Sunday, October 1, 2006

Good Business Karma

STANFORD GRADUATE SCHOOL OF BUSINESS—Patagonia Inc. founder and owner Yvon Chouinard offered his Stanford audience a slew of counterintuitive business practices that have helped make his apparel company a success.

Patagonia has drastically limited direct marketing through catalog distribution, takes other steps to control its growth, and resists the overtures of bankers who would like to take the company public in an IPO, Chouinard said during the 2006 Von Gugelberg Memorial Environmental Lecture at the Stanford Graduate School of Business Oct. 23. He even encourages his customers to buy less and focus on their needs rather than their wants.

At the same time, Chouinard has adopted an expensive and logistically challenging practice of making all of Patagonia's cotton clothing from organically grown cotton, and he actively invests in other innovations to minimize the harm done to the environment.

While many businesses pay lip service to the idea of environmentally responsible practices, Patagonia has defined itself by a mission Chouinard describes as "inspiring and implementing solutions to the environmental crisis." By 2010, the company has pledged to make all its clothing from recycled and recyclable materials, and Chouinard says he would exit the clothing business altogether rather than compromise his standards.

It sounds like the vision of a tree hugger naïve to the harsh realities of the business world, but Chouinard insists that every time the company invests in the environment, it shows up in its bottom line.

"It's karma; it's serendipity," Chouinard said during a fireside chat hosted by the Business School's Public Management Program and the University's Woods Institute for the Environment. "Every time we make a decision to do good, it makes us more money."

Chouinard is author of the memoir Let My People Go Surfing: The Education of a Reluctant Businessman, which recalls his odd entry into the business world when, as a blacksmith and avid mountain climber, he noticed a lack of quality gear on the market. "They were clothes made by a blacksmith," Chouinard said of his earliest apparel, which was designed to endure.

Today, Patagonia's clothing, worn by hardcore climbers and urban dwellers alike, is known not only for its durability but for the minimal footprint it leaves on the environment. Years ago, Patagonia famously developed a fleece material made from recycled bottles.

As the title of his book suggests, Chouinard also has striven to build a business that is as friendly to employees as it is to the environment. The book's title refers to the longstanding practice at Patagonia's coastal headquarters in Ventura, Calif., of letting employees leave their desks when the surf is up.

Unknowingly a pioneer in the notion of flextime, Patagonia was also one of the first businesses to set up a subsidized daycare center in corporate headquarters. Chouinard claims it has become a big profit center for the business by saving him the expense of recruiting new workers when existing ones decide to raise children.

But it is in his knowledge of environmental crises and his efforts to solve them that Chouinard really shines as a business visionary. Explaining his commitment to use only organically grown cotton, he described a visit to an industrial cotton farm as a "death zone," so full of pesticides that not a bird or an insect could survive. Industrial cotton production, he said, consumes 25 percent of the world's pesticides in just 3 percent of the world's farmland.

Chouinard says his resistance to the runaway growth that would ultimately land his company on the IPO track comes back to his environmental mission. There are limits to how much organic, recyclable clothing a company can make. He argues that going public would force expanding production to the point he would have to abandon his standards. "It would be committing suicide, going against almost everything I believe in."

One final counterintuitive practice of particular interest to Business School students: Chouinard rarely hires a business school graduate. Counting "less than a handful of MBAs" among his 1,200 employees, he reasons that sometimes the best business people are students of another discipline.

"None of us ever wanted to work in business; it just happened," he said. "For me, breaking the rules and making it work, that's the fun part of business."