Circular advantage anyone? Sustainability‐driven innovation and circularity at Patagonia, Inc.

• Author: Francesco Rattalino
• Date: 01 September 2018
• Published date: 01 September 2018
• DOI: http://doi.org/10.1002/tie.21917

COMPANIES IN THE CIRCULAR ECONOMY

Circular advantage anyone? Sustainability-driven innovation

and circularity at Patagonia, Inc.

Francesco Rattalino

ESCP Europe

Correspondence

Francesco Rattalino

ESCP Europe,

C.so Unione Sovietica, 218bis,

10134, Torino, Italy

Email: frattalino@escpeurope.eu

For many years, companies have perceived sustainability and corporate social responsibility as

annoying trends involving regulations and extra costs. A new concept of industrial organization

is required to dissociate growth in resource consumption from increasing prosperity. This con-

cept must move beyond significant efficiency gains in order to successfully deliver change—an

idea that is known as a circular economy. The increasing amount of attention paid to environ-

mental issues and pressure from stakeholders have forced businesses to embrace the complex-

ity and interdependencies between shareholder value and sustainable value. Sustainability-

driven innovation that increases the circularity of resources, as in the case of Patagonia, Inc., is

the key to generating a sustainable competitive advantage that marries economic and social

objectives. This article explores ways in which corporations can pursue economic, social, and

environmental objectives while simultaneously embracing circularity.

KEYWORDS

Corporate Social Responsibility, Sustainability, Circular Economy, Patagonia Inc.,

Sustainability-Driven Innovation

1|INTRODUCTION

In the past decade, leading multinational firms have been experiment-

ing with their business models with the aim of moving from a philan-

thropic vision of sustainability in which economic objectives are

separated from social and environmental aims toward more inte-

grated strategies (Ciravegna, 2012; Pies, Beckmann, & Hielscher,

2010). Only firms that integrate their sustainability activities into their

business models and core strategy formulations can truly have both

economic and social impact (Porter & Kramer, 2011).

Sustainable strategies and business ethics are becoming pivotal

in determining the success or failure of organizations in today’s busi-

ness world (Jamali, 2008). They affect companies’reputations and

help define business models that will thrive even in the face of adver-

sity (Amit & Zott, 2012). Many leading companies realize that an

innovative sustainability strategy that is aligned with goals and

resources can deliver a competitive edge (Berns et al., 2009) that can

allow them to increase profits and take advantage of opportunities in

new markets (Khavul & Bruton, 2013). In particular, corporate man-

agers are recognizing that sustainability initiatives help cut costs and

save money, especially in environmental programs; drive the

innovation of new products and business models; and help future-

proof overall corporate strategy (Barton & Wiseman, 2014).

Sustainability demands a broad view of issues and impacts, as well

as a working understanding of what the company does and how

(Nidumolu, Prahalad, & Rangaswami, 2009). However, many organiza-

tions seem to lackthe experience and expertise required to quickly and

effectively developframeworks for overcoming the conflictsthat natu-

rally emerge among economic, social, and environmental objectives—

the “triple bottomline”(Elkington, 1998). In fact, the difficulty of imple-

menting such frameworks was mentioned by 49% of CEOstaking part

in the 2010 United Nations survey on sustainability. These CEOspoint

to the “complexity of implementation acrossfunctions as the most sig-

nificant barrier to implementing an integrated company-wideapproach

to sustainability”(Lacy, Cooper, Hayward, & Neuberger, 2010, p. 14).

Moreover, the difficulty of implementation is accompaniedby the need

to replace the old wayof assessing corporate performance(i.e., a focus

on profit) with a new framework that allows managers to accurately

measure corporate performance alongthe three relevant dimensions of

sustainability(Lacy et al., 2010).

A circular economy can help address these issues, and provide

innovative solutions for reconciling company growth and sustainability.

DOI: 10.1002/tie.21917

Thunderbird Int Bus Rev. 2018;60:747–755. wileyonlinelibrary.com/journal/tie © 2017 Wiley Periodicals, Inc. 747