The impact investing community does not always agree on everything. But ask any impact investor who the figureheads of the environmental movement that they look to for guidance are, and they’re likely to answer “Patagonia,” without skipping a beat.
Patagonia is a global apparel brand with roughly $1 billion in annual revenue and considerable environmental street cred. The Ventura, Calif.-based company and its leadership are now perceived as parental figures of the Certified B Corporation movement and to the new strain of regenerative environmentalism.
The individuals holding the $114 billion purse strings of “impact money” broadly share this view. However, and ironically, if Patagonia were starting up today and looking for financing, it would never receive funding from this group. And if it did, it wouldn’t become Patagonia as we know it, but something far less significant. That’s concerning because it means we are potentially missing out on the Patagonias of tomorrow.
Why is that? And what can we do to change it?
Educate and Lead
First off, it’s worth ironing out some misperceptions about what Patagonia is and isn’t. In many ways, it is a 20th century corporation. Patagonia outsources manufacturing of its clothing to contractors, primarily in Asia. It uses a variety of materials — not just organic cotton — which include petroleum derivatives. It is a for-profit company and far from perfect.
The big distinction is that Patagonia has been a pioneer of supply chain transparency, educating consumers on the reality of its business and the hard choices that need to be made and openly admitting when it falls short. (For example, it found that cotton has a bigger environmental footprint than synthetics). In doing so, Patagonia has created a measuring stick that other companies now need to compare themselves against, which creates a rising tide.
Since 1985, Patagonia has donated $89 million to environmental work. That’s not a bad score, and when you combine it with all the company’s non-cash environmental activity, like its activism in support of protecting public lands, you can begin to imagine how this might have had a systemic effect on environmental preservation.
Much of Patagonia’s environmental credibility comes from this involvement with grassroots organizations, including Patagonia Action Works, its new digital hub for grassroots activism. But more important than the dollars donated, more important than the legal battles with the Trump administration, Patagonia’s greatest contribution is its impact on our culture.
Patagonia has created an army of millions of environmentalists. When the company has been an early adopter of innovative environmentally friendly techniques and approaches, for example, around product lifecycle, it has been incredibly smart and effective in its communication to consumers.
By creating a sense of shared identity, a “cool factor,” and sensitizing parka buyers to technocratic topics like supply chain transparency, Patagonia has transformed the conversation around environmentalism and made it a defining part of many people’s identity. That shift is incredibly hard to quantify and to value in dollars and cents .
Why Wouldn’t Patagonia Get Funded Today?
Patagonia as a start-up would not receive funding from “impact” investors today. That’s not to say it couldn’t receive funding from venture capitalists or wealthy individuals (we’ll get to that), but the large pool of institutional investors with a mandate to grow profits AND impact would turn up their noses.
There are three reasons for this.[…]
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