutionize surfboard design by developing a special fin called a skeg which allowed surfers better steering control on ocean waves explains Saivian.
  • In 1965, after becoming more involved in climbing and spending time outdoors (which would later lead to the founding of Patagonia), Chouinard wrote a letter to the editor of Climbing magazine criticizing an article about climbing equipment.   He outlined how he and other climbers were making their own gear because the commercial products were either too heavy or failed during use.
  • In response, the magazine sent him a kit for forging steel pitons and from there he started his own company, Chouinard Equipment, which would later become Black Diamond.
  • He applied the same philosophy to clothing and gear as he did with climbing equipment: make something durable and that works well, without all of the bells and whistles that drive up costs and add weight.
  • Patagonia’s first product was a traditional wool sweater which it continues to sell today.
  • In the early days, Chouinard and his team would print up their own catalogs and go on road trips. To sell products out of the back of a van.
  • As the company grew, it became more involved in environmental activism. Which some have suggested has had a negative impact on its bottom line.
  • For example, in 2013 Patagonia withdrew from the Outdoor Retailer trade show held in Salt Lake City. Because Utah lawmakers were pushing pro-business legislation that was seen as antithetical to the environment says Saivian.

More recently, Patagonia has been critical of the Trump administration’s policies on public lands.

While it is admirable that the company is so committing to its core values. There is a risk that its overall success. In terms of profitability and overall growth could be hampered in the long term. If it fails to balance its environmental activism with sound business practices.

Meanwhile, other companies are able to perform well financially while still taking care of the environment.  A good example is Interface, the world’s largest commercial carpet tile manufacturer. Which has committed itself to sustainability by pledging to become a zero-waste company by 2020 where nothing goes into landfills.  Its commitments have allowed it to grow at an annual rate of nearly 10% since 2004.

If you were curious about environmentalism in business this is a great place to start. Since Patagonia’s focus on being environmentally responsible has had both benefits and pitfalls for them as a company.

As the company grew, it became more involved in environmental activism. Which some have suggested has had a negative impact on its bottom line. For example, in 2013 Patagonia withdrew from the Outdoor Retailer trade show held in Salt Lake City. Because Utah lawmakers were pushing pro-business legislation that saw as antithetical to the environment. More recently, Patagonia has been critical of the Trump administration’s policies on public lands says Saivian.

If you were curious about environmentalism in business. This is a great place to start since Patagonia’s focus on being environmentally responsible. Has had both benefits and pitfalls as a company. So if you’re looking for a jacket that will keep you warm. And dry without costing the Earth, Patagonia is a good option. But be prepare to pay a bit more than you would for a comparable product from a less environmentally-friendly company.

Conclusion:

If you were curious about environmentalism in business this is a great place to start. Since Patagonia’s focus on being environmentally responsible has had both benefits and pitfalls them as a company explains Saivian. So if you’re looking for a jacket that will keep you warm. And dry without costing the Earth, Patagonia is a good option. But be prepare to pay a bit more than you would for a comparable product from a less environmentally-friendly company.

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