UNIVERSIDAD ESAN

MAESTRA EN ADMINISTRACIN
A TIEMPO PARCIAL 58 LIMA 2015-1 GRUPO 3
COURSE

SUSTAINABILITY AND COMPETITIVE ADVANTAGE.

RETHINKING VALUE CREATION

INSTRUCTOR

PAOLO TATICCHI, PHD

INDIVIDUAL REPORT

CASE OF PATAGONIA INC.

This report has been prepared for:

MIGUEL ANGEL RENTERIA CORONEL

1308897

Lima 2016

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Report Contents
About Environmental and Social Responsibility
How do you assess Patagonias approach to sustainability?
Is sustainability embedded in value-creation processes?
Is sustainability contributing to build a competitive advantage?
What is your evaluation of the sustainability reporting offered by Patagonia?
Conclusion

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5
6
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About Environmental and Social Responsibility

Patagonia and Social Responsibility in the Supply Chain
About Patagonia Inc.
Patagonia, Inc. is an American clothing company founded by Yvon Chouinard in 1973. The
company Patagonia, believes that CSR initiatives are synonymous of good management and
joint work with stakeholders to promote programs for the realization of sustainable
growth for society. It is essential to Patagonia continued commitment to remain a key
player in global society and an example of efficient production. From this point of view,
Patagonia is determined to fulfill its social responsibility of the company with respect to its
various stakeholders, whether customers, business partners, shareholders and investors
or others. Global environmental problems, meanwhile, are the most urgent concerns that
the company Patagonia must address nowadays. As a company in the manufacturing
sector, developing ways to harness our own different technologies to contribute to the
environment is a major challenge. Moreover, Patagonia recognizes that social
responsibility is clearer to help achieve a sustainable world and society through
technological innovation. To this end, Patagonia, Inc. strives to create products and services
that contribute to the preservation of the global environment, a global leader in sustainable
apparel and teams from about 30 companies gathered in a workshop to assess their
operations. The assessment measured environmental impact throughout the supply chain,
assessing the company from the design of a product, manufacturing, packaging,
distribution, use and care and finally the end-of-life of the product.

About Patagonia Inc. Sustainability Initiative

A balance of economic, environmental and social imperatives, integration social and environmental
concerns in their business operations and interactions with their stakeholders, The three spheres of
sustainability, environmental (Natural Resource Use Environmental Management pollution prevention
(air, water, land, waste), economic: profit, cost savings, economic growth, research & Development;
Social: Standard of Living, education, community, Equal Opportunity.)
Learn more or access the programs resources at http://www.patagonia.com/environmentalism.htm

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How do you assess Patagonias approach to sustainability?

Patagonia and Social Responsibility in the Supply Chain
September 2014, B Impact Assessment (Audit Ventura Head), It increased
its score from 107-116. 80 points are the minimum needed score to achieve
certification out of 200. It helps the global movement of entrepreneurs
through business by solving social and environmental issues. It managed to
reach high standards necessary to address social and environmental
problems through programs and campaigns, well performance and
evaluation of supply chains and labor culture. The board includes
independent members who represent the interests of the community. The
company also extended the health benefits to part-time, retail and
warehouse staff. Community: 100% of suppliers were made transparent on
websites and 40% of women are in management positions. 75% of their
materials care about the environment. They have organic and recycled
materials and also, its providers got BlueSign standards (applied to
advanced clothing production). They count with LEED certification, which
makes that more than 5% of the used energy is generated on site. Review:
Its scope has been complete and has worked for all parties, such garments
which use with organic cotton. Currently, innovative dyeing processes
reduce 84% water-usage, 30% energy-consumption and 25% less CO2
emissions. Since the business of manufacturing garments was considered a
dirty business due to the excessive amount of water use and pollution, they
understood that all parameters can change without taking into profitability.
It has invested 20 million to make 8 new projects, which also means
business expansion, achieving a good reputation. Finally, they receive or
have received more than 650 investment applications.

Learn more B Impact Assessment Score: at http://www.patagonia.com/on/demandware.static/Sites-patagonia-us-Site/LibrarySites-PatagoniaShared/en_US/PDF-US/bcorp_annual_report_2014.pdf

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Is sustainability embedded in value-creation processes?

Patagonia and Social Responsibility in the Supply Chain
Value Creation Processes for the Environment: It has reduced CO2 emissions
by 25% through Dyeing processes. 75% of the materials used care about the
environment. They also have organic and recycled materials, Patagonia is still
making the preservation of resources natural and human a priority,
Patagonia protects the environment through its clothing designs, which are
simple, versatile, and designed to last a long time. Many garments are made from
Synchilla, a fabric woven from recycled soda bottles. This spring, the company
converted to organic cotton. Processes Value Creation Society: 100% of its
suppliers are transparent through websites. More than 40% of the frontline
management is women or from ethnic minorities. More than 25% of employees
took time off for community service, 1% of sales are donated to environmental
NGOs. Value Creation Processes for Customers: When generating value
generation processes, people get top products and customers do not take into
account whether companies are transparent or sustainable. Customers are aware
of the production supply chains and NGOs also start feeling more attracted to that
kind of company. Besides, access to customers of their production processes will
generate brand loyalty. Its processes are focused on providing highly durable
products, promoting the Buy less campaign. They also offer repair the products
at a fair price. It presents the initiative to recycle, reduce, re-imagine, repair and
reuse. (Repair: Publish information with solutions to clothing problems such as:
removing stains from its pieces). Value Creation Processes for Employees:
medical benefits are granted for part-time, retail and warehouse staff. 50% of fulltime employees participate in external professional development. It also covers
80% of the coverage of health insurance premiums to full-time employees.
Employees volunteer a total of 10.424 hours on behalf of the company. Value
Creation Processes Supplier: They only accept suppliers which provide 100%
organic cotton. In 1994, the company changed its production process: They
decided to use organic cotton, even though it represented providers an increase
in the price for organic cotton, fortunately, sales increased by 25%. In 1993, they
pioneered in recycling plastic: it was the first company to produce fleece out of
recycled plastic bottles.
Learn more B Impact Assessment Score: at https://legacy.scu.edu/ethics/publications/iie/v8n1/synchilla.html

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Is sustainability contributing to build a competitive advantage?

Patagonia and Social Responsibility in the Supply Chain

SATGE 1 : Viewing Compliance

as Opportunity

STAGE 2: Making
Value Chains
Sustainable

They have increased

efficiency in the value
chain, carbon
management and
Patagonia, Inc. meets high
evaluation of the life
starndares: bluesign, LEED
cycle, ability to
certification
redesign their
(http://www.usgbc.org/certoperations to produce
guide), B IMPACT ASSESSMENT
less emnciones
http://bimpactassessment.net/,
according to the
the company anticipates
bluesign standard,
presents problems means
have been
environmental, since 1985, and
commissioned all
in 1986 uses organic cotton, is
suppliers offer organic
associated with other
cotton, has developed
companies to buy organic
sources of raw
cotton, have changed their
materials such as
technology so your clothes last
organic materials, also
longer
recycles its products,
recycles old clothes to
create other garments,
is innovative

STAGE 3:
Designing
Sustainable
Products and
Services

STAGE 4: Developing New Business Models

The company was able to identify what its

customers want and in that way they develop
processes in charge of meeting their
customers neeeds. Furthermore, they know
They have
how to pick their partners as in the case of
identified their
Adidas and Wallmart, among others and they
various
jointly create the Sustainable Apparel
processes the
Coalition which was in charge of creating an
most harmful
index to measure the business supply chain
materials to the sustainability criteria. The company has also
environment,
assured that all its partners and suppliers
such as
meet the same quality and environmental
chemicals used
standards as Patagonia does. Regularly, they
in the dyeing
audit the factories they work with and as a
process, so have remarkable fact they audited 90% of the
classified
factories they were working on in 2010.
mendiante a
Besides, it has health and environmental
code of colors
safety standards and it also has a Social
are blue gray and Responsibility of Raw Materials for which they
black, with the
must audit their factories to assess if they
black the most
meet the safety, social responsibility and
damaging of all. environmental criteria. It does not only
become sustainable by changing its processes,
but when helping other partners and suppliers
change theirs. Finally, its suppliers help them
set and meet rigorous standards of social,

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STAGE 5: Creating Next Practice Platforms

They were able to identify how

renewable and non-renewable
recources affect their business
model. They also identified the
serious environmental impact
produced by using cotton in
their processes and that's why
they decided to work exclusively
with organic cottom. Nowadays,
during garment production
(specifically for the dyeing
process), they have reduced
considerably the use of water in
comparison to the traditional
methods which water this
resource. Therefore, they
deliver cleaner products. By
changing their processes and
adjusting their premises, they
have been able to reduced the
energy consumption by over
25% and they also got that 5%
of the energy is produced onsite. As a result, new
technologies were developed

environmental, compliance and transparency

performance set for them as for other
companies.

and these allow industries to

use produced energy as sa byproduct. In Patagonia, they
realized that when creating
long-lasting changes, not only
do they improve sustainable
operativity, but they also
support other business to learn
how to reduce their
environmental impact by
making the difference and
revolving the way in which
businesses perceive
sustainability and being this one
of the objectives of Patagonia:
to teach their clients and other
businesses on how they can
help preserve the environment.

Learn more B Impact Assessment Score: at http://www.patagonia.com/on/demandware.static/Sites-patagonia-us-Site/LibrarySites-PatagoniaShared/en_US/PDF-US/bcorp_annual_report_2014.pdf

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What is your evaluation of the sustainability reporting offered by Patagonia

Patagonia and Social Responsibility in the Supply Chain

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Technological
Maximise Material and
energy efficiency

Create value from

waste

Social
Substitute with
renewables and natural
processes

Deliver functionality
rather than ownership

Adopt a
stewardship
role

Source:
Source:
Source:
http://www.patagonia
http://investors.sunpowe
Source:
https://hbr.org/2016
.com/blog/footprintr.com/releasedetail.cfm?r
http://nancybocken.com/
/06/companies-arechronicles/patagoniaseleaseid=610651
sustainable-businessworking-withplastic-packaging-ahttps://blog.deming.org/
model-archetypeconsumers-tostudy-on-the2014/01/processencourage-sufficiency/
reduce-waste
challenges-of-garmentthinking-at-patagonia/
delivery/
the company also
Uses SunPower solar
offers a repair
Patagonia also asks
if it is possible to
panels, the most efficient
program for their
customers to Not Buy
completely eliminate
solar panels on the
customers for a
their jackets, trying to
the use of polybags
market today, permite
modest fee.
make them aware of the
without incurring
reducir su dependencia de Currently, Patagonia effects of their purchases
damage to products
la energa de la red
repairs about 40,000 and encourage them to
that would make them
pblica para los prximos garments a year in
make things last rather
unsellable.
25 aos, (manufacturing) their Reno, Nevada
than buying new.
service center.
It presents the
initiative to recycle,
reduce, re-imagine,
repair reuse, The
company pledges to
Product-oriented PSSLean Manufacturing
build useful things
maintenace extended
that last, to repair
warrantee
what breaks and
recycle what comes
to the end of its
useful life

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Organisational
Encoura Repurpose
ge
for society /
sufficien environmen
cy
t

Develop
scale up
solutions

Conclusion
Patagonia and Social Responsibility in the Supply Chain
Patagonia is a unique company. Their business and
operating models are designed to support their mission that
is based on doing good instead of generating profit.
However, the models are designed such that by creating the
best quality products and promoting sustainable practices
they are also creating a competitive advantage for
themselves and maintaining profitability

Environmental Differentiation Strategy of Patagonia:

differentiation-strategy-of-patagonia

at

http://www.slideshare.net/johannesmahlich/environmental-

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