History of CR and Patagonia

The Apparel Industry

Most people these days are familiar with the term “sweatshop.” Its use became widespread when a human rights group reported in 1996 that some of the clothing carrying the Kathie Lee label was being made in sweatshops and sold at Wal-Mart. The Kathie Lee brand, we came to find out, was not alone in its use of sweatshop labor. We’ve since heard tales of similar conditions in garment factories from Asia to the Americas – factories with interminable workweeks, sub-minimum wages, no overtime pay, unsafe work conditions and even child labor. We’ve seen the names of some of the biggest apparel and footwear brands in the world associated with some of the most disheartening examples of these kinds of abuses.

This is the marketplace in which Patagonia also develops its products.

In truth, not all factories are terrible. Some are actually quite good. These are well managed and produce clothing under safe, healthy and humane working conditions. But there is definitely widespread abuse. People who work in the global garment industry are often poor, young, uneducated and disenfranchised. Labor laws (and enforcement) can be lax. Workers are sometimes taken advantage of, discriminated against, denied the right to unionize, harassed, threatened and cheated. Working conditions can be unsafe and unhealthy.

Mistreatment of garment workers is not just the result of global competition for low-price products, greed or malfeasance. It can also be the result of inefficiency, not only at the factory but also on the part of the company buying the goods. Last-minute changes to orders, unreasonable price demands and hurry-up delivery times can exacerbate already difficult conditions on the factory floor.

Patagonia’s Place in the Apparel Industry

Patagonia is a privately owned company based in Ventura, California. We design, develop and market clothing and gear for a wide range of outdoor sports, travel and everyday wear, and are best known for our innovative designs, quality products and environmental conscience. Our Mission Statement goes like this: “Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.” To that end, we use environmentally sensitive materials (organic cotton, recycled and recyclable polyester, and hemp among them) and both sponsor and participate in a host of environmental initiatives that range from promoting wildlife corridors to combating genetic engineering. To date, we have given some $40 million in grants and in-kind donations to grassroots environmental organizations. Our own employees – the thousand or so people who work directly for us in our offices, stores and distribution center – are paid fairly and enjoy good benefits, including generous health care, subsidized day care (in Ventura), flexible work schedules and paid time off for environmental internships. Many employees share our values, care about quality and are active in environmental and community causes. Turnover is in the single digits, and on average, we receive a couple hundred résumés each month.

Like most clothing companies, we do not make our own products, nor do we own any of the more than 70 factories that do. We design, test, market and sell Patagonia gear. These are our areas of strength. We pay other companies to produce the fabrics and do the actual cutting and sewing. They have the technical expertise and equipment.

We try to work with factories that share our values of integrity and environmentalism. In the past, we found we didn’t have to make a lot of extra effort to achieve this. Our demand for high quality and our close relationships with the small number of factories we did business with pretty much assured it. It really is true that you can’t make good products in a bad factory, and we did business with some of the world’s best. They were, for the most part, efficient and well run. The people who worked in them tended to have a lot of experience. Despite high employee turnover elsewhere in the garment industry, these factories were able to retain employees because they paid them fairly and treated them humanely.

Patagonia’s Road to Responsibility

We were pretty confident of these facts when our business was still small. However, as we grew we recognized that we needed to test these assumptions and begin to formalize our contractor review process. In 1990 we started asking our contract managers and Quality team to begin reviewing the factories they visited, both for product quality and working conditions. We made the decision not to work with any factory we couldn’t visit.

The following year we unveiled something we called a “contractor relationship assessment.” We did so at our first supplier conference, to which we invited representatives from every factory we worked with. The assessment was a scorecard we kept with each factory. We used it to rate a factory’s performance in different areas and asked factory managers to do the same. If we gave a factory a low mark in one area and the factory scored itself high, the difference became the subject of conversation and focus. Our approach was informal, but our demands for high quality largely kept us on the responsible side of social compliance.

The Beginning of Third-Party Audits

We didn’t begin contracting with third-party auditors until the mid-1990s, when we started employing people from outside the company to visit and assess potential new factories. Though audits are but a snapshot in time, they do give an idea of a factory’s work conditions and management systems. They’re also a good way of initiating discussions about change. Our social auditing was informal until two former Patagonia employees were invited to take part in President Clinton’s “No Sweat Initiative” in 1996. We then created a more formal process and also became founding members of the Fair Labor Association (FLA), an independent multi-stakeholder verification and training organization that audits our factories.

A Step Backward

After these several steps forward, we took a step back when we began sourcing products in new factories that could produce them at a lower cost. The number of factories we came to work with ballooned, and some of these subcontracted work to other factories we knew nothing about. We lost track of who we were doing business with and what working conditions were like in many of our factories. For a while we dropped out of the FLA.

In 2002 we hired a manager of social responsibility to monitor social compliance throughout our supply chain and to work again with the FLA. We began to educate Patagonia employees about factory workplace issues to help them understand how their own actions can unwittingly cause factory workers to suffer longer workweeks, hurry-up pressure and greater stress.

Internal Development

We now train Patagonia staff in social responsibility issues. In 2007 we asked Verité, an international nonprofit social auditing, training and capacity-building organization, to train the 75 employees who visit our suppliers’ factories to fully understand Patagonia’s Workplace Code of Conduct. We do a refresher session annually for both new and seasoned employees.

We’ve continued to expand our brand collaboration efforts in auditing, special engagements (with local third-party experts to help solve specific problems within a factory), and information sharing. Three of our cut-and-sew suppliers (with a total of eight factories) are now FLA members (and thus are held to the same high membership standards Patagonia must meet). Since 2007, we’ve worked more closely with our factories and have become more familiar with their supply chain. We’ve identified all subcontractors and are now auditing 100% of our cut-and-sew supply chain. (In 2011, we will for the first time begin auditing raw-materials suppliers.) We have reduced the number of cut-and-sew factories we deal with from 109 to 55. Adding in subcontractors and footwear factories (monitored by Wolverine Worldwide, our footwear licensee) we have about 70 suppliers.

We have integrated corporate responsibility into our sourcing strategy: when considering new factories we take a fourfold vetting approach – one that includes social and environmental practices equally with quality standards and business requirements like financial stability, adequate capacity and fair pricing.

In 2010, we elevated the Social Responsibility Manager position to a high-level Director of Social/Environmental Responsibility. Our Social/Environmental Responsibility (SER) team can veto a decision to work with a new factory (as can, as always, our Quality team). We have trained our Sourcing team in responsible practices to minimize negative impact on the factory workers and the environment. Lastly, we have integrated our quality field managers to assist with SER activities while in the factories.

The Road Ahead

We are working within the industry to help make the living wage principle a concrete reality for garment workers. We are also making the environmental audit for our finished goods factories more robust, releasing a revised Code of Conduct and detailed Benchmark document in 2012 and planning to adopt the Fair Labor Association’s Sustainable Compliance Initiative assessment tool for a portion of our supply chain.

We’ll also continue to improve our raw materials tracing programs for cotton, wool and goose down, and continue to work on several collaborative industry projects with the (U.S.) Outdoor Industry Association, the Sustainability Apparel Coalition’s (SAC) Eco and Social-Indices and the European Outdoor Group’s Sustainability Working Group.

In an effort to understand the social and environmental impacts of our supply chain, Patagonia has launched a completely revised and even more transparent Footprint Chronicles website, in which we trace the environmental and social impacts of products. The Footprint Chronicles is our equivalent of a corporate responsibility report.