Annual
Benefit
Corporation
Report
Fiscal Year 2016
May 1, 2015 – April 30, 2016
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Fiscal Year 2016Annual Benefit Corporation Report
Dear Friends,
We are living in unprecedented and turbulent times in
which the foundations of our democracy are challenged.
The planet is being threatened by those who deny the
reality of climate science and eagerly pollute our air,
water and soil and undermine our treasured public lands
for shortsighted private gain. As businesses, we must
be vigilant, vocal and, most importantly, willing to take
bold action—and so the burgeoning Benefit Corporation
community is more vital to our future than ever before.
The good news: Our movement is gaining real
momentum around the globe as more and more business
leaders take on the challenge of looking beyond profits
in defining the values we can and must deliver to people
and the planet. There are now more than 4,700 legally
designated Benefit Corporations across the country.
Becoming a Benefit Corporation means balancing our
need to achieve reasonable financial gain with purposeful
action to create additional benefits for multiple
stakeholders whenever possible. In other words, Benefit
Corporations take real steps to ensure business is good
for people and good for the planet.
Patagonia became California’s first Benefit Corporation
in 2012, which made these practices part of our legal
charter and embedded our core values into Patagonia’s
foundation forever. Since then, we’ve enjoyed continued
growth by all measures. Together, the Benefit Corporation
structure and B Corp accountability requirements provide
a real framework for decision-making at the executive
and board level and the key source of the model’s power
to improve corporate behavior without sacrificing profit.
This is all good news, but it’s not enough. If business
hopes to rise to this challenge and scale our impact, it
will require the entire herd, not just a few quirky unicorns.
And it can’t take 45 years. Businesses, big and small,
around the globe, must take it upon themselves to
completely reprioritize how we assess corporate returns.
We must transform a conventional business model that
currently places profits above all else to instead ensure
every decision we make as business leaders reinforces
our commitment to the environment, our workers, our
customers and our communities.
And in the end, profits can and will still be made, perhaps
at greater levels than ever before, as in Patagonia’s case.
Adopting a long-term outlook when short-term thinking
currently rules the day in nearly every C-Suite and board
room is not only in the best interest of people and our
planet, it’s ultimately in the shareholders’ interests as well,
because an economy equipped for long-term success
only has room for businesses willing to expand the very
notion of a bottom line.
This year, I’m proud to see the support Patagonia
shows our employees, customers, the environment and
the global community involved in every level of our
business reflected in a B Corp score of 152—up from
116 in 2014. We have also made significant, measurable
progress in advancing our specific benefit purposes. And
since becoming a Benefit Corporation, Patagonia has
continued to achieve near-record growth each year.
Our Annual Benefit Corporation Report describes what
we’ve been up to this year. Patagonia is proud to be a
part of this vital community of businesses, and I look
forward to more good news ahead.
Letter from Our CEO
Rose Marcario
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Fiscal Year 2016Annual Benefit Corporation Report
Introduction
Since its inception in 1973, Patagonia has pursued its mission to build the best
product, cause no unnecessary harm, and use business to inspire and implement
solutions to the environmental crisis. We do so through the design, production,
manufacturing and sale of a wide range of technical outdoor apparel and
sportswear products under the Patagonia brand. Our Patagonia product offering
covers nearly every activity that can be performed outdoors, including alpine
climbing, skiing and snowboarding, trail running, mountain biking, fishing, surfing,
yoga and swimming. We also design, manufacture and sell surfboards
under the brand, Fletcher Chouinard Designs.
In 2012, we extended our product offerings to include
food through our subsidiary, Patagonia Provisions, with
the goal of repairing the food supply chain by offering
healthy products derived from sustainable fishing and
regenerative organic agricultural practices. We also
launched our corporate venture capital fund, Tin Shed
Ventures, to invest in start-ups that offer solutions
to the environmental crisis with the goal of proving
that business—and investments—can be engines of
positive change.
We sell our products around the world in our owned
and operated retail stores, on our e-commerce
sites, and to third-party wholesale partners primarily
focused on the specialty outdoor market who resell
our products online and in their own brick-and-mortar
stores. North America is our largest market, making up
approximately 75 percent of total sales. It’s followed
by Japan and Asia Pacific at 15 percent, Europe at 8
percent and Latin America around 2 percent. For our
fiscal year, which ended April 30, 2016, products sold
through our direct-to-consumer channels made up
approximately 41 percent of our total global sales, with
products sold through wholesale partners at around 59
percent of total sales.
We have approximately 2,200 employees, with
roughly one-quarter based in our Ventura, California,
headquarters, another quarter in our Reno, Nevada,
distribution and service center, around 500 employees
in our retail stores around the world, and 400 based in
our regional offices located in Japan, the Netherlands,
South Korea, Australia, Argentina and Chile. Our
Patagonia Provisions operations are run out of
Sausalito, California.
This report covers Patagonia Works and its U.S.
operating subsidiaries—Patagonia, Inc., Patagonia
Provisions, Great Pacific Iron Works, and Fletcher
Chouinard Designs, Inc.—which are all registered
Benefit Corporations.
Table of Contents
Letter from Our CEO 03
Introduction 05
Benefit Corporation + Certified B Corp
07
Specific Benefit Purposes
08
B Corp Certification and Assessment
10
Patagonia’s Score 2016
11
Benefit Purpose Performance 12
1% for the Planet 14
Build the Best Product 20
Cause No Unnecessary Harm 30
Sharing Best Practices 34
Transparency 38
Supportive Work Environment 42
The Experiment Continues 47
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Fiscal Year 2016Annual Benefit Corporation Report
In 2011, when the Benefit Corporation movement was just
getting started, Patagonia’s founders took note—not only
because it was in line with what the company had been doing
for decades, but because it could lock in that behavior for the
future. As a Benefit Corporation, Patagonia would be legally
required to consider its environmental and social impacts, and
could even prioritize those considerations ahead of profits.
Patagonia Works became California’s first Benefit Corporation
on the day the law took effect, January 3, 2012.
Patagonia then went a step further by incorporating specific
and detailed obligations into our Articles of Incorporation,
protecting the things that might otherwise be cut under a
framework dedicated to maximizing profits at the expense of
the company’s values. These became our six specific benefit
purposes. The board of directors fortified these commitments
by requiring that any changes can be made only with unanimous
shareholder approval.
Benefit Corporation
+ Certified B Corp
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Fiscal Year 2016Annual Benefit Corporation Report
1% for the Planet®
Each year, we contribute one percent (1 percent) of our annual
net revenues to nonprofit charitable organizations that promote
environmental conservation and sustainability.
Build the Best Product with
No Unnecessary Harm
We endeavor to build the best products and to cause no unnecessary
harm to the planet or its inhabitants by: (i) designing and fabricating
the highest quality products as defined by durability, multi-
functionalism and nonobsolescence; (ii) designing and fabricating
products that are easily repaired and made from materials that can
be reused or recycled; (iii) designing and fabricating products with
minimum impacts throughout the supply chain—including resource
extraction, manufacturing and transportation—on water use, water
quality, energy use, greenhouse gas emissions, chemical use,
toxicity and waste; and (iv) partnering with customers to take mutual
responsibility for the life cycle of our products, including repair, reuse
and recycling.
Conduct Operations Causing
No Unnecessary Harm
We will conduct our operations in a manner causing no unnecessary
harm by continually seeking to reduce the environmental footprint
and impact of our operations in water use, water quality, energy use,
greenhouse gas emissions, chemical use, toxicity and waste.
1.
2.
Patagonia’s specific benefit
purpose commitments are:
These specific benefit purposes govern Patagonia at the most
fundamental level, legally binding the company to its long-held
commitment to prioritizing environmental and social values
alongside financial return.
3.
4.
5.
6.
Sharing Best Practices with Other Companies
In support of our commitment “to use business to inspire and
implement solutions to the environmental crisis,” we will share
proprietary information and best practices with other businesses,
including direct competitors, when the board of directors
determines that doing so may produce a material positive impact
on the environment.
Transparency
We will provide information through our website and print catalogs
that describes the environmental impact of representative items
across our different product lines based on the best science and
data practicably available.
Providing a Supportive Work Environment
We will endeavor to provide a supportive work environment and
high-quality health care through measures, including, but not
limited to, providing on-site day care at our corporate headquarters
or subsidized child care at our other facilities.
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Fiscal Year 2016Annual Benefit Corporation Report
In addition to our Benefit Corporation status under California
law, Patagonia is also a certified B Corp, which means that our
company’s overall environmental and social performance is
measured and independently verified by a third party, B Lab.
B Lab’s standard, known as the B Impact Assessment, scores
companies’ environmental and social performance on a 200-point
scale. We chose B Lab for the third-party verification required under
the California Benefit Corporation statute because we believe their
experience certifying hundreds of companies and their social and
environmental performance standards are the most comprehensive
and aspirational available. Our B Corp score is reassessed every
two years. Following the most recent B Impact Assessment in 2016,
our score was 152, up 36 points from 2014 and 45 points from our
first assessment in 2012.
B Corp Certification
and Assessment
Patagonia’s Score
Overall Rating
ENVIRONMENT
WORKERS
CUSTOMERS
COMMUNITY
GOVERNANCE
2016
152
45
25
6
59
17
2014
116
35
26
7
31
17
2012
107
48
25
N/A
20
15
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Fiscal Year 2016Annual Benefit Corporation Report
Patagonia’s
Performance
On Achieving Our Six Specific Benefit Purposes
For Fiscal Year 2016
Inspired early on through our connection to the outdoors and
seeing firsthand how grassroots environmental activists could make
a difference, we made our first environmental grant in the early
1970s to Friends of the Ventura River—an amount of $4,000—along
with a desk to use in our Ventura office. In 1985, we formalized
our environmental grant-making program through a commitment
to donate 10 percent of company profits each year. In 2002, our
founder Yvon Chouinard, and Craig Mathews, owner of Blue Ribbon
Flies, co-founded the nonprofit, 1% for the Planet
®
, an organization
bringing together and certifying businesses committed to pledging
1 percent of sales to environmental nonprofits, which assures
contributions even in an unprofitable year. In 2012, we made this
commitment part of our corporate charter when we became a
registered Benefit Corporation.
1% for the Planet
®
Benefit Purpose Performance
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Fiscal Year 2016
16
Benefit Purpose Performance
1% for the Planet®
Initiatives
Each year, we distribute 1 percent of our annual net revenue (total sales minus chargebacks and returns) to help
support grassroots environmental nonprofits. We do so primarily in the form of cash grants, along with some in-kind
and product donations. A portion of these funds is also used to cover the cost of running our internal grants program.
These amounts are reviewed and certified annually by 1% for the Planet, and in FY16 totaled $7.88 million.
Activist- and Employee-
Oriented Grant Making
Most companies with substantial charitable
giving programs give large grants to a handful of
organizations. As a result, corporate environmental
grants typically fund only the established, national
environmental organizations, which make up just 2
percent of U.S. environmental nonprofits, yet receive
more than half the funding. This leaves the smaller,
grassroots groups of the environmental movement
significantly underfunded.
When we became a Benefit Corporation and
institutionalized our 1 percent giving into our corporate
governance structure, we directed the company
to prioritize giving to these smaller, grassroots
environmental organizations operating in places where
we do business. While we still fund a handful of larger,
national organizations, we prioritize support for activists
working on front-line issues in their backyards.
Each year we fund hundreds of groups around the
world with small grants averaging $7,000-$12,000.
Our small donations can have a big impact: 52
percent of the nonprofits we supported last year have
annual budgets less than $300,000, and 75 percent
have fewer than 10 employees. Grant recipients and
amounts awarded are determined entirely by Patagonia
employees working in all areas of the company.
These employee-driven grant-making programs are
administered by a team of three dedicated, full-time
employees who make up our environmental grants
department. We have 21 different employee grant-
making programs. They include:
Retail Grants
When a grant proposal comes from an organization
or project connected with an issue or area in the
U.S. where we have a store, it goes to that store for
review. Each of our stores has a designated employee
acting as the environmental grants lead. This person
spends a portion of their paid time off the floor vetting
proposals and engaging colleagues in reading and
awarding grants. In FY16, employees in our 32 U.S.
stores allocated more than $1 million to more than 250
grassroots environmental groups connected to the
communities they serve.
Corporate and Media Grants
If a U.S. grant proposal is not connected to a Patagonia
store location, it goes to our corporate grants councils
or, if media is a focus, to our media grants council at
our Ventura headquarters. These councils are made up
of employees who are nominated and elected by their
colleagues. Grants councils meet three times a year
to review and decide some 225 funding proposals.
We estimate that grants council employees devote
120 hours each year to the grant-making process.
Our corporate and media grants councils awarded
more than $1.5 million in grants to 188 grassroots
organizations around the U.S.
Other Ways We Fund
We run more than a dozen other employee-
administered granting programs to fund our 1 percent
commitment. These include working with multibrand
retailers that sell our products to identify organizations
in their communities, which we fund on their behalf,
as well as various international grants programs in
regions where we do business that are tailored to local
communities and cultures.
Grant proposals received
Proposals funded
Environmental organizations receiving grants
Fiscal year ended April 30, 2016
Total Number of...
1st Grant to Friends of
the Ventura River
$4,000 + Work Space
Co-Founded
1% for the Planet
Became a Benefit Corporation
Institutionalizing 1% Giving
$6,638,027
$6,129,444
$5,519,756
1% of Net Revenue
$2,770,643
10% of Company Profits
$92,784
$6,374,353
$7,125,777
1985
2001
FY03
2012
FY12
FY13
FY14
FY15
FY16
$78 Million
Lifetime contribution of cash and in-kind services
1970s
2014
1,303
875
770
2015
1,234
857
766
2016
1,403
985
824
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Fiscal Year 2016
18
Benefit Purpose Performance
1% for the Planet®
Stopping the Susitna Dam
For the past few years, we have partnered with the
Susitna River Coalition to stop a proposal to construct
a 735-foot dam on the Susitna River in Alaska, donating
more than $116,500 to the effort. The project would
have resulted in the second tallest dam in the U.S.
and significantly impacted fish populations, caribou
migrations, recreation and tourism in the area. Through
continuous political pressure and public awareness
driven by a number of groups, including the Susitna
River Coalition, the project was officially denied by
Alaska Governor Bill Walker in mid-2016.
5 National Monuments Created
For the past year, we have increased our involvement
with several environmental groups working for federal
designation of a handful of public lands as national
monuments. Many of these campaigns move precious
ecosystems into permanent protection, keeping wildlife
cultural sites and recreational opportunities safe for
generations. Through work with the Conservation
Lands Foundation, Amargosa Conservancy, Mojave
Desert Land Trust, Tuleyome, and California Wilderness
Coalition, funded (in small part) by Patagonia donations,
five national monuments were created in FY16. These
monuments span more than 2.5 million acres and
include the Basin and Range, Berryessa Snow Mountain,
Castle Mountains, Mojave Trails, and Sand to Snow
monuments.
Tools for Grassroots
Activists Conference
To complement our 1 percent giving, since 1994 we’ve
hosted a now biennial Tools for Grassroots Activists
conference where environmental activists come to learn
best practices to maximize their impact. This past year,
we hosted 80 activists from grassroots organizations
around the country for training sessions conducted by
14 experts on topics such as community organizing,
campaign strategy, communication, lobbying,
fundraising, working with businesses, and effectively
using social media and other technology to advance
issues. Forty Patagonia employees, from store employees
to our CEO, participated in the three-day conference.
50 Miles of Trail in Chile
Our Mile for Mile campaign was a companywide push
to raise funds and awareness to build new trails in
Chile’s Patagonia Parque—soon to be designated a
national park. The campaign kicked off with a Patagonia-
produced film featuring three of our ultra-running
ambassadors, who subsequently toured with the film
to a number of our stores, bringing in donations from
customers around the world and a matching grant
from Patagonia. We raised over $90,000 for nonprofit
Conservación Patagónica, which will now build more
than 50 miles of trails.
Challenges
Scaling our 1% Giving and
Grant-Making Process
As our sales grow, so do our donations—and the dollars
are piling up quickly. Our grants program has increased
by 50 percent since we became a Benefit Corporation in
2012, this fiscal year totaling $7.1 million going to fund
environmental work. As we continue to scale, we need
to ensure our funding program has the resources to do
an efficient job of supporting organizations, big and
small, that are making a difference.
Activism and Brand Reputation
Activism can be polarizing, especially for a business
or brand, as it involves choosing a side on often
contentious and political issues. People with differing
opinions may choose not to buy our products. If
something we support creates a significant backlash
that impacts our sales, we’ll have less to contribute to
the fight to protect our planet. Our history indicates that
most of our customers support environmental activism
and challenging the status quo, but our activism may
alienate some potential customers.
Alaska’s Susitna River has been spared—at least for the moment. TRAVIS RUMMEL
Activists work together at Fallen Leaf Lake, California. AMY KUMLER
Basin and Range National Monument, Nevada. TYLER ROEMER
Mile for Mile, Chile. JAMES Q. MARTIN
Achievements in supporting
grassroots environmental activists
over the past year include:
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Build the Best
Product With No
Unnecessary Harm
With a product development calendar that spans nearly
18 months from product conception to completion,
and a supply chain made up of hundreds of contracted
independent suppliers, we rely on a number of different
tools and programs with the goal of embedding the
commitments described above into our product life cycle
and measuring impacts along the way.
Benefit Purpose Performance
1. Is it functional?
Does the product fulfill a clear and needed functional
purpose? Do the design and materials of the product
serve the functional purpose? Without a serious
functional demand, we can end up with a product that,
although may look great, is difficult to rationalize as
being in our line—i.e., “who needs it?”
2. Is it multifunctional?
Is this product able to serve multiple and varied
functional applications? Does this one product prevent
the user from having to carry or purchase other gear?
Is the product designed creatively to allow for multiple
different applications? The more you know the less you
need. Why buy two pieces of gear when one will do the
work of both?
3. Is it durable?
Will the product stand up to hard, prolonged use? Do
all the parts of the product wear out roughly at the
same time and only after a long life? Will the product
go threadbare before any one piece will fail? We test
until something fails, strengthen that part, then see
what fails next…Until we’re confident that the product is
durable as a whole.
4. Can it be easily repaired?
Can the product be easily repaired in the field with little
or no tools? Is the product a responsible choice from
its birth to death? There’s always going to be a need
for repairs, and we make sure that they are possible; a
zipper should be replaceable without the entire coat
having to be taken apart.
5. Does it fit our customer?
Does the fit of the product meet the needs of our
core user, and is it appropriate for the activity it
was intended? Is the fit of the product consistent
throughout line? Will it fit after repeated wash/care?
Does the fit take layering into consideration?
6. Is the product simple?
Is the product as simple as possible? Functionally
driven design is often minimalistic. Complexity is often
a sure sign that the functional needs have not been
solved. Is the product as simple as possible?
7. Is the product globally
relevant/appealing?
Will the product fill the functional and aesthetic needs
of core users in every locale? Does the design lend
itself toward global acceptability, functional needs,
sizing and color?
8. Is it easy to care for?
Is the product easy to clean? Does it require any
maintenance? Low maintenance of product is a criteria
for high quality. No ironing is required. Will it still look
acceptable on a plane ride home after washing it in a
sink on the way to the airport?
9. Does it have aesthetic appeal
(added value, authentic, art)?
Does the aesthetic of the product differentiate it/make
it better than other products? Is it beautiful, timeless or
authentic? Are we making the “real” thing? Is it the best
of its kind? Real art is timeless.
10. Does it cause any
unnecessary environmental harm?
Without sacrificing quality, could the product have
been made in a less environmentally harmful or more
sustainable manner? Is the product a responsible
choice from its birth to death?
Fiscal Year 2016
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YC Scorecard Questions
Patagonia Design Quality
Benefit Purpose Performance
Build the Best Product With No Unnecessary Harm
Initiatives
Maximizing Quality
To influence the design process with the goal of making
the best product possible, Patagonia developed an
internal product-rating system based on our founder
Yvon Chouinard’s design quality attributes. Known as the
YC Scorecard, this rating system was designed to embed
a focus on quality across all teams touching our products
and create a common “quality language” to answer the
question: “Is it a Patagonia 10?” To get to that answer, an
internal team of experts evaluates the functional, social
and environmental performance of every Patagonia
product using the 10 Patagonia Design Quality Attributes
(next page), assigning a score of 1 to 10 for each.
The product-scoring teams typically consist of five
people from a mix of the company’s departments
responsible for product design, development, quality,
repair, field testing, product category leadership, and
corporate social and environmental responsibility.
YC Scorecard Results
We started using the YC Scorecard with our fall 2015 product line and have scored every new or redesigned
product since, with 1,315 products scored to date. This process provides our design teams with real-time
feedback for improving product quality over time. Average minimum product scores have risen on our
10-point scale from 7.2 to 8.04 since fall 2015. Because it’s an internal measure that can be largely subjective,
we use the YC Scorecard for design and development purposes and not as a customer-facing metric.
Fall ‘15 Spring ‘16 Fall ‘16 Spring ‘17
8.98 8.81 8.86 8.90
Average quality score
7. 20 7.15 7.74 8.04
Lowest score
9.84 9.68 9.61 9.61
Highest score
644 301 192 172
Total number of products scored*
*The number of products scored was the highest in fall ’15, when we started and when
we scored all products for the first time. Following that season, we look at only new or
redesigned products.
Quality Return Rates
As another measure of quality, we look
at return rates for products that our
customers tell us did not meet their quality
or fit expectations. Product returns for
quality or fit reasons as a percent of total
sales have declined year-over-year since
implementation of the YC Scorecard.
2015 2016
.44% .41%
Quality returns as a percentage of sales
1.96% 1.85%
Fit returns as a percentage of sales
Fiscal year ended April 30, 2016
58%
24%
15%
3%
2015
54%
26%
18%
2%
2016
Virgin petroleum-based products (polyester/nylon)
Recycled materials
Cotton and other plant-based materials
Wool and other animal products
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Fiscal Year 2016
Minimizing Impacts from Materials
To facilitate a transition away from fabrics made from virgin
petroleum-based materials—like polyester and nylon—in early
2015 we quantified the total amount of virgin, recycled and
natural fibers used across our entire product line to develop a
baseline. In 2016, we decreased the use of virgin materials in
our products from 58 percent to 54 percent.
We redesigned our line of Nano
Puff® products for fall 2016. While
the shell and lining were always
100 percent recycled polyester,
the insulation was made entirely
from virgin material. So we worked
with our supplier Primaloft®, Inc.
to develop high-performance
insulation containing 55 percent
postconsumer recycled fibers,
saving the equivalent of two
million plastic bottles from the
landfill in the first year alone.
We redesigned the shell of our
Torrentshell Jacket, replacing
124,000 pounds of virgin material
in that product alone with recycled
nylon in spring 2016.
We redesigned our wetsuits to
replace the traditional neoprene,
made from oil with a material
made with 85 percent natural
rubber by polymer content.
The natural rubber comes
from plantations managed in
accordance with the Forest
Stewardship Council® to ensure
they aren’t contributing to
deforestation, maintain the
ecological functions and
integrity of the forest, and
conserve biodiversity and
sustainable livelihoods.
Benefit Purpose Performance
Build the Best Product With No Unnecessary Harm
Minimizing Impacts from Manufacturing
The modern apparel supply chain is complex, with many
levels of suppliers. Nearly all products are made from
components sewn and assembled by third-party finished-
goods manufacturers using materials from other third-
party suppliers. Most apparel brands track and audit
factory conditions only at their “Tier 1” suppliers—the
factories that assemble their finished products—and often
only for social compliance as required by the Fair Labor
Association. We assess all 81 of our Tier 1 suppliers for a
wide range of things, including social, environmental and
quality standards.
In 2012, we expanded our social and environmental
audit program to include our Tier 2 suppliers, focusing
primarily on those providing the raw materials—fabrics
and trims—we use in our products. By the end of FY16,
we had completed the process of bringing 40 of them
into our social audit program, auditing those that supply
approximately 80 percent of our fabrics and trims.
Nearly every audit uncovers an opportunity for
improvement, and all substandard audit findings must be
remediated in a timely manner. What constitutes “timely”
can vary, depending on the complexity of the issue.
When an audit reveals significant problems that require
in-depth analysis, we work with the supplier to identify
the root cause of the problem and then determine
whether working with the factory toward a long-term
solution will lead to positive change.
Remediating systemic problems can take time, resources
and continuous monitoring. But we view sustainable
remediation as the most valuable outcome of our
monitoring efforts, because it raises standards across
the board, improving social, environmental, and health
and safety conditions in a factory, not just for us, but for
other brands as well. This is important because Patagonia
typically represents only a small percentage of a factory’s
total business. We spend a good deal of time helping
factories identify and implement impactful solutions
to their biggest challenges. We often require them to
participate in specific training, education or continuous-
improvement programs, which Patagonia helps pay for
in part or full. In FY16, we participated with our suppliers
in the following capacity-building programs: fire-safety
training; grievance-system training; root-cause-analysis
assessments; management-system assessments; fair-
compensation assessments; Better Work, a program
committed to improving working conditions on global
textile and apparel supply chains; Fair Trade USA
certification process; and the Fair Labor Association
Participating Supplier program.
Fair Trade Certification
Fall ‘14 Spring ‘15 Fall ‘15 Spring ‘16
10 33 192 190
Number of Fair Trade styles
998 873 964 950
Total number of Patagonia styles
1% 4% 20% 20%
Percentage of total styles that are Fair Trade
FISCAL YEAR 2015
$76,317
FISCAL YEAR 2016
$355,904
Premium paid for Fair Trade products
Allowed to graze as they do in nature, buffalo are helping to restore the Great Plains. Jon Levitt
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Fiscal Year 2016
Benefit Purpose Performance
Build the Best Product With No Unnecessary Harm
Improving Workers’ Wages
One of the most significant systemic issues in the
garment industry that requires a long-term, sustainable
remediation effort, is factory wages. For 200 years,
garment workers have earned the lowest wages in the
industrial economy, often far below a living or even a
minimum wage. We believe one of the most effective
paths available to raising workers’ wages is through
Fair Trade, an international certification program that
increases the wages of workers directly or indirectly
to bring them closer to a living wage. Fair Trade
brand partners pay a premium for products made in
Fair Trade Certified™ factories, which average 1 to 2
weeks pay. The premium goes directly to workers, who
democratically decide how to spend it. Sometimes
they take the money as a bonus, or they might spend
it on programs to improve their working and living
conditions. Workers in our Fair Trade Certified factories
have used this money, for example, to open a child care
center and establish a health and hygiene program.
We have made the Fair Trade program a focus of our
sourcing strategy. In 2014, we offered 10 Fair Trade
products from one factory. In FY16, we raised that number
to 192 products from six factories, effectively paying the
workers an extra $350,000 that fiscal year. By fall 2017
we expect to offer an estimated 300 products from 13
factories, representing 29 percent of our product styles.
Reducing Chemicals
To assess and manage the use of chemicals and
environmental impacts in our global supply chain, in
2015 we launched our Chemical and Environmental
Impacts Program (CEIP). CEIP builds upon our own
social and environmental responsibility supply chain
programs, and the work we have done with bluesign®
Technologies since 2000.
The program covers: chemicals, waste, water use,
energy use, greenhouse gasses and other air
emissions based on the strictest local legal standards.
It requires our suppliers to comply with the most
stringent international consumer products legislation,
as well as local laws. It also utilizes the latest industry-
wide tools—including both the Facility Environmental
Module and Chemicals Management Module of the
Higg Index® and criteria from the bluesign® System—
to evaluate environmental performance in our supply
chain. We assessed all of our Tier 1 suppliers and 20
of our largest Tier 2 suppliers for compliance with
our CEIP requirements, focusing on facilities with the
highest potential for environmental harm due to the
nature of their processes. Based on the results, we
developed continuous improvement plans with our
suppliers that often include training, implementing
policies and establishing management programs at
our supplier facilities.
Fixing the Food Supply Chain
We believe there is great opportunity—and an urgent need—for positive change in the food industry, which is why we
launched a food line called Patagonia Provisions in April, 2013. Patagonia Provisions is dedicated to finding solutions to
repair the food supply chain starting with sourcing. In some cases, this means looking to current best practices, but, more
frequently, it means turning back to the old ways of farming to produce food.
In FY16, Patagonia Provisions offered 10 products made
with organic ingredients sourced and manufactured by
like-minded partners working to help improve the food
supply chain. They include:
Wild salmon caught from healthy salmon runs using
selective-fishing techniques, which allow less abundant
species to avoid capture and continue their migration
unharmed. These techniques are often old-fashioned
and more labor-intensive than modern industrial fishing,
but they also produce higher quality fish and support
the wild salmon ecosystem. Through our support of
fishermen willing to fish more responsibly, we believe we
can help rebuild endangered salmon populations and
boost local economies.
Buffalo jerky from grass-fed buffalo raised on the
prairies of ranches managed by Wild Idea Buffalo,
which is guided by a shared conservation ethic and a
commitment to producing the highest quality meat.
Instead of following the conventional livestock model,
which undermines the nutrition and flavor of the meat
and has a negative impact on the environment, Wild
Idea-affiliated ranches raise buffalo that live, feed and
roam the land freely and are harvested and processed
in the field with mobile, USDA-approved equipment.
This process, along with the local production of the jerky
itself, provides employment and economic benefits to
small communities in the Great Plains. Grazing naturally
and roaming freely, the buffalo also help to improve the
land by recycling nutrients and tilling the soil.
53,065
Number of garments repaired in the U.S. (We also
helped customers repair 1,532 products themselves at
no cost to them.)
13,902
Number of garments we recycled. (We take back any
Patagonia product at the end of its useful life at no
charge to the customer.)
8,281
Number of miles our mobile-repair centers
logged in 2016.
6,878
Number of Patagonia products returned for recycling
that were instead upcycled (turned into usable
merchandise), such as beer koozies from old wetsuits and
scarves from down jackets, which we sell at our stores.
4,923
Number of used Patagonia items we helped to resell.
50
Number of states our mobile repair centers drove
through to repair people’s damaged apparel (both
Patagonia products and that of other brands), and teach
them to do the same.
8
Number of Patagonia stores in which we’ve installed
mini repair centers to make simple repairs and provide
easier access for customers.
3
Number of mobile–repair centers that tour
the U.S. and Europe.
28 29
Challenges
Conflicts Between Performance
and Environmental Sustainability
We strive first to make durable, quality products that
deliver maximum performance. But sometimes, those
objectives run counter to our environmental values. For
example, we use a durable water repellent (DWR) to
disperse surface moisture from some of our clothing,
which serves the critical function of helping to keep
customers dry. Yet the byproducts of DWR, a fluorocarbon-
based treatment, are toxic and persist in the environment.
We’ve spent the past decade researching and testing
fluorocarbon-free alternatives that have less of an impact
on the environment, but still meet our durability standards.
And we’ve made strategic investments in companies
developing alternative waterproof treatments that are not
harmful to the environment. We’ve yet to find a perfect
alternative, as many still pose significant environmental
issues, and none meet our standards for quality. We’re
always looking to eliminate conflicts between performance
and environmental harm, but we inevitably have to balance
these considerations and make trade-offs. Sometimes the
replacement has its own problems.
Conflicts Between Performance
and Social Responsibility
We strive to develop the highest social and environmental
practices in our supply chain. Sometimes, however, we
find that the factory best qualified to produce the highest
quality technical product may not be a leader in social or
environmental responsibility. In the event this happens,
we work hand in hand with the factory to help it comply
with our standards before we place an order. At times this
means shifting product launch seasons, and sometimes it
requires significant investment to help the factory improve.
Worn Wear: Repairing and Reusing Our Products
We believe that one of the most responsible things we can do as a company
is to make high-quality products that last for years and can be repaired so you
don’t have to buy more. Our multifaceted Worn Wear program is designed
to extend the useful life of apparel by repairing damaged products, and
encouraging reuse and responsible recycling practices.
Patagonia Repairs
We provide no-cost repairs in our
Reno customer repair center for
Patagonia products that still have
a useful life. We also have installed
mini-repair centers in eight of our
stores to provide on-site service
for simple repairs and faster turn-
around times. And we have three
mobile repair vehicles that tour
the globe, repairing our apparel,
as well as that of other brands, and
teaching participants to fix their
own. In FY16, we repaired 44,000
garments in Reno and another
56,000 globally.
Do-It-Yourself Repairs
On our website, we offer customers
instructions in six languages for
repairing products, including
step-by-step videos describing
over 40 different care and repair
processes in detail. We also bring
slightly damaged Patagonia
products to our Worn Wear events,
where we provide participants
with the equipment, materials
and instructions to repair them. In
exchange, we let participants keep
them. Last year, we gave away 1,182
of these repair-it-yourself products.
Trade-Ins
Customers can trade in their used
Patagonia items at our Portland
store in exchange for Patagonia gift
cards. We fix them, when needed,
and resell them in the Worn Wear
shop within the store. In FY16, we
sold 2,300 used items.
Benefit Purpose Performance
Build the Best Product With No Unnecessary Harm
2014 2015 2016
31,000 37,000 44,000
Number of garments repaired
$1.47M $1.85M $2.16M
Total cost of repairs (in U.S. dollars)
950 1,414 2,300
Number of repaired items sold in
Portland Worn Wear store
Fiscal year ended April 30, 2016
Worn Wear Program
30
Conduct Operations
Causing No
Unnecessary Harm
As Patagonia’s physical footprint continues to grow, we try to
do so in a way that minimizes overall impact to the earth and
its inhabitants. In all new construction, retrofit and expansion
projects, we try to incorporate responsible building design and
material selection as much as possible, retrofit old buildings
rather than build new ones, source materials close to our
building sites, reuse old fixtures and materials, and install
energy- and water-efficient appliances. We have generally done
this as a matter of course, but are currently formalizing design
standards we can apply to Patagonia-owned and operated
facilities around the world.
Benefit Purpose Performance
Energy Use (kWh) Emissions (tonnes CO2e)
5,165,556 2,679
North America
941,604 519
Asia (Japan)
662,238 260
Europe
130,435 104
Australia
114,239 55
South America
7,014,072 3,617
Total
32 33
Fiscal Year 2016
Initiatives
Measuring Our Footprint
In FY15, we took steps to improve our collection,
measurement and analysis of energy, greenhouse gas
emissions, water and waste at our 134 owned and/or
operated offices, stores and distribution centers around
the world. We also began mapping and measuring the
impacts of our Tier 1 and Tier 2 suppliers, which have
the biggest environmental footprint, but are outside
our direct control. This data established the baseline
numbers we used to set reduction targets.
In FY16, we began working to improve and simplify data
collection and analysis by implementing a customized
software platform that will facilitate year-over-year
comparisons of each facility’s performance and the
company’s overall portfolio. This will allow us to further
refine areas of improvement, track trends of our footprint,
and develop long-term goals related to year-over-year
improvements in these metrics.
Challenges
Verifying Data
One of the biggest challenges in measuring impact is
gathering complete and verified data. On the supply
chain side, not all of our suppliers report environmental
metrics for their operations, and those that do report
enter their own information, which we can’t verify. As
a result, we rely on the data we have, and use it to
extrapolate the rest. Even where industry-wide tools
are available, factories are slow to adopt them because
reporting can be burdensome, and factories are not
incentivized to do so for a relatively small customer like
Patagonia. Widespread adoption of verifiable reporting
on environmental metrics throughout our supply chain
will depend on industry collaboration to increase
efficiencies and leverage. This is already happening, but
not as quickly as we’d like. As a result, the data we have is
imperfect, but still provides a working baseline.
Generating Renewable Energy
Ideally we could generate enough renewable energy
to power all of our operations, rather than purchase
renewable energy certificates, to ensure we are not
emitting greenhouse gases and depleting the earth’s
finite supply of fossil fuels. Space constraints and lack
of control over our supply chain and most of our retail
locations make this difficult. We’re currently exploring
community solar programs and virtual power-purchase
agreements, in addition to increasing on-site systems
where possible. Through our Tin Shed Ventures fund,
we have invested $62 million in two solar funds to
help support the expansion of solar as a cost-effective
and readily available source of renewable energy. In
structuring our second fund, we brought in four certified
B Corps: Kina‘ole Capital Partners, LLC as fund manager,
Sungevity, Inc. as project developer/maintenance
provider, and New Resource Bank and Beneficial State
Bank to provide financing.
Benefit Purpose Performance
Conduct Operations Causing No Unnecessary Harm
Global Corporate Energy Use and GHG Emissions
Renewable Energy Planning
Currently, we operate a 98.4 kW solar energy system
over the parking lots of our Ventura, California,
headquarters, as well as a 71.6 kW rooftop system
on one of our Ventura office buildings. In FY16, these
systems produced 126,634 kilowatt hours of electricity.
Fifteen percent of our global operations are currently
powered with renewable electricity, 3 percent of which
was generated on-site through our own solar arrays.
Our goals for FY17 include improving solar efficiency,
increasing on-site generation and adopting market
mechanisms, like community solar, to reach our goal.
Reducing Single-Driver Commutes
We encourage our employees to carpool, bike, walk
or use mass transit to get to and from work by paying
them $4 for each single-occupancy vehicle round-trip
they avoid—up to $500 per year. In FY16, we paid our
employees $263,318 through this program and averted
800,000 single-occupant vehicle miles traveled.
Sustainable Building and Operating Principles
In FY16, we began developing sustainable building
principles to provide guidance to the architects and
contractors we hire to design and build our facilities.
These principles address site location, energy, water,
waste, materials and human health. Whether a new
construction or a retrofit, the building principles
emphasize the life cycle of the project from design to
demolition or deconstruction.
To help our stores reduce their footprint, we developed
a set of guidelines for purchasing, transportation and
community engagement, along with ways to use less
energy and water, and reduce waste and resource
consumption. Each store will be responsible for
developing and implementing its own sustainability plan,
tailored to its particular operations and conditions, based
on an internal sustainability audit and the guidelines.
34
Sharing Best
Practices
with Other
Companies
Manufacturers have long relied on industry standards to
provide their supply chains with a consistent framework
to ensure certain specifications are met. Historically,
standards focused on quality and performance, but
increasingly they are being developed to also ensure
meeting environmental and social requirements. We
work with a number of industry groups— including the
Sustainable Apparel Coalition, the Outdoor Industry
Association, the Fair Labor Association, and others—on
developing a wide range of industry standards.
Much of this work requires sharing information—often
proprietary, and often with our direct competitors—to
develop efficient and effective standards that can be used
across the apparel industry. We believe the long-term
benefits of creating meaningful, universal measurement
tools and standards outweigh the near-term competitive
advantage we would gain by keeping our approach
confidential and working alone to improve the system.
36 37
Fiscal Year 2016
Initiatives
Collaboration is a critical part of improving the overall supply chain, but industry
action occurs through consensus, which can be slow and cumbersome. We
develop our own supply chain standards when the industry is too slow or shows
insufficient interest in tackling a controversial issue that could negatively impact
sales. We then share those standards with the industry and hope to influence
change. Recent efforts include:
Migrant Worker
Employment Standard
We developed a comprehensive
migrant worker standard for our
suppliers that covers every aspect of
employment, including: pre-hiring
interactions, labor contracts, wages
and fees, retention of passports, living
and working conditions, grievance
procedures and repatriation to
workers’ home countries.
As part of the development process,
we partnered with Verité, a nonprofit
expert in this area, and invited 40
apparel brands to attend a forum we
hosted in San Francisco to talk about
human trafficking (seven attended).
In December 2014, we finalized and
released the new standard to our
Taiwanese suppliers and organized a
forum in Taiwan hosted by our chief
operating officer.
Since that time, we’ve engaged with
a number of government agencies
and nongovernmental organizations.
We met with Taiwan’s Ministry of
Labor Workforce Development
Agency to discuss ways to improve
the system for all companies in
Taiwan. We traveled to Washington,
DC, to participate in a White House
Summit on Human Trafficking, where
we shared our work. We participated
in a symposium on modern-
day slavery conducted by the
International Labour Organization.
And we met with the California
Attorney General’s office to discuss
the standard and California’s
Supply Chain Transparency Act. We
also posted the standard on our
website and have made it available
throughout the industry.
Throughout FY16, we have sought
opportunities that strengthen and
support our multiprong approach
to improve the lives of the workers
who make our products. We are
committed and fully engaged in
eliminating all human trafficking in
our supply chain and, to the degree
possible, in our industry.
Wool Sourcing Standard
In 2011, we partnered with The
Nature Conservancy and the Ovis
21 network of 160 ranchers in
Argentina on a new program to
grow merino wool that, through the
use of holistic grazing practices,
helped restore long-degraded
grasslands in Patagonia to health.
In 2014, while in the process of
developing a wool sourcing standard
with the Textile Exchange designed
to minimize the harmful impacts
of sheep on the environment and
more comprehensive animal welfare
guidelines, we learned that some
of the Ovis 21 sheep in our existing
supply chain were being mistreated.
In response, we spent much of
FY16 working with animal welfare
experts to develop a new Patagonia
Wool Standard that combines
best practices on animal welfare
with grazing standards designed
to regenerate the grasslands
ecosystem. We published the
standard in July 2016.
Traceable Down Standard
Two percent of our raw material
supply (by weight) is made up
of virgin down. Down provides
excellent insulation, but inhumane
practices are sometimes used to
maximize the commercial value of
geese and ducks, including force-
feeding to produce foie gras and
plucking feathers from live animals
to increase yield. We learned this the
hard way during a campaign by Four
Paws, an animal welfare nonprofit
that targeted our down supply chain.
In response, we worked closely
with Four Paws, down suppliers and
other animal welfare and traceability
experts to develop our Traceable
Down Standard, which provides
third-party verification with full chain
of custody to ensure animal welfare
compliance from farm to factory.
We then partnered with NSF International—an
independent, accredited organization that tests,
audits and certifies products and systems, to achieve
global, independent certification of our down supply
chain—and NSF adopted our standard as its highest
tier certification. Following this standard, by the end of
2016, we had certified more than 350 entities—including
parent farms, hatcheries, raising farms, slaughterhouses,
down pre-processors, down processors and finished
goods factories—across five countries. Four Paws now
considers Patagonia to be one of the best brands in the
outdoor industry regarding animal-welfare practices in
the down supply chain.
Sharing Materials
For a number of years, we worked with Primaloft®, Inc.
to develop a synthetic insulation made from post-
consumer recycled fibers that meets our performance
requirements. Those efforts came to fruition this fiscal
year, resulting in the launch of PrimaLoft Gold Eco
Insulation. It has 55 percent recycled content and is
now the insulation we use in our entire line of Nano
Puff® products. While our original deal with PrimaLoft
included an exclusive right to use Gold Eco Insulation,
together we saw an opportunity to reduce the industry’s
footprint by shifting PrimaLoft’s entire category of top
performance synthetic insulation to this environmentally
superior alternative. Beginning in 2017, PrimaLoft will
replace all of its Gold Insulation, anywhere it’s used, with
the new 55 percent recycled Gold Eco Insulation.
Sharing Our Business Model
This past year, we shared our business model and
operational practices through books, including a 10th
anniversary revised edition of Yvon Chouinard’s 2006
memoir, Let My People Go Surfing: The Education of
a Reluctant Businessman, which lays out Patagonia’s
philosophies and business practices. The first edition
of the book, published in 2006, sold 250,000 copies. It
was translated into 11 languages and is widely used at
colleges and universities. The revised edition includes a
Teacher’s Guide, with questions and projects inspired by
the book.
We also published a book capturing stories and
teachings from our Tools for Grassroots Activists
conferences, which we’ve been holding since 1994.
The book is called Patagonia’s Tools for Grassroots
Activists: Best Practices for Success in the Environmental
Movement. It was selected as the main text for an
environmental policy course to be taught next year at
Stanford University.
Patagonia’s co-founder Malinda Chouinard, together
with Jennifer Ridgeway, Patagonia’s first director of
marketing and advertising, authored a book in July
2016, to share Patagonia’s experience providing
company-run child care at our Ventura headquarters
during the past 30 years. Family Business illustrates what
this looks like and serves as an instruction manual for
child care operators interested in Patagonia’s philosophy
on early childhood education. It’s also an advocacy
piece for business leaders interested in providing the
highest level of family-friendly benefits to employees.
Challenges
Developing Standards for Adoption
We’ve devoted substantial financial and staffing
resources to develop, implement and publicize
environmental and social standards. Our hope is that
competitors will join us, moving the market further than
we could alone. So far, the results have been mixed and
progress slow, in large part because of the need to build
consensus across the apparel industry, which can be
cumbersome and often results in standards less rigorous
than we would like. We frequently have to decide
whether we can have a greater impact by working
alone toward a more stringent standard, or by working
collectively toward a broader industrywide system or
standard.
Exclusivity vs. Sharing
Common practice for a business like ours is to develop
an exclusive raw material or proprietary system to gain
market advantage. Over the past years, we have gone
against that norm, cultivating innovative products,
materials and processes, and sharing them with others
soon after. We may be sacrificing a competitive edge by
sharing innovation in this way.
Benefit Purpose Performance
Sharing Best Practices with Other Companies
38
Transparency
The conventional corporate approach to communications
is to promote the good and keep quiet about the bad.
Characteristic of our founders, we’ve taken the alternative
approach that it’s better to put everything out there and
then work to fix it—the idea being that transparency will
keep us honest and keep our team focused on constant
improvement. We hope that sharing good and bad
information makes it easier for other brands to do the same,
which should help to drive collective action to raise the bar.
40 41
Fiscal Year 2016
Initiatives
We communicate about issues in a number of ways, including through our
catalogs, at conferences and seminars, at industry forums, on government panels,
by hosting visitors, by working with journalists, etc. Our primary communication
vehicle, however, is online, where we can reach the largest number of people and
have the space to tell often complex stories.
The Footprint Chronicles (website),
The Cleanest Line (blog),
and E-mails to Customers
We publish the name and address of each of our
finished goods factories online in The Footprint
Chronicles. In FY16, we wrote about the environmental
problems with the durable water repellent (DWR) finish
applied to some of our apparel, and the difficulties
finding quality alternatives. We also wrote about the
difference between a living wage and a minimum
wage. We try to publish one article a month discussing
a challenge we face in making our products. We post
articles on our website under The Footprint Chronicles
to highlight environmental and social issues relating to
the apparel industry and our products.
We use our blog, The Cleanest Line, to write about
challenges, problems and solutions with respect to
various issues, ranging from government policies, such
as the Trans-Pacific Partnership (TPP) and the FAMILY
ACT, to migrant workers, animal cruelty and problems
we’ve found in our own supply chain. We posted 11
stories in FY16 related to challenges in our business.
For example, when we learned that laundering synthetic
fabrics might be causing a significant source of plastic
pollution, we wrote about the issue, raising awareness
and triggering outreach from others also working on it.
This led to a research project we commissioned from
the University of California, Santa Barbara (UCSB), for
the purpose of gathering what is known throughout
the scientific community and performing initial
experiments to assess the seriousness of the issue and
identify solutions.
Their report, which was released in early 2016, found
that synthetic fabrics do shed microfibers during the
wash cycle and those fibers can pass through water-
filtration systems and end up in the world’s oceans.
We reported those findings and are currently working
with others in the apparel industry, as well as washing
machine manufacturers and the scientific community, to
expand understanding and action on this issue and come
up with solutions. Discussion on the topic and a link to
the full UCSB report is published on The Cleanest Line.
Periodically, we send our customers e-mails notifying
them of new products, sales and other promotions,
while also including a brief discussion of substantive
issues related to our products.
Social Media, Journalism and Op-Eds
Like many organizations, we have a growing social
media presence. At the end of 2016, Patagonia had
2,322,444 followers on Instagram; 843,272 followers
on Facebook; 326,969 followers on Twitter; 118,524
followers on Tumblr; 112,355 followers on LinkedIn; and
46,528 followers on Pinterest. Our CEO, Rose Marcario,
became an “influencer” on LinkedIn and periodically
posts on various topics, such as voting the environment,
Fair Trade and the B Corp movement.
We work with journalists to engage deeply on topics
related to the impact of our business. For example,
we shared information with The Atlantic magazine
that contributed to an article published in June 2015
highlighting the migrant worker issue in the apparel
supply chain as a form of human trafficking. Our hope
is that by shining a spotlight on issues, we can influence
change. Additionally, in FY16, we published a number of
op-eds on topics that included the TPP, the FAMILY ACT
and dam removal.
Films & Books
We are continuing to raise the awareness of
environmental issues through films. Over the past year,
we produced films about environmental conservation,
paid leave, our Fair Trade program and regenerative
organic agricultural practices used to produce our
Patagonia Provisions products. In addition to film,
for years we have been partnering with authors and
publishing books through our Patagonia Books business.
This year, we continued to grow this business as a means
to inspire other businesses and customers, including
releasing a revised version of Let My People Go Surfing,
a new book on child care and working families called
Family Business, and a toolkit for nonprofits and
businesses alike titled Tools for Grassroots Activists.
Challenges
Enough Information or
Information Overload?
Many of the issues we highlight on our website, blog
and e-mails are complex. We recognize that most of our
customers probably don’t want to read a lengthy analysis,
so in many cases, we present the highlights and provide
links where customers can go for more information.
Finding the right balance between transparency and
information overload can be a challenge.
Full Transparency Isn’t Yet Possible
When we started The Footprint Chronicles, our goal
was to show every step of the entire supply chain for
all of our products. This proved impossible because
although we know all of our suppliers, we don’t know
all of our suppliers’ suppliers, or their suppliers further
down the line. The supply chain is deep, complicated
and constantly changing, and we will never know what is
going on everywhere at every moment. If we did, there
wouldn’t be enough time or space to talk about it all. So
we audit our suppliers regularly and share key findings
along the way.
Opening Ourselves Up to Criticism
We work to be openly transparent about our business
with our customers, nongovernmental organizations and
other stakeholders, because we believe they deserve
to know where and how our products are made—the
good, the bad and the ugly. But airing our dirty laundry
exposes us to criticism.
Benefit Purpose Performance
Transparency
42
Providing a
Supportive Work
Environment
For Patagonia, a supportive work environment is
one that seamlessly blends life and work. Parents
can have their kids on-site at work. Activists and
environmentalists can work off-site protecting
the places they love. With flexible hours, athletes
can get out to surf, ski or climb. “Remember, work
has to be fun.” —Yvon, in Let My People Go Surfing
Families are an integral part of corporate culture at Patagonia. Tim Davis Moy Hill Community Garden, Ireland. Allison Allen
44 45
Fiscal Year 2016
Initiatives
Child Care
The heart of our headquarters and the anchor of
Patagonia’s supportive work environment is our company-
run, on-site child care facility, the Great Pacific Child
Development Center (GPCDC). Founded in 1983 by
Malinda Chouinard and Jennifer Ridgeway, GPCDC offers
a full-time, Patagonia-subsidized child development
program serving children, ages 8 weeks through 9 years.
As of April 30, 2016, GPCDC had 81 kids enrolled in seven
classrooms spanning over 20,000 square feet of indoor
and outdoor space on our Ventura, California, campus.
Since GPCDC opened its doors in 1983, more than 1,500
kids have gone through the program.
In January 2016, we opened the Truckee River Child
Development Center (TRCDC) for employees’ children at
our Reno, Nevada, distribution and service center. TRCDC
began operations with one infant/toddler classroom for up
to 15 children ages 8 weeks to 36 months, and opened a
second, multi-aged preschool classroom in March 2017
to serve 45 children.
While operating on-site child care is expensive, the
benefits to our employees and the company outweigh
the cost. This is reflected most directly in retention rates
for new moms. At Patagonia, 100 percent of our mothers
return to work, compared to the U.S. average of around
64 percent. Replacing employees is expensive, ranging
from 35 percent of annual salary for a non-managerial
employee, to 125 percent of salary for a manager, to
a couple of years pay for a director or vice president.
Based on the moms who returned to work following their
maternity leave, we estimate the value attributable to
Patagonia’s post-maternity leave retention rates in FY16 to
be around $300,000.
Patagonia subsidizes tuition for our company-run child
care programs based on need. In FY16, these subsidies
totaled $38,000. For employees who don’t have access to
a Patagonia-run program, we offer a child care stipend,
ranging from $50 to $250 per month, to offset the cost.
In FY16, 31 employees received stipends, totaling
approximately $37,000.
When work travel is required for parents of infants up to 12
months (and for moms who are nursing babies of any age),
Patagonia pays for the cost of a caregiver to travel with the
employee parent and child. We estimate that the cost of
this benefit in FY16 was around $8,585. We also reimburse
employees who adopt children for up to $10,000 of
related costs, spending $17,697 on this benefit in FY16.
Yvon has been known to point out, that the kids who
come through our child care programs are Patagonia’s
“best product.”
Paid Leave
In March 2016, we expanded our paid-leave policies,
increasing maternity leave for birthing mothers from
12 weeks to 16 weeks at full pay, giving 12 weeks of
paid leave to adoptive moms, and increasing paternity
leave from 8 to 12 weeks at full pay. We also introduced
12 weeks of paid medical leave for employees who
experience a serious medical condition or who need to
care for a family member with a serious medical condition.
And we added 12 weeks of full pay for employees called
to active military duty or for an employee who needs
to care for a member of the military. These benefits are
available to all employees working full- or part-time (at
least 29 hours per week) after nine months of working for
Patagonia in any of our U.S. locations.
We can see the impact of providing a supportive work
environment in a number of ways. It allows us to retain
and advance female employees and, regardless of
gender or role, Patagonia employees are less likely to
quit their jobs here than they would somewhere else. In
2015, according to research conducted by Comp Data
Surveys (a compensation survey and consulting firm that
researches turnover trends), the average annual turnover
for corporate jobs in America was 10.1 percent; annual
turnover at our Ventura headquarters in FY16 was 5.4
percent. For retail jobs, the national average turnover is
around 72 percent; turnover in our U.S. stores in FY16 was
34 percent.
And Patagonia employs more women than men. And at a
time when female full-time employees earn about $0.79
for every dollar made by full-time male employees (this
according to the Institute for Women’s Policy Research),
the average base pay for women at Patagonia is slightly
higher than for men. We also have more women (54
percent) than men in executive roles, compared to a
national average of just 27 percent. And we have a female
CEO, as do only 4.4 percent of all companies in the U.S.
Health Care
At a time when health insurance premiums continue to
rise and the future of government provided health care is
uncertain, Patagonia pays all medical premiums for full-
and part-time employees, starting their first day of work.
Compared to the average U.S. company of comparable
size, which covers only 75 percent of the premium cost,
this benefit costs Patagonia an additional $2.3 million per
year. Patagonia’s health care coverage also includes a wide
range of benefits, such as acupuncture, massage therapy,
chiropractic treatments, naturopathic care, infertility and
transgender benefits.
Volunteering
Patagonia employees with at least one year’s tenure are
given the opportunity to take a fully paid leave of up to
two months to work for the nonprofit environmental group
of their choice. Patagonia continues paying the employee’s
normal salary and benefits during this time. Through our
environmental internship program, 63 individuals and
several groups of employees volunteered about 14,000
hours in FY16 at a cost to the company of around $164,000.
Benefit Purpose Performance
Providing a Supportive Work Environment
GPCDC in FY16
Cost to Patagonia $1,000,000
Federal Tax Credit ($150,000)
Income Tax Reduction ($350,000)
Retention Savings* ($300,000)
Employee Engagement* ($110,000)
Net Cost to Patagonia $90,000
*Estimates
• More Women In Management
• Greater Employee Loyalty
• Stronger Workplace Culture of Trust
• 100% Post-Maternity Leave Return to Work Rate
• Raising the next generation of environmentalists
Costs Benefits
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Benefit Purpose Performance
Providing a Supportive Work Environment
47
The Experiment Continues
In his book, Let My People Go Surfing, Patagonia’s owner and founder
Yvon Chouinard describes his company as an “experiment.”
“Patagonia exists to challenge conventional wisdom
and present a new style of responsible enterprise,” Yvon
Chouinard wrote in his book, Let My People Go Surfing.
“We believe the accepted model of capitalism that
necessitates endless growth and deserves the blame for
the destruction of nature must be displaced. Patagonia
and its two thousand employees have the means and the
will to prove to the rest of the business world that doing
the right thing makes for a good and profitable business.”
The Benefit Corporation movement grew out of this
same idea, introducing a new legal framework that allows
companies to do more than just maximize profits.
This report is a retrospective on how we sought to
address our six specific benefit purposes in fiscal year
2016. But it doesn’t end here. As we look to the future,
we plan to build on our success of 2016, and continue to
deliver on our benefit purposes in fiscal year 2017.
You’ve already seen some of this with our commitment
to donate $10 million, 100 percent of our global retail
and online Black Friday sales, directly to grassroots
environmental nonprofits working on the front lines to
protect our air, water and soil for future generations. And
we shifted our focus from working to help expand the
protection of public lands through the designation of
national monuments like Bears Ears in Utah, to the fight
to preserve them.
Patagonia’s founders are deeply committed to supporting
grassroots activism as a means of pushing policy makers,
government and citizens to act. In the last few years, our
voice and reach has grown louder and stronger. And we
won’t stop—we’ll only push harder.
We continue to focus on building the best product, while
causing the least environmental harm, as demonstrated
by our introduction of recycled down in our fall 2016
product line. In our own operations, we’re working to
procure more renewable energy and reduce our use
of natural resources. In fiscal year 2017, we have plans
to reimagine the work week to provide an even more
supportive work environment—one that allows our
employees more time with family and more time in the
great outdoors. As always, we will seek ways to share our
learnings and standards with the industry, while being
honest and transparent with our customers and critics
about the business, social and environmental challenges
we face in meeting our mission and delivering on our
benefit purposes.
The Patagonia experiment is far from over, but we feel
confident in saying that financial success and the social
and environmental health of the planet are not in conflict,
and we plan on proving that year over year.
Activism
Patagonia encourages activism by giving employees
paid time off to participate in nonviolent civil
disobedience protests. To do so on work time,
employees must first complete nonviolent civil
disobedience training put on by the Ruckus Society,
which we offer periodically on the company dime.
If a Patagonia employee is arrested during an act
of nonviolent civil disobedience in support of an
environmental or social justice issue after completing
the Ruckus training, Patagonia will reimburse the cost
of bail.
Continuing Education
Patagonia offers all employees who have been
with the company for more than one year, a tuition
reimbursement up to $500 per year for classes and
books. This extends to any type of continuing education,
and has, in the past, included programs ranging from
college or postgraduate coursework to professional and
personal development classes, like avalanche safety and
mindfulness training. Total tuition costs reimbursed in
FY16: $38,000.
Saving for Retirement
Patagonia encourages employees to save for retirement
by matching employee contributions to their 401(k)
accounts at a rate of 50 percent of every dollar
contributed up to 5 percent of annual income. In FY16,
on top of the company match, we contributed an
additional 6 percent to every U.S. employee with an
active 401(k) account. Those who took full advantage
received an additional 8.5 percent annual income at a
cost to Patagonia of $5,891,478.
Challenges
and Threats
Potential Changes in
Federal Income Tax Benefits
The tax benefits currently provided to businesses that
offer on-site child care pay nearly 50 percent of our
overall operating costs. If these benefits are repealed
or changed, our program—and others like ours—could
become significantly more expensive.
Saving for Retirement or
Paying Down Student Debt
We know that many of our employees struggle to pay
their student loans and that some would prefer student
debt assistance that would benefit them today rather
than contributions toward retirement savings accounts
for tomorrow. But current tax programs incentivize
retirement contributions over student debt, presumably
because retired people without a safety net cost more
than students defaulting on loans. We’re currently
looking at ways to help ease the burden of student
loans for our employees while continuing to encourage
saving for retirement.
Providing Comparable Benefits
Packages on a Global Scale
In countries outside the U.S. where we have offices,
including Japan and the Netherlands, the optimal range
of benefits may vary based on different cultural norms,
government programs and local laws. We continuously
work to improve Patagonia employee benefits around
the world to achieve a fair, consistent and supportive
work environment for all.
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Annual Benefit Corporation Report
© 2017 Patagonia, Inc.
