Apparel company revamps supply lines, cuts production to maintain its ethical standards
by Erica E. Phillips, The Wall Street Journal
Patagonia Inc. built an $800 million outdoor apparel empire selling heavy-duty jackets, backpacks and long underwear at premium prices, winning a loyal customer base with vows to “build the best product” and “cause no unnecessary harm.”
But as Patagonia’s growth has taken off, the company is finding those two promises coming into conflict.
In 2010, German animal-rights group Four Paws said it found evidence that farms supplying down feathers to Patagonia were force-feeding geese to fatten their livers for foie gras. In 2012, Patagonia discovered brokers were charging migrant workers thousands of dollars for job placement at the company’s factories in Taiwan—a practice human-rights groups say is a form of slavery. And last summer, People for the Ethical Treatment of Animals posted a video online depicting grisly abuse of sheep at South American ranches that sold wool to Patagonia.
Each revelation has caught the company—which promotes itself as the one writing the rules, not breaking them—off guard. In response, Patagonia has set new standards. In Taiwan, it worked with suppliers to repay workers, and in other cases it cut ties with suppliers and rebuilt supply chains from scratch, even as it pursued global expansion and launched new product lines.
Patagonia’s profit has tripled since 2008, and the company maintains a reputation for transparency and socially responsible behavior with its customers, brand experts say. But the company is learning a tough lesson: upholding a strict code of ethics while chasing mass-market appeal is a tricky balancing act.
Companies often run into “a huge disconnect—where [marketing teams] are ready to tell the story before operations and supply-chain teams are ready and able to confirm it,” said Alexis Bateman, a researcher at Massachusetts Institute of Technology’s Center for Transportation and Logistics. “It’s possible they know where the farm is, even who the farmer is, but not what’s happening 365 days a year.”
Patagonia was founded in 1973 by Yvon Chouinard, a surfing, mountain-climbing environmentalist who has written books on socially and environmentally responsible business practices and advised other retailers on ways to improve transparency in sourcing.
“When you’re trying to clean up your supply chain, you can’t believe how deep you have to go,” Mr. Chouinard said.
Under Chief Executive Rose Marcario, who worked previously in corporate finance and private equity, Patagonia has added retail partners across five continents, invested in e-commerce and launched new product lines.
Cara Chacon, Patagonia’s director of social and environmental responsibility, said it felt like her team was “still eyes deep” in fixing the down-feather supply chain last August, when executives learned that PETA was planning a campaign against the company’s wool supplier. Within 24 hours, they learned, PETA would be posting a video to its website showing rough treatment and mutilation of sheep during shearing.
“Wool was on our radar,” Ms. Chacon said. “We knew that it probably wasn’t perfect, but we had no idea that was going on.”
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