Patagonia’s 2025 Carbon Neutrality Sustainability Strategy

In December 2019, Rodrigo Bustamante published a post on Patagonia’s blog about the company’s goal to become “carbon neutral across our entire business, by 2025.” The post describes some of Patagonia’s approaches to achieving that goal.

Patagonia is a privately-held company in the clothing industry. About 95% of the company’s carbon emissions come from its supply chain connecting “the crops grown to make yarn, to shipping finished clothes to warehouses, stores and our customers’ front steps.” The post appears to exclude post-consumer use and disposal from Patagonia’s supply chain, which is not uncommon in supply chain conceptualization. However, “downstream transparency is becoming increasingly crucial regarding disclosing post-consumer waste from a company’s products or their packaging” (Sodhi and Tang, 2019: 2947). Patagonia has published product recycling principles, suggesting it is thinking about downstream impacts.

The blog post discusses Patagonia’s efforts to switch to renewable energy for its “owned and operated locations” and reduce the emissions of its supply chain. Altering its supply chain is more difficult because it does not own or operate many of the companies in its supply chain and must use other means of coordination than ownership to change company behavior.

Patagonia’s Ventura, California headquarters and distribution center in Reno, Nevada, both in the United States, already have on-site solar arrays, but they do not supply all of the energy used by the facilities. The firm is building four more arrays at the two locations, but even after completion 20% of its distribution center power will have to come from other sources.

Patagonia’s strategy to address the remaining power needs uses its in-house venture capital firm Tin Shed Ventures to invest in more than 1,000 residential solar projects in the USA. Those projects produce Renewable Energy Certificates that Patagonia purchases, claiming such purchases offset its consumption of electricity from non-renewable sources.

While offsetting works in theory, there are concerns about “leakage” with offset programs in which the carbon reduction that supposedly happens to generate offsets never actually happens. For more on the efficacy of certificate and offset programs, see ProPublica’s investigation of the California cap and trade system and the work of the Berkeley Carbon Trading Project led by Barbara Haya.

Ultimately, Patagonia claims it wants to rely less on offsets over time and instead reduce its emissions directly.

Renewable energy projects are underway in other countries, too. Patagonia’s Amsterdam office is 100% powered by wind power. Its Australian office and retail stores remain mostly powered by nonrenewables, though 25% of power comes from solar panels. In Japan, Patagonia funds agrivoltaics-combining solar arrays with agricultural fields-to offset “a large portion of the emissions” of its retail stores.

While efforts to decarbonize power for the facilities it owns and operates are proceeding, Patagonia’s true challenge is decarbonizing its supply chain that produces 95% of the company’s carbon emissions.

To decarbonize its supply chain, Patagonia is

• Switching to recycled and renewable supply chain inputs,
• Developing low-emission dying techniques, and
• Researching new materials that are biobased and biodegradable.

In 2019, 69% of all materials used in Patagonia products were recycled, reducing carbon emissions.

Material changes will never bring [Patagonia] to net-zero emissions.

However, “material changes will never bring [Patagonia] to net-zero emissions.” More aggressive strategies are needed to convert its suppliers to new, zero-emissions practices.

Patagonia is vague about the strategies it will use to achieve this more difficult challenge, saying only that it hopes its suppliers will install more energy-efficient machinery and/or use renewable energy in their operations.

While Patagonia emphasizes the role of suppliers in achieving net-zero emissions by 2025, it also cautions that decarbonizing its supply chain will be “a behemoth task” complicated by a large number of suppliers in its supply chain and by the number of countries in its supply chain.

The high number of suppliers in its supply chain makes coordinating changes complicated and expensive. The high number of countries means the firm must deal with multiple renewable energy policies that exist at the country level.

As an alternative to changing supplier behavior, Patagonia is investing in carbon sequestration projects to remove carbon from the atmosphere. Such projects include regenerative organic agriculture that stores carbon in soil and reforestation that stores carbon in newly-grown trees.

While these projects might work in theory, they are far from feasible in terms of the scale needed to remove large amounts of carbon. Further, the same complexity problems exist in coordinating sequestration projects across a high number of projects as exist in coordinating changes in a high number of suppliers spread among many countries.

Finally, Patagonia claims it cannot achieve the goal alone and that it needs “customers and other businesses to join the movement.” It’s unclear why Patagonia cannot achieve the goal alone, and calls for partnerships sometimes verge on calls to diffuse responsibility for failure rather than meaningful calls for collective action.

While it’s encouraging to see Patagonia set a carbon neutrality goal, it remains vague and non-committal about tangible strategies and tactics it is allocating money toward to achieve the goal. And its strategy describes decarbonizing its supply chain as both critically important and, perhaps, impossible. The company eventually resorts to unproven carbon sequestration technologies and a call for partnerships to solve its problem, suggesting even firm’s on the cutting edge of decarbonization, which Patagonia is, still face difficult challenges in achieving decarbonization.

References

Sodhi, M. M. S., & Tang, C. S. 2019. Research Opportunities in Supply Chain Transparency. Production and Operations Management, 28(12): 2946–2959.

Originally published at http://nicholaspoggioli.com on January 24, 2020.