by Alec Ross
The company took an even bigger leap in 1996 when it switched 100 percent of its clothing line to organic cotton. A few years earlier, Patagonia had opened a store in Boston. Within three days, it was shut down after multiple employees called in sick. The company soon discovered the cause: the cotton clothes stored in the basement were emitting formaldehyde into the ventilation system.
This prompted Patagonia to investigate its supply chain. The company did not like what it discovered: not only were cotton clothes finished with formaldehyde resin, but the pesticides and fertilizers used to grow cotton left the surrounding area devoid of life. “When they cleared the fields to plant, they used chemicals that had been originally developed as nerve gases,” Stanley told me.
As it researched the problem, the company realized the only solution was to go organic. Again, the decision was risky—making the switch would require retooling Patagonia’s whole supply chain, and it would raise production costs of each item of clothing by three to five dollars. Many people thought it would make the company less competitive. But Chouinard issued an ultimatum: “If we can’t figure out how to go organic, I’m getting out of sportswear.”
To bring the rest of its employees on board with the decision, Patagonia showed them the reality on the ground. In groups of forty, employees loaded onto buses and ventured to the San Joaquin Valley in central California. They first stopped at conventional cotton farms. Before they even got off the bus, they could smell the pesticides hanging in the air. “It smells like the inside of a poorly vented laboratory,” Stanley said. When people stuck their hands in the soil, they found it barren. “There’s no life in [the soil] because it takes three years for the worms to come back after you stop spraying.”
The employees then ventured up to the organic farms where Patagonia planned to source its cotton. The difference was stark.
“People would see birds landing in the fields—there was life in the soil,” Stanley said. “People would come back from that and say, ‘Okay, this isn’t abstract anymore. This isn’t reading some kind of paper about chemicals. The company’s made the right decision, and we’re going to help make it happen.’ That I think was the big turning point.”
After it switched to organic cotton, Patagonia was forced to cut one-third of its clothing line. It took years to return to its original sales level, Stanley said, “but when we did, the company had a new identity. We had the basis of a new relationship with customers. We had employees who were committed to this and they were willing to do the next thing because they had this cultural confidence that you could pull this off.”
As of June 2020, Patagonia was still the only major apparel company that relied exclusively on organic cotton. Over the last decade, the company has made it a mission to fight against “fast fashion,” a practice of quickly translating every season and every moment’s movement in high fashion to mass production. On Black Friday in 2011, Patagonia took out a full-page ad in the New York Times that alerted consumers to the environmental impact of its clothes and called on them to think twice before buying something they did not need. The ad, which depicted one of the company’s popular fleece jackets, was titled in all caps “DON’T BUY THIS JACKET.”
In 2015, Patagonia launched the “Worn Wear Wagon,” a mobile truck that repaired damaged Patagonia clothes. During an interview around the launch, Chouinard said, “I hardly own any new Patagonia stuff—I just don’t have a need for it.” He proudly announced the shirt he was wearing was ten years old. Two years later, the company expanded the program, creating an online platform where customers could trade, sell, or buy Patagonia clothes secondhand.
Patagonia became more aggressive in its activism when it sued the federal government in 2017, joining a lawsuit filed by Native American and grassroots groups over plans to reduce the size of two national monuments in Utah. The company announced the lawsuit on its website with the caption “The President Stole Your Land.” While other businesses might have wrung their hands about such a decision, Patagonia employees were fully on board, said Corley Kenna, my former State Department colleague who now runs the company’s global communications team. At the end of the day, customers were on board too.
“Our community rewarded us, and we attracted a lot of new people who didn’t know about us before, because people thought, ‘Wow, that’s really great that this company is willing to do this,’” she told me. “It’s not something that a Harvard MBA marketing class … would recommend as a great way to sell jackets. That’s not why we did it. But at the end of the day it was good for the business in all ways.”
After Congress passed the Tax Cuts and Jobs Act in 2017, Patagonia donated its $10 million return to environmental groups. In a LinkedIn post, CEO Rose Marcario called the tax cut “irresponsible.” In a profile, Chouinard criticized his wealthy Wyoming neighbors who took advantage of the state’s lax tax laws. “I happily pay my taxes,” he said.
Patagonia’s business model allows it to cast economics to the wind in a way that most companies cannot. For one, Patagonia is privately owned, which means there are very few shareholders to answer to. Secondly, it can afford to invest in organic cotton and other eco-friendly policies because its clothes are more expensive than most. As of June 2020, the fleece jacket that Patagonia told consumers “not to buy” cost $169 before taxes. There is a reason that the company is sometimes labeled “fratagonia” among college students and “Patagucci” among outdoorsy types. That is not to disparage its strategy: Patagonia has proven that many people are willing to pay higher prices for more sustainable, high-quality products that last longer.
The effort to bring more responsible and sustainable practices to fashion has found an intriguing foothold in China, the capital of cheap manufacturing. China is the world’s largest garment manufacturer and has reaped the economic rewards of the explosion of fast fashion. But the same boom has devastated the environment in China. A detailed investigation by Greenpeace International found that international brands like Abercrombie & Fitch, Adidas, Calvin Klein, and H&M obtained their supplies from factories in China that regularly dumped toxic dyes from textiles into waterways. The following year, the influential Chinese environmentalist Ma Jun published a report stating that he had found six thousand environmental violations committed by apparel factories, including illegally dumping toxic wastewater into rivers and streams that supplied drinking water.
Ye Shouzeng and Shawna Tao are strong examples to the contrary. They founded a luxury clothing brand in Shanghai and named it Icicle in 1997. Their slogan, “Made in Earth,” represents an aesthetic of clothing that is contemporary and minimalist, with sweaters and jackets in neutral tones. Rather than use tissue paper, Icicle wrapped newly sold clothes in reusable cloth bags. Price tags were made from corn fiber rather than plastic, and buttons from natural materials like shells. In the production process, Icicle committed to using only environmentally friendly materials, including natural dyes and only organic cotton when it used cotton at all. Icicle also works only with suppliers that own their production facilities, rather than outsourcing the work. Icicle, along with its suppliers, says that it participates with various independent nongovernmental organizations to scrutinize and verify its sustainability claims. Perhaps most importantly, the clothes are intended to be kept for years and to survive and outlast short-term trends.
While the Western fashion industry has embraced Chinese apparel factories for their ability to produce fast fashion, Icicle bucked the trend with Chinese-made slow fashion. And like Patagonia, it has proven a success. Since its founding in the 1990s, Icicle has opened more than two hundred storefronts in China, but for most of its existence, the brand was largely unknown outside the country. That changed in 2019, when Icicle purchased the French couture brand Carven, which was facing bankruptcy. Since then, Icicle has recruited European fashion executives to help introduce it to a wider audience and create a new “Made in China” ethos that wears sustainability on its sleeve.
A new wav
e of the fashion industry, focusing on eco-friendly clothing, has caught up with Icicle and Patagonia in recent years. According to a January 2020 report by Barclays bank, sustainable fashion has the potential to grow into a €100 billion industry. A 2017 study on consumer trends in China found that 58 percent of consumers were willing to pay more for responsibly made clothing.
Companies like Patagonia and Icicle increasingly have loyal customers who are interested not just in the products but also in the mission. Patagonia has repeatedly taken political stands and made real-world contributions to the environment through its status as a benefit corporation. And its customers have stood behind it every time, to the point where brand loyalty to a company like Patagonia is something of a political statement.
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ALL TOO MANY corporate responsibility efforts are just fluff, a hand wave at citizenship that distracts from more significant harms elsewhere in the corporate food chain. But there are also clear examples of positive initiatives from some of the largest companies in the world, which start to reveal how they can operate meaningfully as leaders while prioritizing the breadth of their stakeholders rather than just shareholders. One fascinating story comes from none other than Walmart.
Walmart is the largest company on the planet, measured by both revenues and number of employees. With 2.1 million workers, it is the world’s third-largest employer behind the US and Chinese militaries. The company operates more than forty square miles of retail space across the globe, an area almost twice the size of Manhattan. If it were a country, Walmart would have the world’s twenty-fifth largest economy, just ahead of Thailand. Given its size, Walmart’s decisions can transform entire sectors of the economy. Where many intellectuals hold Walmart up as a caricature of the worst of capitalism and consumption culture, Walmart is so big and so very good at what it does that there is now a transgressive movement of leftist intellectuals who think that Walmart and its (very few) peers are laying the groundwork for socialism. As Cory Doctorow wrote, “We are now surrounded by companies and organisations that within the same order of magnitude as the Soviet economy at its apex, undertake breathtakingly efficient allocations of goods and resources, and all without markets, running as command economies.” The idea is that the socialism that failed last century could emerge smarter and stronger if it learns from companies like Walmart and Amazon about how to allocate goods and resources.
Facing criticism for its shoddy labor practices and sizable environmental footprint in 2005, Walmart executives committed to using the company’s clout to bring more eco-friendly products to consumers.
Under the Toxic Substances Control Act, the US government can halt production of a chemical if regulators can prove it poses an “unreasonable risk to health or to the environment.” However, due to the cautious nature of environmental researchers and heavy lobbying from industry, proving that risk is a long and arduous process. It turns out major retailers can use their leverage to force a product off the shelves much faster than the government can. And over the last fifteen years, Walmart has used its size and power to drive the market toward greener products.
One of its first targets was the laundry room. In 2007, Walmart announced it would begin selling only concentrated liquid detergent, which used less water and smaller packaging than traditional detergent, at its US stores. It worked with suppliers like Unilever to ramp up production, and within the year Walmart had finished making the transition. Over the next three years, the company estimated that the switch saved 400 million gallons of water, 95 million pounds of plastic, and 125 million pounds of cardboard. This was good for both the environment and the bottom line. Suppliers saved money on production, packaging, and shipping costs, and Walmart itself freed up tracts of shelf space that could be put to more profitable use. Soon, the rest of the market fell in line. Concentrated detergent became the new normal.
Later, the company shifted its attention toward taking harmful chemicals off its shelves. In 2013, Walmart announced that it would phase out ten chemicals from all the cleaning and personal care products sold at its stores, requiring suppliers to rework their formulas if they wanted to continue being sold. In 2017, Walmart became the first retailer in the United States to agree to join the Chemical Footprint Project, a nonprofit, voluntary program that gives retailers a blunt assessment of how their suppliers use and dispose of potentially toxic chemicals. Walmart also asked its suppliers to voluntarily reformulate their cleaning, pet, baby, and personal care products, citing a growing consumer demand for “natural” products.
Walmart’s commitment to removing harmful chemicals from its stores had a ripple effect down the supply chain and across the retail industry. The nonprofit group Safer Chemicals, Healthy Families, which releases an annual report “grading” retailers on their chemical policies, said that retailers averaged a B− in 2019, a dramatic increase from the D+ average just three years before. Walmart, Target, and Apple earned the top A ratings. The nonprofit thanked the retailers for filling what it described as a “growing regulatory void” in relation to chemical safety in the United States.
Today, Walmart is actively engaged in other efforts to build a more sustainable supply chain. It is working with suppliers to reduce greenhouse gas emissions and invest in renewable energy. Walmart has also made notable strides in diverting its own waste away from landfills, reducing food waste, shrinking the size of packaging, and improving the efficiency of its truck fleet.
If the world’s largest company by revenue takes concrete steps to reduce its environmental footprint, the impact can be enormous—and made all the more necessary by governments not compelling companies to change their practices through law or regulation. By pressuring its supply chain to embrace sustainability and remove harmful chemicals from products, Walmart was more effective in bringing about change than any government regulator. In this way, Walmart should serve as a model for the rest of the private sector. If Macy’s, Nordstrom, or Kohl’s started carrying only brands that used organic cotton, Patagonia would no longer be an outlier. Leveraging their clout, large corporations can galvanize change across the market.
Just as Walmart was able to shape up its environmental record in recent years and refocus its power toward positive ends, sectors more commonly cast as capitalism’s greatest villains have taken surprising acts of moral leadership.
There are few organizations that have had more ink spilled over their power and market influence than Goldman Sachs, arguably the most powerful investment bank in the world. Journalist Matt Taibbi famously characterized the bank as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Goldman Sachs has become the very caricature of Wall Street power, but perhaps to the surprise of its more radical critics the company is now wielding that power to push for more diversity at the highest levels of the private sector in industries the world over.
At the 2020 World Economic Forum, Goldman Sachs CEO and chairman David Solomon announced that the company would underwrite initial public offerings (IPOs) only for American and European companies that have at least one board member who is a woman or a person of color. In 2021, that minimum number rose to two. In other words, if your whole board is made up of white guys, Goldman will not take you public.
In 2018 and 2019, some sixty companies in the US and Europe went public with all-white, all-male boards. In the US, 40 percent of the companies that IPOed in the first eight months of 2019 had all-male boards. As the top underwriter of IPOs in the world, Goldman Sachs had a platform to push the very white, very male financial industry to prioritize diversity across the upper echelons of business.
“Venture capitalists really didn’t feel like it was their job to worry about the construct of a board the minute a company goes public,” Goldman CEO Solomon told me. “None of them would debate … that they need to have diverse boards, but they weren’t focused on it. It was lower on the priority list. One of the things our policy di
d is it accelerated or brought forward the focus on certain communities in private equity, in venture capital. This shined a light on it and amplified it, and I think it has moved the conversation forward.”
Solomon’s thinking was shaped in part by his two daughters. “When they were in college, I started to really appreciate much more how I saw things through their eyes differently than I saw them as a white male in the workforce,” he told me. “When I became CEO, I decided literally day one that diversity was something I really wanted to focus on during my tenure.”
Solomon’s support for diversity initiatives helped him land the top job in the first place. He was in a two-man competition with his colleague Harvey Schwartz to succeed Lloyd Blankfein as Goldman’s CEO. Schwartz was closer to Blankfein and considered the front-runner. But in the run-up to Blankfein’s retirement, the board of directors wanted a plan and presentation on diversity initiatives. This was considered “a tough fucking thing to present to the board,” according to Gregg Lemkau, then the co-head of Goldman’s investment banking. So Schwartz ceded to Solomon the responsibility of making the presentation (“to let him eat the shit sandwich,” according to one Goldman leader). Solomon embraced the opportunity. He went big, outlining an aggressive diversity initiative that would reshape the composition of the bank. Solomon’s plan and presentation so impressed the board that he moved in front of Schwartz as Blankfein’s likely successor, a transition that happened not long thereafter.
Soon after taking over as CEO, Solomon fought to ensure that women made up half the bank’s entry-level hires and set hiring minimums for African American and Latino applicants.
When Gregg Lemkau suggested setting a diversity threshold for IPOs, Solomon jumped at the idea. “Can we do that?” he asked Lemkau.
“We can do anything we want,” Lemkau replied.
There was not much time to shop it around: it was December 2019, and Solomon wanted to announce the initiative the following month at the World Economic Forum in Davos. As Lemkau hammered out the details of the policy, he met some resistance. Certain energy companies and family-owned businesses asked for exceptions. Within Goldman Sachs, some people feared the decision would cost Goldman business. Emails between Solomon and Lemkau pegged the number of new US listings they had done since 2016 without female directors at approximately 20 percent. That is a big chunk of their business. Yet Solomon kept pushing, and Lemkau’s message internally was that this was going to get done without any waivers or exceptions. The day before the announcement, Lemkau said some were suggesting limiting the policy to US companies. “This is not bold enough and I want to go further,” Solomon responded in an email. Ultimately, they expanded the requirement to European companies and set a date for raising the threshold.
