We look at quality, business factors (technologies, skill, location, price, customer service, ability to deliver on time), and environmental and social performances.
Quality continues to be our principal criterion for sourcing. Reduced environmental harm is a strong second criterion. If we can reduce environmental harm without sacrificing quality we do so. Where reduced harm will increase the price we make judgment calls. The environment often wins, even when we think a decision will cost us sales.
Our corporate social/environmental responsibility team can veto the use of any mill or factory that does not meet our standards for social and environmental practices. Failure to meet our high minimum standards in any regard automatically disqualifies a factory from being considered. When evaluating social performance we look at two things: the degree to which the factory meets or exceeds the standards set in our Code of Conduct and the extent to which its owners are willing to work with us to improve areas in which they fall short.
Our corporate social/environmental responsibility team visits a large percentage of the factories and fabric and trim mills in our supply chain each year. Team members are in daily e-mail and phone contact with factories. And we hire third-party auditors to visit the factories to investigate social/environmental concerns. In addition, the Fair Labor Association (FLA) conducts a random sampling of audits of our finished goods factories each year. Patagonia’s design, development and production staffs are also in constant e-mail contact with our factories and visit them frequently. Our quality team visits factories regularly. Quality and sourcing team members have also been trained to identify and report human rights and health and safety concerns in the factories.
We look worldwide to find factories with the skills and equipment to do a quality job, deliver on time at a competitive price, do the least environmental harm and treat workers fairly. Click here to see our most recent list of finished goods factories. We also post the locations of our finished goods factories, along with some of our raw materials suppliers and farms, on our Footprint Chronicles supply chain map.
We currently use eight assembly factories and more than 40 fabric mills located in the United States. While this does not represent a large percent of our overall volume, we consciously try to source in the U.S. as much as we can. The global chase for skilled, low-cost labor has pretty much caused the U.S. garment industry to shut down. Even in their heyday, U.S. garment factories didn’t have the expertise to make our most technical products. Though we do manufacture some Patagonia garments in the U.S., they are few and limited to some of our more basic styles.
Some of the countries we work in, including China, have poor to mixed records for protecting the environment and workers' rights. The record is better in the U.S., but even here it’s not as good (in some cases not nearly as good) as in the E.U. and Japan.
We've chosen not to disengage from good factories in countries with poor environmental and human rights records. We work with several excellent factories in China and Vietnam, for example. We believe in choosing factories wisely and in constructive engagement with other entities to lobby or work for change. Patagonia alone cannot change the work culture or government policies of the countries in which we do business. To improve working conditions, we work with other brands that make products in the same factories we do. And we collaborate with NGOs and others.
During our years in business, we’ve seen the epicenter for quality sewing move from Hong Kong to mainland China; now it’s moving to lower-cost Vietnam, Bangladesh and Myanmar. Other countries have even lower labor costs, but we only use factories that can assure us quality work, decent environmental standards and good workplace conditions. Factories in many lower-cost countries do not meet our standards for quality or social and environmental responsibility, so we do not use them.
Our workplace Code of Conduct requires contractors to comply with local laws. But even if local laws allow it, we will not work with any factory that employs workers under age 15–the minimum age acceptable to the International Labor Organization. We pre-screen our factories for social responsibility before we place an order. This includes checking for child labor. If child labor is found in our factories, we follow our Forced Labor & Human Trafficking Policy, which is based on International Labor Organization and Fair Labor Association guidelines.
Most do not earn a living wage, which is generally defined as sufficient compensation for a family to live on. Since early 2013, our Code of Conduct has required Patagonia factories to move toward paying a living wage, as well as paying legal minimum wage, overtime and abiding by benefit regulations. Manufacture of our more technical clothing requires highly skilled labor from operators who generally earn a decent hourly rate in their labor market. Some workers can earn close to a living wage through piece-rate pay. We prefer to work with factories that pay workers enough to meet basic needs–and more. We track minimum and prevailing wages in each country we work in, and work toward a fair or living wage in our costing negotiations with each factory. Our social audits and FLA monitoring reveal that many of our factories already pay above minimum wage for some or all of their workers.
We agree workers should be paid a living wage, but we don’t pay it, at least not yet. There are several reasons why. Sewing is low-paid work, the industry is competitive and many governments, including the U.S., set a low minimum wage. Factories often make products for multiple brands, and pay their workers the same wage regardless of which brand they’re working for. So for a factory to pay its workers more, all brands making products in that factory have to agree to pay more. Factories also have to be assured they will not lose business if they charge more for their products to pay higher wages. (A loss of business can result in worker layoffs, which would not be a good outcome.) And last, consumers have to be willing to pay more for products to ensure workers earn a living wage.
We believe the Fair Labor Association’s effort to establish a living wage (or fair wage) clause is the best way to achieve it. All companies that belong to the association would agree to it in their Codes of Conduct, along with a graduated or “stepped” timetable for achieving it. To be effective, any new wage clause has to have teeth and include provisions for auditor training and factory verification. We are working for this within the FLA.
In 2013, we announced our partnership with Fair Trade USA–an NGO that audits our Fair Trade factories, calculates a living wage for their workers and manages a program whereby Patagonia pays a premium, on top of our FOB price, that goes directly into a bank account controlled by the workers. A democratically elected worker committee decides how best to use the money. This includes distributing it as a bonus to bring workers closer to a living wage. It’s one of our first concrete steps in figuring out how Patagonia can best help to raise wages in our supply chain.
According to the “Living Wage Calculator” developed by MIT, we pay the vast majority of our employees in the U.S. an hourly rate about the Living Wage. MIT’s Living Wage Calculator makes assumptions around the local cost of basic needs like food, healthcare and childcare. We mitigate many of these costs by delivering the highest quality on-site childcare at our offices in Reno, NV, and Ventura, CA, at subsidized rates for our qualifying employees and their children, providing industry-leading paid leave policies for new parents and those with serious health concerns, and offering 100% premium-free individual healthcare for all full-time and part-time employees. While we continue to move toward a Living Wage hourly rate for 100 percent of our full-time and part-time employees, we are also committed to push beyond the basic benefits most companies provide and a higher total compensation than the standard hourly rate listed in the Living Wage Calculator. The total package we provide for our employees may be the reason Patagonia continues to earn recognition as one of the best companies in the United States to work.
In a word, yes, but shipping contributes only a small percentage (1 to 2 percent) of carbon output and energy to the production of finished goods. Of shipping methods, ocean and rail are most efficient and least harmful; airfreight and transport by truck the least desirable. One way to reduce transportation is to cluster a supply chain as much as possible (with relatively short distances from farm to mill to factory to port). This is common practice in China, India and Vietnam. Because we sell worldwide, manufacturing solely in the U.S., if it were possible, would not provide a significant advantage.
We are committed to “use business to inspire and implement solutions to the environmental crisis.” Over the past 30 years we have given some $70 million in cash and in-kind donations to environmental causes. We helped launch two other North American business philanthropies–The Conservation Alliance and 1% for the Planet–along with the European Outdoor Group’s Association for Conservation. We don’t give money to schools, hospitals or the arts. All of our philanthropic efforts go to environmental work.
That said, we understand that as a business we contribute to the environmental crisis. Everything we do pollutes and generates waste. For more than 20 years we have been working to reduce the harm we do both directly and indirectly. We were the first company of our size to switch to the exclusive use of organic cotton and to make fleece from recycled soda bottles. We now also make products out of hemp, recycled wool, Traceable Down, natural rubber and other environmentally friendlier materials, and employ best practices around dyes and finishes. As we learn to reduce our environmental footprint, we actively share the information with other businesses.
By another definition of responsibility–how we conduct our business–we give the social and environmental sides equal weight. We treat our own employees as valued human beings who have active family lives and important outside interests. We are commonly included in lists of “100 Best” North American companies to work for. We were the first company of our size to open subsidized, on-site child care at our Ventura headquarters.
We also work to improve the lives and protect the health and safety of the factory workers who produce Patagonia clothes worldwide. We don’t chase lowest-cost labor around the globe. We were a founding member of the Fair Labor Association (FLA), which audits factories that produce our goods to make sure employees are paid legal (or higher) wages, work in humane conditions and have the right to join a union (FLA publishes its audits on its website). In the U.S., we are an active and founding member of the Sustainable Apparel Coalition and active participants in the Outdoor Industry Association’s Sustainability, Traceability and Social Responsibility Working Groups through which we can exchange information on best practices with other like-minded brands and mentor smaller companies just starting out with their own social responsibility programs. Patagonia Europe is similarly active within the European Outdoor Group’s (EOG) Sustainability Working Group.
We also take some unusual business actions to advance social responsibility throughout the supply chain. Our social and environmental responsibility (SER) team reports directly to our chief operating officer–not to the administrative, legal or marketing arms of the company. All three teams (SER, quality, production) work and travel together. Each team’s director has an equal say in sourcing decisions for new and current goods. Each has veto power over doing business with a new factory. Before we place our first order, each new factory is viewed through a comprehensive social/environmental and quality lens during direct audits by our SER and quality staff. SER staff visit factories regularly to conduct audits, follow up on corrective actions from previous visits and perform trainings or concentrated remediation for specific concerns. We are strongly committed to long-term continuous improvement of social and environmental standards in factories.
We have not yet published a CSR or sustainability report that follows the guidelines of the Global Reporting Initiative (GRI) or other framework used by other companies.
We are committed to co-responsibility for humane treatment of workers throughout the supply chain. We publish our factory list online. You can access social audit report results for factories that make Patagonia clothes on the Fair Labor Association’s (FLA) website. We are an accredited member of FLA, which randomly audits a sampling of our factories every year, as well as our own CSR program every three years.
To report on environmental responsibility, our Footprint Chronicles looks at some of the environmental impacts in our supply chain. It allows us to talk about critical social and environmental stories with all our stakeholders–customers, press, suppliers, employees and students–in unspecialized, everyday language. We give priority to the issues that challenge us the most–or that our stakeholders regard as a challenge and ask us to address. We highlight failures and ongoing challenges, as well as incremental successes.
We inform our customers and the public on our progress in social and environmental responsibility in other ways too–in the Corporate Responsibility section of The Footprint Chronicles, in our annual Environmental & Social Initiatives booklet, in the Environmental and Social Responsibility section of our website, and on our blog, "The Cleanest Line." We feel these are exciting, interesting, interactive and transparent methods to show our commitment to human rights, environmentalism and ethics.
The advantage to the reader/user of sustainability reports that follow the Global Reporting Initiative framework is the ability to easily compare data from different companies. The disadvantage: a sustainability report, like an annual report, can be a dull read held forth in specialized language that clouds as much as it reveals. Because we recognize the advantages of easy comparability, we are investigating the possibility of importing data we collect for The Footprint Chronicles into a more predictable but exciting framework (and with as much plain speaking as possible). We want to continually raise, rather than lower, the quality of the conversation we’ve created with our stakeholders over the past years.
We use our own expert CSR field staff, the FLA, the Better Work Program, Fair Trade USA and professional third-party auditors to perform our social and environmental audits. Our SER team in Ventura is comprised of professional auditors with decades of experience assessing and helping suppliers improve their CSR programs. A post-audit report describes factory compliance with the requirements of our workplace Code of Conduct and local law. This report goes to our social/environmental responsibility team, which then, if necessary, works with the factory to develop a corrective action plan. The plan lists the problems and corrective actions and includes a timeline for compliance. Where problems are serious, we engage a factory in a continuous improvement process that includes further audits, root-cause analysis, longer-term training and onsite help to resolve issues. There is much follow-up from our SER team, but at that stage it’s also incumbent upon the factory to take ownership of its shortcomings and rectify them in a sustainable manner.
Yes, we have. But because the goal of our program is to safeguard and improve workers’ rights, it is our policy to work with factories to correct social problems and promote better practices. As a factory customer we can have a positive influence; as an outsider we would have little or no leverage. Furthermore, the Fair Labor Association advises against “firing” noncompliant suppliers unless the supplier is unwilling to work toward improvement. Leaving a factory usually leads to further deterioration of workplace conditions and can result in layoffs. Should a factory ultimately be unwilling or unable to meet our requirements, we would terminate our relationship.
We publish our contract factory list for review by NGOs, customers and other stakeholders. We want to work with other brands to communicate, monitor and implement solutions for social and environmental responsibility. We want to ease the burden of monitoring and focus resources on making the changes that will improve working conditions.
As more brands become vocal about their social responsibility efforts, suppliers become more aware that social responsibility is a part of doing business. Consistent messaging from all brands builds momentum.