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Presentación Alex Perry- 22 Encuentro Empresarial CRCP
- 13. Patagonia mission statement Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.
- 22. Multifunctional performance, lowest possible footprint
- 24. But why?
- 25. Doing good for the planet is good for business. 6 reasons for sustainability.
- 26. #1 It saves you money.
- 29. #2 Brand Value and Positive Press
- 30. Patagonia vs. Donald Trump
- 32. #3 Brand risk and risk management.
- 34. #4 The measurement tools for sustainability are being increasingly used as filters by equity fund managers.
- 36. #5 Recruiting the best and the brightest.
- 38. #6 Consumers are increasingly aligning to brands that demonstrate commitments to environmental protection and social justice.
- 42. Revenue Time
- 43. So, how do we operationalize the integration of sustainability into our business?
- 55. www.sistemab.org
- 56. #7… “There is no business on a dead planet.” - David Brower
- 64. Gracias.
Editor's Notes
- Thank you for this invitation to share with you why I think of all of us need to integrate sustainability into our businesses. My talk here will be in three parts. First, I will show you who we – Patagonia – are and a bit of what we do. Then I will discuss why sustainability should be integrated into all of our businesses. And that will be by considering how sustainability creates business value. That means I am leaving out the moral reasons, the “because it’s the right thing to do” reasons. And finally, I will provide you all with some specific ways of how companies can operationalize the integration of sustainability into your own businesses. But first, I would like to give you all a little bit of context of who we are…
- We got our start with climbing. Our founder, Yvon Chouinard, learned how to climb rock while still in his teens. Dissatisfied with the gear available at the time, pitons made of soft steel that could only be used once or twice, he began to forge his own in his parents’ backyard out of hard chrome-moly steel. A tool that could be used more than once meant that a climber on a multiday trip had to carry far fewer pitons, allowing them to do bigger and taller climbs.
- And it was Chouinard and his partner Tom Frost who redesigned and reinvented every tool used by climbers. Quality had to be impeccable because their lives—and the lives of their friends—depended on it.
- As climbing grew more popular, Chouinard realized that his hard-steel pitons were starting to widen and damage the cracks on the premier climbing routes in Yosemite Valley, El Dorado Canyon, the Shawangunks in New York state.
- And so in 1972 we asked our customers to stop using hard-steel pitons for climbing. Pitons were our biggest sellers at the time, so from a business standpoint, it was a potentially fatal move. But once we realized how they defaced the rock we loved, business as usual suddenly was not acceptable. And it hasn’t been since.
- And so we replaced our piton business with an alternative: aluminum chocks that could be placed and removed without a hammer. Within eight months, our principal source of business had shifted from pitons to chocks.
- From climbing “hardwear” we saw an opportunity to move into what we called “softwear”. Clothing could have been our irresponsible business.
- But our habits of quality and innovation carried over from “Chouinard’s yard.” We developed a whole new way to dress in the mountains, with wicking underwear against the skin, a fleece insulation layers, and waterproof shells. And as you can see here, we have had a lot of fun along the way!
- From 1973 on, the Patagonia label was chosen to be used for our clothing business, while the climbing gear remained under a different label. And from a small climbing company, building product for our friends and other climbers…
- …we have grown to a $1B global business involved in the manufacturing of products for many different sport categories…
- …to disrupting the food and agriculture industries with our food business Patagonia Provisions…
- …to investing in new companies that are doing good for the planet via our capital investment arm – Tin Shed Ventures – which invests in new companies this one – Bureo – who collect old fishing nets from right here in Chile and turns the plastic into consumer products like skateboards and sunglasses that we then sell at our stores. And so how have we done it? [NEXT SLIDE]
- ….By having a strong mission, staying true to our core values, and by embedding sustainability into the framework of our company. And I would like to spend just a few minutes to talk about our missions statement, because it is the lens through which we look to make every single decision at our company.
- …The first part - - Build the best product. Our materials innovation teams, product designers and product developers are the best in the industry. And they don’t rest until the product is the best. Because we know that without the best product, the rest of the business could fall by the wayside. And so building the best product has brought us success in the marketplace.
- Like with this product, our new Micro Puff Hoody which took 10 years of research and development to get it just right. And now it is isrupting the outdoor industry for its synthetic insulation properties that outperforms down insulation in many ways thought not previously possible.
- The second part of our mission statement is “cause no unnecessary harm”. And a great example of how we make good on this is a story that begins over 20 years ago. In the early 1990’s, after opening a new store in Boston, our employees started to call in sick, with headaches and stomach trouble. We traced the problem to formaldehyde off-gassing from cotton sportswear stored in the basement. We commissioned a study of our four major fibers (cotton, wool, polyester and nylon) — and learned that cotton was the most harmful because of the intensive use of pesticides in its cultivation. And so in 1996 we switched to exclusive, 100% use, of organic cotton in cotton clothes. In the process, we learned a lot about the supply chain we had formerly delegated to others. And it provoked a fundamental change in our attitudes about agriculture.
- We use as much recycled content in underwear and fleece as we can without sacrificing performance. We began making recycled polyester from plastic soda bottles in 1993 – the first outdoor clothing manufacturer to transform trash into fleece. Using recycled polyester lessens our dependence on petroleum as a source of raw materials.
- But causing no unnecessary harm means not only no unnecessary harm to the planet. But it’s also a commitment to causing no unnecessary harm to the people and workers in our supply chain. Patagonia was one of the first apparel companies to offer Fair Trade USA certified products, and we now offer more Fair Trade styles than any other apparel company on the planet. But I’ll let you hear from some of the folks working in our supply chain tell you themselves why they feel that Fair Trade is so important…
- And this brings us to the third part of our mission statement, and that is to use our business to inspire solutions to the environmental crisis. And we do that by leveraging our company and its resources as a tool in the fight to save the planet. Like this, example seen here, where we rallied our community and used our communication platforms to oppose dams in the Patagonia region right here in Chile.
- Another example is through our program Worn Wear - - we will fix any product so that you don’t have to buy a new one. On the surface level, this may seem counterintuitive to generating new revenue. But what we have found that by encouraging our customers to fix what they own, and only buy new when they need to, they become loyal customers for life.
- And that goes for here in Chile as well. The carrito shown here travels up and down the country – from Santiago to Coyhaique and beyond – fixing garments for our customers and community. And oh by the way, this is how committed we are to our core values…we will fix any product from any brand. For FREE! Because we know that the best way to reduce waste is to keep things in play for longer!
- And we are not afraid to be disruptive when standing up for what is right. This was what our website looked like just this past December when the President of the United States, in an unprecedented and illegal move, decided to eliminate public lands in the interest of oil and natural resource extraction.
- But why? I have shown you a bit of our history and what we do. But I want to share with you now why we do the things that we do.
- What we have learned is that sustainability creates business value. Meaning, what is good for the planet is good for business. And so I would like to share with you six of the reasons why we embed sustainability into every aspect of our business.
- And the first reason is a reason that I know we can all get behind…and that is because it saves you money! Microsoft recently said that its internal carbon tax is saving the company about $10M year. Dow announced its sustainability commitments would save an aggregate $1B by 2025. And in our own sector Gap, H&M, Levis and Target said that their partnership with NRDC cleaning up textile mills in China would save almost $15M in operating costs.
- I’ll give you another example. This here is our global headquarters in Ventura, California. Today, 100% of our energy for our North America business is run on renewables, and 71% of our global operation is run on renewables. We are on track to reach running on 100% renewables globally by 2021. And that means that right here in Chile we will be making direct investments in clean (wind, solar, etc.) energy projects. What this also means for us is that we are not only saving money, but we are actually making money back. The payback period on corporate investment in renewables is around 6 years. But the panels last much longer than that. By investing in renewables, and putting energy back on to the grid, we see clear returns in a period of just 6 years.
- That’s why in 2016 we doubled down on our investment strategy in renewables. We created a first-of-its-kind group of five certified B-Corporations – or, Empresas B – and came together to create a $35 million tax equity fund that will make the benefits of solar power available to more than a thousand U.S. households. The new fund uses state and federal tax credits to direct Patagonia’s tax dollars for residential development of affordable, efficient Sungevity solar energy systems. And as our CEO Rose Marcario commented, “B Corps know how to make money while creating broader benefits—but any company would be smart to leverage their tax dollars this way. I hope others take advantage of a great opportunity.”
- The second way that sustainability creates business value is that it drives brand value up and brings in positive press. In the case of the clothing brands, its not just recognition of reducing the toxic and water pollution in their mills and dye houses but it’s also the increased safety and health of the workers in those factories. And we all know that in the age of social media, this can be more valuable than paid advertising.
- And if Patagonia has any secret sauce, this is it: we have a miniscule advertising budget because we don’t need one since we get so much earned media from our sustainability and environmental initiatives. This is the image and headline for an article in GQ magazine just last month that spoke about our lawsuit against the President for his attack on public lands. It went viral and became our most shared social media post for the month. It garnered over 5 million impressions. And for reference, our total our earned media value last month was approx. $10M.
- Or this example of when Fortune magazine deemed Patagonia “The Coolest Company on the Planet” which had an media value far beyond what our marketing budgets could ever pay for. But all the praise of course has put us on a pedestal which is always a vulnerable position…and that’s why we also pay very close attention to the third reason for sustainability…
- And that is Brand risk and risk management. The way we manage risk at least in our supply chain is following the old saw that you can’t manage what you don’t measure…(next slide now)
- …and here we rely on the Higg Index from the sustainable apparel coalition. The Higg Index in particular, and sustainability measurement and reporting in general, is also the fourth reason for committing to sustainability…
- The measurement tools for sustainability are being increasingly used as filters by equity fund managers. Bennett Freeman, who manages ESG screens for the Calvert fund, has been making presentations to Goldman Sachs and JP Morgan who have been seeking advice on their own interest in adopting sustainability screens to help them place bets.
- Take Danone North America for example – whose annual revenues are $6B – and just became the largest B Corp on the planet this past April. The reason they did it is because they know it is good for business. And banks and equity fund managers are proving that. Danone secured a syndicated loan of $2 billion from 12 banks with reduced interest rates for each subsidiary of Danone that becomes a B Corp, because the syndicate assesses its risk as reduced proportionately…
- Now the fifth reason for sustainability is that it allows you to hire the best and the brightest. Young people coming out of business schools are increasingly only interested in companies making these commitments. Michael Bloomberg made this point to an audience at a recent talk, and then pointed to Rupert Murdoch, who was sitting between Warren Buffett and Bill Gates, and said, “Do you think Rupert is greening the News Corporation because he’s becoming an environmentalist?”
- The answer is obviously NO - - but rather, he knows that being more sustainbile gives his company a competitive edge when hiring talent. And the scenario rings true for us at Patagonia as well. I’ll give you a recent example. Each summer our campus fills up with kids on summer break from University doing their internships with us. And this summer we had 15 internship positions to fill. So when we posted the jobs last November on our website, we were inundated with applications. We received over 10,000 applications for the 15 spots. This gave us the opportunity to hire only the best and brightest…
- The sixth reason is especially important…and that is consumers are increasingly aligning to brands that demonstrate commitments to environmental protection and social justice. It is especially important in the age where millennials will increasingly continue to hold more and more of the overall purchasing power. Most of us would probably agree that is something new, and surveys support the fact that more and more consumers are voting with their wallets to support brands that make meaningful and transparent commitments to sustainability.
- Take Unilever as an example… CEO Paul Polman took over in 2009 and Unilever’s commitment to integrating sustainability into their business has been a priority. They built a portfolio of sustainable companies and developed the Sustainable Living plan because they had the foresight to know that it would create value for their business. And oh, by the way, since Mr. Polman took over, Unilever’s stock price has grown over 200% ! Paul Polman, Unilever CEO, said: “We have made great progress. Our results show that sustainability is good for business, with increasing evidence that our ‘sustainable living brands’ do better. Sustainable Living brands grew over 50% faster than the rest of the business Delivered more than 60% of Unilever’s growth in 2016 18 Sustainable Living brands in the top 40 Unilever brands, up from 12 in 2015 Continued consumer demand driving brands with purpose
- And oh, by the way, since the introduction of the Sustainable Living plan, Unilever’s stock price has grown over 200% ! Paul Polman even said: “We have made great progress. Our results show that sustainability is good for business, with increasing evidence that our ‘sustainable living brands’ do better [than our others].” And I want to linger on this fact for a moment, and provide some statistics… Unilever’s Sustainable Living brands have grown over 50% faster than the rest of the business. The Sustainable Living brands delivered more than 60% of Unilever’s growth in 2016. And the reason the site is that continued consumer demand is driving brands with purpose.
- We ran this ad in the New York Times back in 2013, and it grabbed attention with the headline – “Don’t buy this Jacket”. And when you read the text underneath what we did was urge customers to consider all of the inputs that it takes to make this jacket. Urging them to not buy the jacket unless they really needed it. This kind of commitment to sustainability and transparency builds a trusting relationship with customers. And as we have seen, Unilever has seen, as well as many other companies have seen, customers are increasingly aligning with brands that are committed to sustainability.
- And the proof is in the numbers. Over the past decade, we have doubled down on our commitment to sustainability, and as a result we have doubled our revenue and quadrupled our profits.
- OK, so we have touched a bit on who we are, where we came from, and why we, and others, have embedded sustainability into our business. And I have given some clear ways that sustainability creates value for businesses. But how did we do it? How can each of you – the leaders and decision-makers in your organizations – begin to integrate sustainability in to your own businesses?
- To answer that question, I will focus on two specific ways that companies can operationalize the integration of sustainability into their businesses.
- The first is 1% For the Planet. Any company or even any individual, can become a 1% member. What does that mean? It means members give 1% of net sales each year, without regard to profitability, to local non-profit environmental groups.
- And who wouldn’t want to support an organization like the one shown here, who helped keep the Colorado flowing free from dams. Since it began its giving, Patagonia has donated $105 million to grassroots environmental organizations.
- And our giving is global. In fact, right here in Chile we have donated to more than 40 different environmental organizations, totaling more than $1.5 million dollars and growing donated to Chilean environmental non-profits.
- Groups like the Fundacion Punta de Lobos who just recently saved the iconic headland, known as the Mirador, at Punta de Lobos in Pichilemu, forever.
- The second tool for operationalizing sustainability is through taking the B Corp Assessment and becoming a certified B Corporation – or una Empresa B.
- Patagonia became California’s first certified benefit corporation on January 1, 2012 – weaving our values formally into our charter and articles of incorporation. B Corp allows us to enshrine our core principles. It is a tool for evaluating and measuring our business through the lens of sustainability. We are not necessarily successful because we are a B corp, but rather B Corp legitimizes our theory that if we do right by the planet then we will be doing right by business.
- And the B movement is gaining momentum in Latin America.
- The total number of B Corps in Latin America has grown to over 300 certified B Corps.
- And Chile has the most of any country in the region!
- Companies, like Bowl Park here in Chile – who builds skate parks and creates safe community for youth in Chile – knows that by being a certified B Corp that they are part of a larger global community doing right by the planet and doing right by business. Their employees are more motivated to come to work each day because they are proud of their B Corp certification – their customers are more willing to return to purchase because they are proud to align with a brand that is doing right for the planet, and Bowl Park knows that they are in a competitive advantage with youth because increasingly, youth and millennials – the next generation of customers.
- And so going back to the point I made about not being able to manage what you cannot measure, we feel that being a B Corp is one of the best tools we have for measuring our business’ sustainability. And becoming a B Corp all starts with taking the B Assessment. The assessment is a series of questions that a company answers about its operations. And at the end of the assessment, it receives a report. That report makes it clear to the company and its leaders what it is doing well, and where it needs to improve.
- Which brings me to my closing point. And it’s the 7th reason for sustainability…one that I didn’t include in the list because many would argue that it’s not connected to business value although at Patagonia we feel the opposite is true. [NEXT SLIDE]
- And it’s the fact that every year the indicators of the health of our planet continue to tank.
- Global temperature, ocean acidification, fresh water eutrophication, deforestation, desertification, extinction of species.
- At Patagonia these are the real KPI’s by which we measure our business, and by which we think all companies should be measuring their businesses. Why?
- Because as our company’s mentor David Brower said, “We do not inherit the planet from our ancestors, we borrow it from our children.”
- Business can be a positive change agent. But it cannot be afraid to be disruptive to the marketplace.
- And as such, I urge each of you to consider taking the B Assessment. By taking the B Assessment, it will reveal what areas you are doing great in, and which areas have room for improvement. And then once you know where improvements can be made, it is simply up to you and the leaders of your company as to whether or not to take action.
- We cannot improve what we do not understand. And by understanding what we may improve, we are able to integrate better sustainability practices into our businesses. Which, as I have shown here today will making sure that as our businesses prosper. And, arguably most importantly, that we are doing all that we can do to give our children a planet on which they too can prosper.