Patagonia: ESG's Golden Child

Patagonia: The Brand

It’s no question that Patagonia has revolutionised the ESG world. When you hear “Patagonia”, you don’t just envision the outdoor clothing line: you envision social goodness. As one article headline writes, “the more Patagonia rejects consumerism, the more the brand sells.”

The company garnered national attention for its innovative business model, transcending the traditional division between environmentalism and capitalism. Through fair labor practices, sustainable production, and philanthropy, Patagonia has become the epitome of an ideal stock for ESG investors. In spite of all its considerations that may compromise its low costs, Patagonia maintains a 10% profit margin that beats publicly traded apparel companies like Abercrombie & Fitch.

Proving the Impossible: A Curious Case of Corporate Social Responsibility

As counterintuitive as that sounds, a fashion company – conventionally synonymous with levels of high pollution – may have proved the impossible possible: planet and profit can coexist. From animal welfare protection programs and migrant worker support to supply chain transparency, Patagonia covers every area of Corporate Social Responsibility (CSR) – a business model that improves different aspects of society. For decades, the company has shocked the world of business by donating all their $10 million Black Friday sales and another $10 million from the Trump corporate tax cuts, running ads in the New York Times that command people, “Don’t Buy This Jacket”, as well as providing a lifetime warranty and free repair service. Ironically, sales increased by 30% following the “Don’t Buy This Jacket” campaign, establishing itself as a classic marketing case study.

Patagonia trailblazed a new model of capitalism, effectively advancing the world of ESG investing. The company sells more than $1 billion worth of outdoor apparel each year, valuing the company at around $3 billion. Hence, it’s almost paradoxical to acknowledge that Patagonia is also one of the world’s most sustainable and ethical multinational corporations.

Growing ESG Market

As climate change and its intersectional social issues, such as wealth inequality, are exacerbated, more and more corporate moguls have emulated Patagonia's model “1% for the planet” where companies donate 1 percent of their annual profits to environmental causes. Simultaneously, investors have become exponentially interested in these issues as recent estimates from Harvard Law School suggest that “there are more than $330 billion in assets managed by ESG funds”. Similarly, Bloomberg Intelligence has predicted that “Global ESG assets are on track to exceed $53 trillion by 2025.”

Non-profit Ownership of Patagonia

To take things further, the family-owned business recently broke headlines once again by giving away its ownership of Patagonia to the Patagonia Purpose Trust (a uniquely curated trust) and Holdfast Collective (a non-profit). This ensures that the company’s profits of around $100 million per year are dedicated to combatting ecological crises such as biodiversity loss and climate change. Among U.S adults who were already aware of Patagonia, data from CivicScience shows that 42% are “more likely to purchase their products” given that the company has essentially been donated to fight against the global climate crisis.

While Patagonia fulfills ESG investors’ main practical considerations such as financial returns and growing demand, the company’s founder has remained vocal about his distrust of the general stock market. Understandably, it is inevitable to be critical of public companies’ competencies in protecting their missions. However, the growing surge of ESG investments and millennial social consciousness could potentially abate the wave of concern, paving the way for more socially responsible innovation and business practices.

Currie, Antony. “Patagonia Lobs ESG Breakup Calls Back to the Wild.” Reuters, Thomson Reuters, 16 Sept. 2022, https://www.reuters.com/breakingviews/patagonia-lobs-esg-breakup-calls-back-wild-2022-09-16/.

Demkes, Emy. “The More Patagonia Rejects Consumerism, the More the Brand Sells.” The Correspondent, 28 Apr. 2020, https://thecorrespondent.com/424/the-more-patagonia-rejects-consumerism-the-more-th e-brand-sells.

“Don't Buy This Jacket, Black Friday and the New York Times.” Patagonia, 22 Nov. 2022, https://www.patagonia.com/stories/dont-buy-this-jacket-black-friday-and-the-new-york-ti mes/story-18615.html.

“ESG Assets May Hit $53 Trillion by 2025.” Bloomberg, Bloomberg, 23 Mar. 2021, https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/.

Explains, Kenji. “‘Don't Buy This Jacket’ - Patagonia's Daring Campaign.” Medium, 11 June 2020, https://bettermarketing.pub/dont-buy-this-jacket-patagonia-s-daring-campaign-2b37e145046b.

Gelles, David. “Billionaire No More: Patagonia Founder Gives Away the Company.” The New York Times, The New York Times, 14 Sept. 2022, https://www.nytimes.com/2022/09/14/climate/patagonia-climate-philanthropy-chouinard.html.

Howard, Adam, et al. “ESG: 2021 Trends and Expectations for 2022.” The Harvard Law School Forum on Corporate Governance, 25 Feb. 2022, https://corpgov.law.harvard.edu/2022/02/25/esg-2021-trends-and-expectations-for-2022/.

Patel, Sambhram. “Five Key ESG Risk Considerations Investors Care About.” Conservice ESG, 5 July 2022, https://www.gobyinc.com/five-esg-risk-considerations-investors-care-about/#:~:text=The%20importance%20of%20ESG%20.

Rose-Smith, Imogen. “How Patagonia's Private Plan for the Public Good Inadvertently Reveals the Limits of Impact Investing.” ImpactAlpha, 1 Nov. 2022, https://impactalpha.com/how-patagonias-private-plan-for-the-public-good-inadvertently-reveals-the-limits-of-impact-investing/.

Shriber, Sara. “Consumers Are More Inclined to Purchase from Patagonia With News of Founder Donating the Company.” CivicScience, 23 Sept. 2022, https://civicscience.com/consumers-are-more-inclined-to-purchase-from-patagonia-with-news-of-founder-donating-the-company/#:~:text=CivicScience%20data%20show%20that%2042,likely'%20to%20buy%20from%20them.