Written by Gabby Land
As the world becomes increasingly more concerned about social justice, inequality, and sustainability issues, many consumers are looking for accountability in the companies that they buy from. Alas, the concept of benefit corporations, or “B Corps” offer a vehicle for companies to demonstrate their commitment to social and environmental performance and accountability, transparently. To become a certified B Corp, a company must meet certain social and environmental responsibility standards with the goal to create value for the broader society versus just traditional shareholders (Usher, 2023). Some standards include passing a B Impact Assessment, being risk-reviewed, and meeting an annual revenue requirement of $5 billion, all of which are assessed every three years to ensure consistent commitment to sustainability (B Corporation, n.d.). This model that balances the generation of profit with benefiting the public is one that more corporations should consider. The clothing company and certified B Corp Patagonia serves as a real-world example proving how sustainable business models can be not only profitable but also create social value.
Patagonia’s performance over its time being a certified B Corp demonstrates that sustainable business models can be successful. Patagonia’s revenue has been consistently growing throughout the years. The company has an estimated value of about $3 billion dollars and brings in $100 million in revenue annually (Pereira, 2023). Further, its sales have quadrupled in the past decade to around $1 billion annually (Semuels, 2019). On top of this healthy revenue growth, Patagonia has managed to maintain its focus on ethical sourcing and employee well-being. This can be seen through its donation of 100% of its Black Friday sales to environmental causes in 2016, to providing many employee benefits (Semuels, 2019). It’s no surprise that Patagonia earned a 151.4 on the B Corp Impact Assessment, while the median score for all B Corp companies is 50.9 (B Corporation, n.d.). Clearly, sustainability can and should go hand and hand with generating revenue and profit.
Examining Patagonia’s overall popularity shows consumers’ demand for more ethical and sustainable companies is increasing. Nowadays, consumers have become increasingly interested in the impacts of what they consume and are beginning to gravitate towards more sustainable products and companies who prioritize ethical sourcing and sustainability (Faire, 2023). For example, in a recent report by NielsenIQ, it was found that 95% of consumers try to take some action to live sustainably (Faire, 2023). Also, internet searches with words including “eco-friendly” or “reusable” have increased dramatically in the past year (Faire, 2023). These data points have a direct correlation with consumer’s spending habits. It appears that in today’s day and age, when given the option, consumers will likely choose a more sustainable product if they have an option. Because a company’s stance on sustainability and transparency on sourcing and other operational decisions has become an element in a consumer’s product choice, it is logical that companies who adopt a more sustainable business model have the potential to be more successful.
Transparency is another key to Patagonia’s success with their marketing of their sustainability efforts, such as offering Fair Trade sustainable clothes since 2014 or and clothing made from recycled materials. The company has maintained an effective branding campaign, as a sustainable brand that offers high quality products which has generated a loyal customer following. For example, according to a 2018 Accenture study, brands that are outwardly communicative of their main purpose are found 64% more attractive to consumers (Engage for Good, 2016). Consumers want to know the impact of their spending, and firm transparency is key to helping them understand. Given that there is substantial financial upside for companies who choose to be transparent about their sourcing practices, carbon footprint and how they treat their employees, it serves as a strong motivation for companies to be more sustainable and transparent. Sustainability and transparency are becoming competitive necessities in today’s business market, and Patagonia perfectly displays this.
Some may argue that Patagonia’s success story is unique and replicating their model may not work for all businesses due to the effort and expense of becoming truly sustainable. While adopting sustainable practices may initially be expensive for a corporation, the investment will pay off in the long run, fueled in part by increased consumer demand for ethical products. There are a plethora of companies who have adopted ethical practices and increased their revenues – Athleta, OLIPOP, Toms, and Seventh Generation – to name a few (Rae, 2021). For example, Ben and Jerry’s, the much beloved ice cream brand is a certified B Corp trying to reduce their carbon footprint through many initiatives including sustainable packaging and less plastic use while also promoting social change and responsibility (Ben & Jerry’s, 2017). In particular, for their company owned ice cream shops and offices and their manufacturing practices, they are almost approaching 100% renewable electricity (Ben & Jerry’s, 2017). Further, they practice sustainable farming practices to preserve soil health and reduce negative carbon emissions from cows (Ben & Jerry’s, 2017). Based on the brand’s success, their commitment to ethics and sustainability is attractive to consumers, contributing immensely to the financial success of their brand. Companies who make investments in sustainability now, later reaped the financial rewards (Engage for Good, 2016). Therefore, moving towards more sustainable models is arguably one of the smartest moves a growing company can make.
In short, certified B Corps are helping companies today shift away from the traditional profit-driven focus, unlocking the potential to not only contribute to society but help reshape the way consumers view the value and impact of their spending decisions. By examining how companies are successful in their sustainable practices, more firms can follow suit. Patagonia proves that being ethical, transparent, and sustainable need not come at the expense of profit. Consumers are attracted to sustainability and transparency. In today’s market climate, it is in everyone’s interest for companies and consumers to adopt more sustainable practices for the betterment of business and more importantly the planet as a whole.
References
B Corporation. (n.d.). Driving continuous improvement for high-quality social and environmental business standards.Www.bcorporation.net. https://www.bcorporation.net/en-us/standards/development-and-governance/
Ben & Jerry’s. (2017). How We Do Business. Http://Www.benjerry.com. https://www.benjerry.com/values/how-we-do-business
Engage for Good. (2016). Social Impact Statistics You Should Know. Engage for Good. https://engageforgood.com/guides/statistics-every-cause-marketer-should-know/
Faire. (2023, April 19). Trendspotting: Demand for sustainable products shows no signs of slowing. Faire Learning Hub. https://blog.faire.com/industry-insights/sustainable-product-trends/#:~:text=Today%2C%20interest%20in%20eco%2Dfriendly
O’Brien, B. (2018, February 8). 4 companies who succeed by focusing on ethical sourcing and manufacturing. Trade Ready. https://www.tradeready.ca/2018/topics/supply-chain-management/4-companies-succeed-focusing-ethical-sourcing-manufacturing/
Peek, S. (2020, May 5). A Complete Guide to Starting a B Corp. Https://Www.uschamber.com/Co. https://www.uschamber.com/co/start/strategy/b-corp-advantages-and-requirements
Pereira, D. (2023, April 17). Is Patagonia Profitable? The Business Model Analyst. https://businessmodelanalyst.com/is-patagonia-profitable/
Rae, M. (2021, February 8). 25 of The Best Certified B Corporations to Support in 2021. Everyday with Madi Rae. https://everydaywithmadirae.com/best-b-corporations-to-support/
Semuels, A. (2019, September 23). “Rampant Consumerism Is Not Attractive.” Patagonia Is Climbing to the Top — and Reimagining Capitalism Along the Way. Time; Time. https://time.com/5684011/patagonia/
Usher, V. (2023, October 8). Council Post: Five Actionable Tips For Achieving B CorpTM Certification. Forbes. https://www.forbes.com/sites/forbesbusinesscouncil/2023/10/06/five-actionable-tips-for-achieving-b-corp-certification/?sh=5984e0e47691