The Patagonia model shows how less can lead to more

The outdoor clothing company is putting sustainability ahead of profit and asking consumers to 'buy less'. It's a bold strategy, but also a smart way of doing business
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Patagonia is partnering with eBay to provide consumers a way to resell their used Patagonia apparel. Photograph: Sarah Lee for the Guardian

Consumers account for over 60% of GDP in both the UK and US. As consumers spend more, companies prosper, and the global economy expands. And so does our level of environmental impact.

Last month Patagonia continued its effort to break this chain of cause and effect. Indeed the progressive company is now actively encouraging consumers to buy less of Patagonia's new apparel. The company intends to influence consumer behaviour in order to lower the environmental strain from ever growing consumption levels. But could a programme encouraging consumers to buy less actually lead to growth for the company and a reduction of environmental impact? If so, could other companies follow a similarly counter-intuitive approach to growth? The answers are yes and maybe. Here's how and why.

To put the idea into action, Patagonia is partnering with eBay to provide consumers a way to resell their used Patagonia apparel via the Common Threads Initiative site on eBay. In addition consumers will now be able to resell their used Patagonia apparel on a new Used Clothing & Gear section on Patagonia's website.

Those familiar with Patagonia's mission will conclude the company's campaign is both genuine and borderline heroic. As a family owned business with a very strong track record of environmental and social stewardship, the company is famous for putting sustainability ahead of profit. Nevertheless for-profit companies worldwide have long looked to Patagonia for managerial advice and insight.

These companies might now be asking themselves how Patagonia's approach can resolve the conscious capitalist's paradox all for-profit businesses face. That is, how can for-profit businesses grow while actively lobbying individuals to buy less?

One tactic to be considered is changing your company's tax status. A shift from for-profit to not-for-profit would remove the pressure to grow, thereby breaking the capitalism-environmentalism Gordian Knot. A similar but less draconian tactic would be a shift in corporation structure. Most for-profit companies (as opposed to for-profit partnerships) are classified as 'C corporations.' C corporations are legal entities with a fiduciary responsibility to maximise shareholder value. There is a movement within the US to encourage corporations to adopt a new structure — the 'B corporation.' This designation is for profit-driven companies to signal to the market their intention to manage their business for the benefit of stakeholders, not just shareholders. While this can reduce the pressure shareholders place on companies to grow, it doesn't completely eliminate this pressure. The paradox remains.

Can Patagonia's 'buy less' campaign provide an essential tool to solve the paradox? And should your company pursue a similar strategy?

I believe it's possible that Patagonia's new campaign could actually lead to revenue growth for the apparel maker. There are three tactics available to companies that focus on high quality goods. Companies that aren't known for high quality will have a much more difficult time employing the first tactic in particular.

Increase prices

An undercurrent of Patagonia's message is that consumers should buy high quality apparel that will last a very long time. Such apparel should command a premium price relative to lower quality substitutes. So in theory Patagonia can quietly raise its price per item to a point that would offset (and then some) the potential decrease in quantity sold as a result of their campaign.

Sell more new apparel

Sounds strange to say that encouraging customers to buy less new apparel could actually lead to increased sales volume for Patagonia. Yet this scenario is possible. Two types of customers could be more inclined to buy new Patagonia apparel as a result — customers who make decisions based on sustainability considerations and customers who can now sell their used Patagonia apparel in order to have the cash to buy new apparel.

John Donahue, the CEO of eBay, Patagonia's new business partner, suggested this might be possible. "Patagonia is extending its customer base and increasing it. People who are selling it are likely to turn around, take the money they got, and buy the new Patagonia products."

Expand into new categories

Patagonia could seek to sell both upstream and downstream. Typically when we consider who customers are, we think 'downstream'. In other words, we focus on the volume of finished goods sold to consumers. But what if we challenged this assumption by adding 'upstream' (ie suppliers) when we consider ways to increase quantity sold? Patagonia's products are positioned as high quality, environmentally conscious items.

What if it works with retailers and consumers to recycle clothing that has been too worn to be resold and then sells the used materials back to its upstream suppliers at a lower price than comparable 'virgin' materials? For this to work, Patagonia's price to suppliers would need to be lower than the price suppliers pay for virgin materials — a distinct possibility given commodity price appreciation in recent years.

Is the company's potential success with this strategy replicable by other apparel companies? Maybe. I believe it's likely that only the companies that share in common with Patagonia three building blocks — lower pressure from shareholders to sell more now (Patagonia is privately held), long-standing and well known commitment to sustainable ideals, and high-quality products — will have a possible shot at counter-intuitive growth as a result of this kind of strategy. If this approach leads to growth, sustainability will become more closely aligned with business success as a result.

Eric Lowitt is author of The Future of Value


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