As a company, living your values while remaining profitable is tricky at best. Patagonia, Inc., the American clothing company founded by rock climber Yvon Chouinard in 1973, has managed to pull it off.

Company leaders, in full view of the entire organization, balance core values with the realities of business and growth. And when cracks have been exposed in the system, they’ve not only survived but thrived by doubling down on values.

“I think the founders … and the leadership of Patagonia have been historically really good at self-awareness and self-assessment. [They’ve been] introspective about who they are and what they’re doing – and they revisit that on a regular basis,” says Craig Wilson, former lead strategist.

Here’s a look at what’s made Patagonia successful, as well as some ideas and inspiration for leaders who want to commit to being a values-led company.

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For more of the story, check out “Patagonia’s Demand for Ethical Supply” in our original podcast, Teamistry.

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Patagonia: “We’re in business to save our home planet”

Patagonia has long been known as a company that wears its values on its sleeve. They hire for values fit over specific job experience, strongly support work-life balance, and their commitment to the environment is without equal in the industry.

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“Patagonia uses business to inspire change, to inspire solutions to global challenges,” says Bethany Patten, a lecturer and Senior Associate Director for MIT Sloan Sustainability Initiative. “I think, at the core, they care more about doing the right thing than they really do about profits.”

Indeed, before corporate social responsibility was a popular concept, Patagonia had declared a commitment to better outcomes for workers and the planet.

But that commitment came with added pressures for remaining profitable, as well as some unexpected challenges.

Accidental exploitation hidden in the supply chain

One of the biggest bumps along the road was e-commerce. Wilson, explains: “In the early 2000s, there was a lot going on in terms of change inside the organization. When the internet happened, Patagonia became a rather complex company.”

The company was expanding in ways it hadn’t before. They had begun to source products from overseas factories that could make more of what they needed at lower cost. They were also working with a larger number of factories – many of which subcontracted the work to factories Patagonia’s leaders knew nothing about.

Almost overnight, keeping track of the supply chain become even harder. And just as suddenly, the company discovered issues of exploitation and poor working conditions – the very issues they sought to avoid – in the difficult effort to balance ethics and profits.

By losing track of their supply chain, Patagonia couldn’t live up to its fair labor commitments. Something needed to be done, or the company would risk losing focus on the very ideals it was built upon.

Walking the talk

Patagonia realized it needed to move from ideas and beliefs to practices and behaviors. It was the only way to ensure values led their decision-making at scale.

To regain their good standing, they began a process of enshrining their values and principles in all aspects of their teams. This involved three strategies:

  • Empowering all employees to embody the values.
  • Evaluating all company decisions and actions openly.
  • Committing to holding themselves accountable.

The first step was hiring a social responsibility manager. This person would monitor the supply chain and oversee the education of all employees on factory labor issues. In addition, the company held mandatory monthly seminars with activists. “If you were sitting at your desk,” says Wilson, “and that meeting was going on, somebody from leadership would come around and grab you and say, ‘You know what? That can wait. This is what’s important.’”

Patagonia’s culture is a result of the strategy, and the strategy is the result of the principles. “The idea was to have each individual understand and embody it,” says Wilson, “which enabled them to execute against that with their domain expertise. Everyone from a product developer to a web designer would get the big picture. They’d understand the cause and what the business stands for and how it operates.”

Patagonia reclaimed its standing, in part by partnering with organizations like Fair Trade USA. “When responsibility and sustainable sourcing and commitment to people and planet is in a company’s DNA, it’s just so authentic that you can feel that,” says Maya Spaull, Fair Trade USA’s Vice President of apparel and home goods. “It’s most successful when it’s really embedded in the culture.”

How to create and remain a values-driven business

If your company is prioritizing values similar to Patagonia’s, keep in mind that it’s an ongoing process. Says Wilson: “It breaks down very, very quickly. Because few companies are willing to do the work to build that into the organization in an absolute way. Patagonia is not an absolute solution. It’s not doing everything perfect according to its principles, but it’s always trying to get as close as possible.”

While no company has it all figured out, Patagonia’s example includes many touchstones. Take a look, try a few things, and then iterate, iterate, iterate.

1. Craft your values

You don’t set core values, you discover core values.

Jim Collins, author of “The Mars Group”

Leading with your values once you’ve defined them doesn’t safeguard all decisions. But by viewing all decisions through the lens of core values, you’re able to defend them, stand by them and, more often than not, feel proud of them. Plus, it’s what your people want most.

Discover your company’s values by planning a trip to Mars

Atlassian didn’t “create” our core values. Instead we tried to articulate the values the company and the staff were already living. And then we let them take root, grow, and evolve.

Early on, we did our version of Jim Collins’ “The Mars Group” exercise, which asks companies to “Imagine you’ve been asked to recreate the very best attributes of your organization on another planet.”

The management team and Atlassian staff each came up with a list of values. Co-CEO and co-founder Mike Cannon-Brookes said, “The most fascinating and gratifying thing was the huge overlap between the two lists. The correlation was scary, they were almost exactly the same list.” After some discussion, a merged version became the core values.

2. Focus on hiring the right people

Hiring for a values fit helps ensure the organization remains strong, and can grow and change in exciting ways that are aligned with your company’s vision. When leaders who have common values hire others who share them, a virtuous cycle is created.

Patagonia fills their teams with people who’ve backpacked across the globe, climbed mountains, and simply refused to live a conventional life – also known, affectionately, as the “dirt bag life.” And they hire people who, above all, care about sustainability. Then they help them understand the job, on the job.

3. Don’t try to make a culture, nurture one instead

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Company culture is the natural outgrowth of people with shared values.

For Patagonia, work-life balance is as important to the culture as is sustainability. Says Bethany Patten, ”Sustainability is woven into every single piece of their culture, whether it’s the cafeteria on campus or the onsite childcare. The fact that you can surf during the day shows they really value that we need our free time and exercise in order to be more healthy employees.”

4. Stick by what you believe in

Patagonia’s commitments to the environment are legion. Their policies emphasize recycled and low-impact materials, and they provide opportunities for customers to buy fewer new items through their Worn Wear initiative. They’re a products company known for opposing over-consumption. Their Black Friday ad a few years ago was headlined “Don’t Buy This Jacket.” The company even redirected a $10 million corporate tax cut toward environmental causes.

Says Wilson, “My primary lesson learned in my time at Patagonia is that it’s a 100% principles-driven business. There’s clarity of what they stand for, what they believe in, and what they’re willing to do and not do.”

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