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UNIVERSIDAD ESAN

MAESTRA EN ADMINISTRACIN
A TIEMPO PARCIAL 58 LIMA 2015-1 GRUPO 3
COURSE

SUSTAINABILITY AND COMPETITIVE ADVANTAGE.


RETHINKING VALUE CREATION

INSTRUCTOR

PAOLO TATICCHI, PHD

INDIVIDUAL REPORT

CASE OF PATAGONIA INC.

This report has been prepared for:

MIGUEL ANGEL RENTERIA CORONEL 1308897

Lima 2016

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Report Contents
About Environmental and Social Responsibility
3
How do you assess Patagonias approach to sustainability?
Is sustainability embedded in value-creation processes?
5
Is sustainability contributing to build a competitive advantage?
6
What is your evaluation of the sustainability reporting offered by Patagonia?
Conclusion
8

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About Environmental and Social Responsibility


Patagonia and Social Responsibility in the
Supply Chain
About Patagonia Inc.
Patagonia, Inc. is an American clothing company founded by Yvon
Chouinard in 1973. The company Patagonia, believes that CSR initiatives
are synonymous of good management and joint work with stakeholders to
promote programs for the realization of sustainable growth for society. It is
essential to Patagonia continued commitment to remain a key player in
global society and an example of efficient production. From this point of
view, Patagonia is determined to fulfill its social responsibility of the
company with respect to its various stakeholders, whether customers,
business partners, shareholders and investors or others. Global
environmental problems, meanwhile, are the most urgent concerns that the
company Patagonia must address nowadays. As a company in the
manufacturing sector, developing ways to harness our own different
technologies to contribute to the environment is a major challenge.
Moreover, Patagonia recognizes that social responsibility is clearer to help
achieve a sustainable world and society through technological innovation.
To this end, Patagonia, Inc. strives to create products and services that
contribute to the preservation of the global environment, a global leader in
sustainable apparel and teams from about 30 companies gathered in a
workshop to assess their operations. The assessment measured
environmental impact throughout the supply chain, assessing the company
from the design of a product, manufacturing, packaging, distribution, use
and care and finally the end-of-life of the product.

About Patagonia Inc. Sustainability Initiative

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A balance of economic, environmental and social imperatives, integration social and


environmental concerns in their business operations and interactions with their
stakeholders, The three spheres of sustainability, environmental (Natural Resource Use
Environmental Management pollution prevention (air, water, land, waste), economic:
profit, cost savings, economic growth, research & Development; Social: Standard of
Living, education, community, Equal Opportunity.)
Learn more or access the programs resources at
http://www.patagonia.com/environmentalism.htm

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How do you assess Patagonias approach to sustainability?


Patagonia and Social Responsibility in the
Supply Chain
September 2014, B Impact Assessment (Audit Ventura Head),
It increased its score from 107-116. 80 points are the minimum
needed score to achieve certification out of 200. It helps the
global movement of entrepreneurs through business by solving
social and environmental issues. It managed to reach high
standards necessary to address social and environmental
problems through programs and campaigns, well performance
and evaluation of supply chains and labor culture. The board
includes independent members who represent the interests of
the community. The company also extended the health
benefits to part-time, retail and warehouse staff. Community:
100% of suppliers were made transparent on websites and
40% of women are in management positions. 75% of their
materials care about the environment. They have organic and
recycled materials and also, its providers got BlueSign
standards (applied to advanced clothing production). They
count with LEED certification, which makes that more than 5%
of the used energy is generated on site. Review: Its scope has
been complete and has worked for all parties, such garments
which use with organic cotton. Currently, innovative dyeing
processes reduce 84% water-usage, 30% energy-consumption
and 25% less CO2 emissions. Since the business of
manufacturing garments was considered a dirty business due
to the excessive amount of water use and pollution, they
understood that all parameters can change without taking into
profitability. It has invested 20 million to make 8 new projects,
which also means business expansion, achieving a good
reputation. Finally, they receive or have received more than
650 investment applications.
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Learn more B Impact Assessment Score: at http://www.patagonia.com/on/demandware.static/Sites-patagonia-usSite/Library-Sites-PatagoniaShared/en_US/PDF-US/bcorp_annual_report_2014.pdf

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Is sustainability embedded in value-creation processes?


Patagonia and Social Responsibility in the
Supply Chain

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Value Creation Processes for the Environment: It has reduced


CO2 emissions by 25% through Dyeing processes. 75% of the
materials used care about the environment. They also have organic
and recycled materials, Patagonia is still making the preservation of
resources natural and human a priority, Patagonia protects the
environment through its clothing designs, which are simple,
versatile, and designed to last a long time. Many garments are
made from Synchilla, a fabric woven from recycled soda bottles.
This spring, the company converted to organic cotton. Processes
Value Creation Society: 100% of its suppliers are transparent
through websites. More than 40% of the frontline management is
women or from ethnic minorities. More than 25% of employees took
time off for community service, 1% of sales are donated to
environmental NGOs. Value Creation Processes for Customers:
When generating value generation processes, people get top
products and customers do not take into account whether
companies are transparent or sustainable. Customers are aware of
the production supply chains and NGOs also start feeling more
attracted to that kind of company. Besides, access to customers of
their production processes will generate brand loyalty. Its processes
are focused on providing highly durable products, promoting the
Buy less campaign. They also offer repair the products at a fair
price. It presents the initiative to recycle, reduce, re-imagine, repair
and reuse. (Repair: Publish information with solutions to clothing
problems such as: removing stains from its pieces). Value
Creation Processes for Employees: medical benefits are
granted for part-time, retail and warehouse staff. 50% of full-time
employees participate in external professional development. It also
covers 80% of the coverage of health insurance premiums to fulltime employees. Employees volunteer a total of 10.424 hours on
behalf of the company. Value Creation Processes Supplier:
They only accept suppliers which provide 100% organic cotton. In
1994, the company changed its production process: They decided
to use organic cotton, even though it represented providers an
increase in the price for organic cotton, fortunately, sales increased
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by 25%. In 1993, they pioneered in recycling plastic: it was the first


company to produce fleece out of recycled plastic bottles.
Learn more B Impact Assessment Score: at https://legacy.scu.edu/ethics/publications/iie/v8n1/synchilla.html

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Is sustainability contributing to build a competitive advantage?


Patagonia and Social Responsibility in the
Supply Chain

SATGE 1 : Viewing
Compliance as
Opportunity
Patagonia, Inc. meets
high starndares: bluesign,
LEED certification
(http://www.usgbc.org/cer
t-guide), B IMPACT
ASSESSMENT
http://bimpactassessment
.net/, the company
anticipates presents
problems means
environmental, since
1985, and in 1986 uses
organic cotton, is
associated with other
companies to buy organic
cotton, have changed
their technology so your
clothes last longer

STAGE 3:
Designing
Sustainable
Products
and
Services
They have
They have
increased
identified
efficiency in the
their various
value chain,
processes the
carbon
most harmful
management and materials to
evaluation of the
the
life cycle, ability
environment,
to redesign their
such as
operations to
chemicals
produce less
used in the
emnciones
dyeing
according to the
process, so
bluesign standard, have
have been
classified
commissioned all mendiante a
suppliers offer
code of colors
organic cotton,
are blue gray
has developed
and black,
sources of raw
with the black
materials such as the most
organic materials, damaging of
also recycles its
all.
products, recycles
old clothes to
STAGE 2:
Making Value
Chains
Sustainable

STAGE 4: Developing New


Business Models

STAGE 5: Creating Next


- Practice Platforms

The company was able to identify


what its customers want and in that
way they develop processes in
charge of meeting their customers
neeeds. Furthermore, they know how
to pick their partners as in the case
of Adidas and Wallmart, among
others and they jointly create the
Sustainable Apparel Coalition which
was in charge of creating an index to
measure the business supply chain
sustainability criteria. The company
has also assured that all its partners
and suppliers meet the same quality
and environmental standards as
Patagonia does. Regularly, they audit
the factories they work with and as a
remarkable fact they audited 90% of
the factories they were working on in
2010. Besides, it has health and
environmental safety standards and
it also has a Social Responsibility of
Raw Materials for which they must
audit their factories to assess if they
meet the safety, social responsibility

They were able to identify


how renewable and nonrenewable recources
affect their business
model. They also
identified the serious
environmental impact
produced by using cotton
in their processes and
that's why they decided to
work exclusively with
organic cottom.
Nowadays, during
garment production
(specifically for the dyeing
process), they have
reduced considerably the
use of water in
comparison to the
traditional methods which
water this resource.
Therefore, they deliver
cleaner products. By
changing their processes

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create other
garments, is
innovative

and environmental criteria. It does


not only become sustainable by
changing its processes, but when
helping other partners and suppliers
change theirs. Finally, its suppliers
help them set and meet rigorous
standards of social, environmental,
compliance and transparency
performance set for them as for
other companies.

and adjusting their


premises, they have been
able to reduced the
energy consumption by
over 25% and they also
got that 5% of the energy
is produced on-site. As a
result, new technologies
were developed and these
allow industries to use
produced energy as sa byproduct. In Patagonia,
they realized that when
creating long-lasting
changes, not only do they
improve sustainable
operativity, but they also
support other business to
learn how to reduce their
environmental impact by
making the difference and
revolving the way in
which businesses perceive
sustainability and being
this one of the objectives
of Patagonia: to teach
their clients and other
businesses on how they
can help preserve the
environment.

Learn more B Impact Assessment Score: at http://www.patagonia.com/on/demandware.static/Sites-patagonia-usSite/Library-Sites-PatagoniaShared/en_US/PDF-US/bcorp_annual_report_2014.pdf

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What is your evaluation of the sustainability reporting offered by Patagonia


Patagonia and Social Responsibility in the
Supply Chain

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Technological
Maximise Material
and energy
efficiency

Create value
from waste

Organisation
al

Social
Substitute with
renewables and
natural processes

Deliver
functionality
rather than
ownership

Adopt a
stewardshi
p role

Source:
Source:
http://www.pata
http://investors.su
Source:
Source:
gonia.com/blog/f
npower.com/releas https://hbr.org/ http://nancybocken
ootprintedetail.cfm?
2016/06/compa .com/sustainable- chronicles/patag
releaseid=610651
nies-arebusiness-modelonias-plastichttps://blog.demin
working-witharchetypepackaging-ag.org/2014/01/proc consumers-toencouragestudy-on-theess-thinking-atreduce-waste
sufficiency/
challenges-ofpatagonia/
garmentdelivery/
the company
also offers a
Uses SunPower
Patagonia also
repair program
if it is possible
solar panels, the
asks customers to
for their
to completely
most efficient solar
Not Buy their
customers for a
eliminate the
panels on the
jackets, trying to
modest fee.
use of polybags
market today,
make them aware
Currently,
without
permite reducir su
of the effects of
Patagonia
incurring
dependencia de la
their purchases
repairs about
damage to
energa de la red
and encourage
40,000
products that
pblica para los
them to make
garments a
would make
prximos 25 aos,
things last rather
year in their
them unsellable.
(manufacturing)
than buying new.
Reno, Nevada
service center.

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Encou
rage
suffici
ency

Repurpo
Develop
se for
scale up
society /
solution
environ
s
ment

Lean
Manufacturing

It presents the
initiative to
recycle, reduce,
re-imagine,
repair reuse,
The company
pledges to
build useful
things that
last, to repair
what breaks
and recycle
what comes to
the end of its
useful life

Product-oriented
PSS-maintenace
extended
warrantee

Conclusion
Patagonia and Social Responsibility in the
Supply Chain
Patagonia is a unique company. Their business
and operating models are designed to support
their mission that is based on doing good
instead of generating profit. However, the
models are designed such that by creating the
best
quality
products
and
promoting
sustainable practices they are also creating a
competitive advantage for themselves and
maintaining profitability

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Environmental Differentiation Strategy of Patagonia: at http://www.slideshare.net/johannesmahlich/environmentaldifferentiation-strategy-of-patagonia

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