ESG

Patagonia’s groundbreaking announcement proves small actions can create big impact

Patagonia founder Yvon Chouinard.

Patagonia's founder Yvon Chouinard has transferred ownership of the firm to a trust dedicated to fighting climate change. Image: Campbell Brewer

Joe Cahill
Chief Customer Officer, Project Management Institute
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  • Outdoor clothing company Patagonia recently transferred ownership of the firm to a trust and nonprofit dedicated to fighting climate change.
  • Business leaders can follow Patagonia's example by starting small and defining their purpose.
  • Instead of looking for immediate financial results from ESG initiatives, leaders must adopt a longer-term view and think about the impact on brand and market value.

Environmental sustainability is a strategic business priority for a growing number of executives. Here are three lessons that purpose-driven leaders can learn from Patagonia's bold move.

Almost instantaneously, Patagonia’s announcement last week that its founder, Yvon Chouinard, has transferred company ownership to a trust and nonprofit dedicated to fighting climate change became the most talked-about subject among business leaders, in the media and on social media. As groundbreaking as this announcement is, for those familiar with Patagonia, it follows a long trajectory of the company charting new territory when it comes to corporate sustainability and environmental responsibility.

Most leaders today recognize that sustainable practices must be a strategic business imperative; in fact, Gartner’s survey of 400 senior executives in April found that environmental sustainability ranks eighth on their list of priorities, up from 13th place in 2020. Chouinard’s bold move has once again put sustainability and environmental, social and governance (ESG) goals into the spotlight and shows what can be achieved when companies commit to their principles.

How can purpose-led business leaders follow Patagonia’s example, even if they don’t share the same end goal? Here are three key takeaways from the company’s announcement:

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1. Start small and within your own ecosystem

When it comes to defining and delivering on a company’s purpose, the smartest approach is to work within the ecosystem in which you’re already operating. Chouinard writes that Patagonia’s sustainability journey started small and accelerated over time: "We started with our products, using materials that caused less harm to the environment. We gave away 1 percent of sales each year. We became a certified B Corp and a California benefit corporation, writing our values into our corporate charter so they would be preserved. More recently, in 2018, we changed the company’s purpose to: We’re in business to save our home planet."

For leaders struggling to define their organization’s purpose, a good starting point is to review the United Nations’ 17 Sustainable Development Goals (SDGs) and select one or two where you can have the most impact. Another entry point is to look at how you can reduce your organization’s or your own environmental footprint, such as by conducting a carbon audit, integrating emissions targets into key performance indicators and using recycled packaging and materials. Then, you can encourage your customers, suppliers and other stakeholders to do the same. Start from within, and then move outward through your sphere of influence.

2. Be consistent

Patagonia’s announcement is decades in the making. As Chouinard puts it, "It’s been nearly 50 years since we began our experiment in responsible business." Like many things in life, the hardest part of advancing sustainability goals is getting started. Ultimately, sustainability and other ESG initiatives require coordination, cooperation and speed of delivery. But as I’ve witnessed firsthand many times, once organizations begin making progress on their goals, they start to build momentum, and that momentum picks up over time. The more employees, customers, board members, investors and other shareholders see positive results, the more they will want to be involved.

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How is the World Economic Forum helping companies track their positive contributions towards achieving the Sustainable Development Goals?

Achieving consistent outcomes requires having project professionals — those who are certified project managers or who have strong project management skills — involved in sustainability initiatives from the very beginning. Project managers are adept at setting incremental goals (called "checkpoints"), optimizing limited resources (namely, time and money), measuring progress, as well as collaborating and reporting on milestones to all relevant stakeholders — all of which is required to keep teams on track and engaged so they can build momentum. My organization finds that today’s most successful project managers are also highly proficient in interpersonal skills such as communication, empathy and problem-solving — which we call "power skills" — that motivate their teams to produce the steady drumbeat of results necessary for organizations to maintain consistency and build on their ESG efforts over time.

3. Have a long-term view

The biggest challenge of sustainability — and the reason why some leaders are reluctant to make it a top priority — is that measuring and linking outcomes to financial results is incredibly difficult. While some countries, including Australia, China, South Africa and the United Kingdom, have adopted mandatory ESG reporting, in many others — including the U.S. — there is a lack of transparency, accountability and alignment in measuring and tracking progress when it comes to sustainability. That may be changing, though, with the Securities and Exchange Commission proposing new climate-related disclosures in March and standards bodies working closer together toward harmonization.

Without a mandate to adopt environmentally responsible practices, some business leaders may see sustainability as a competitive disadvantage. But instead of looking for immediate financial results from ESG initiatives, leaders must adopt a longer-term view and think about the impact on brand and market value. This is certainly the case with Patagonia, which is known for its loyal customer base who sees the brand, its products and its commitment to environmental advocacy as intrinsically linked.

Patagonia is an anomaly in many ways — privately owned, with its founder still at the helm. It has a relatively simple corporate structure and isn’t beholden to myriad stakeholders in the way that many companies are. And yet, with environmental sustainability seen as a strategic business priority for a growing number of executives, organizations across the board can learn important lessons from Patagonia’s journey.

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