Blueprint for green business (cont.)

By Susan Casey, Fortune

The 'dirtbag' way

Born in rural Maine to French-Canadian parents, Chouinard had an early education in rugged living and recalls watching his father once do his own dental work with pliers. When Yvon was 8, la famille Chouinard moved to Burbank. Speaking little English and saddled with a girl's name, Chouinard spent much of his time alone, exploring the nearby ocean, forests and lakes. School chafed (with the exception of shop class); social success was elusive. At 15 he followed several "fellow misfits" into the local falconry club, where he learned to rappel down from raptors' cliff-top nests. And at this point, everything changed. Climbing was it.

Life became a circuit of passions, with only occasional interruptions for school (two years in community college) and work (a stint at his brother's detective agency, where he spied on starlets for the main client, Howard Hughes). There was surfing in Baja, fly-fishing in the Tetons, and - especially - climbing in Yosemite. Chouinard gravitated to the famed Camp IV, where elite climbers congregated to scale the park's 2,000- to 3,000-foot granite walls. As much a '60s subculture as a base camp, Camp IV's residents shared a disdain for the establishment, a reverence for nature, and a genius for scaling sheer, vertical rock. Chouinard was in heaven.

But there was the problem of gear. Yosemite's difficult climbs called for a new generation of tools. Back in Burbank, Chouinard installed a coal forge in his parents' garage and became a self-taught blacksmith, hammering out pitons - three-inch strips of steel used for anchoring climbing ropes. Chouinard's pitons were stronger and more elegant than their predecessors, a triumph of minimalist engineering. He sold them out of the back of his car for $1.50 and tried to live on the proceeds.

It wasn't easy. There were lean years of Dumpster diving and, during one particularly fallow time, subsisting on cat food. There was a summer spent living in an abandoned incinerator. And in 1962, Chouinard was arrested with a climbing buddy in Winslow, Ariz., and spent 18 days in jail for "wandering around aimlessly with no apparent means of support." (Upon release, he was given 30 minutes to get out of town.) But what he describes as the "dirtbag" way - living as close to the wild as possible with as little as possible - never seemed like privation. Rather, this was freedom.

Chouinard managed to keep climbing even when he was drafted and sent to Korea for two years in the 1960s. Upon return he made a series of big-wall ascents that established him as one of the era's greats. He expanded his business, which he now called Chouinard Equipment, and moved it to Ventura - and he met his match: a rock-climbing art student named Malinda Pennoyer. They married in 1970.

Over the years, Chouinard Equipment grew and morphed and existed mainly to fund its owner's wilderness adventures. Malinda threw herself into the work, and in 1972 they branched into clothing, launching a new company called Patagonia. Among its early offerings were rugby shirts, corduroy knickers and boiled-wool mittens. Meanwhile the outdoor industry itself was taking off, with more people doing the kinds of activities that required these clothes.

Which is how Yvon Chouinard, who intended to spend approximately zero days of his life behind a desk, became a businessman. But he and Malinda were crystal clear: This would be business on their terms. It wouldn't release toxins into rivers or cause nervous breakdowns or chase endless growth. It wouldn't make disposable crap that people didn't really need. Anything it produced would be of the highest quality, manufactured in the most responsible way. When the surf was up or the powder wafted down, employees would be where they ought to be: outside. If an employee's child was sick, the parent would also be where he ought to be: at home. They would keep Patagonia privately held and say no to anything that compromised their values.

Scaling the likes of Yosemite's El Capitan, Chouinard had learned big lessons. The biggest was that reaching the summit had nothing to do with where you arrived and everything to do with how you got there. Likewise, he thought, with business: The point was not to focus on making money; focus on doing things right, and the profits would come. And they did.

Pradagonia

On a winter Saturday afternoon the Patagonia store on Manhattan's Upper West Side is jammed with shoppers eyeing Houdini full-zip shells, Plush Synchilla hoodies, Micro Puff Polarguard vests and Recycled Capilene underpants. Unlike, say, Abercrombie & Fitch (Charts), where anyone over 23 is greeted with a hostile stare, there is no one type of customer here. There are couples pushing double-wide strollers, teenagers and grandparents, and even a woman in high heels clicking across the sustainably harvested Douglas fir floor.

None of them is suiting up for Everest anytime soon, and many would be surprised to hear Chouinard's criteria about what makes the merchandise appealing: "You should be able to wash travel clothes in a sink or a cooking pot, then hang them out to dry in a hut and still look decent for the plane ride home."

It's ironic that although Chouinard detests trendiness, instructs Patagonia designers to ignore the current fashions and tells his customers that "the more you know, the less you need," people often refer to this store, and the other 22 like it, as Patagucci and Pradagonia.

As always, there is plenty of fleece on the shelves. In 1977 the company created its breakthrough product, a jacket made of polyester pile that, unlike natural fibers, repelled moisture while retaining heat. It was stiff and ungainly but worked like a charm in environments where looking odd was preferable to getting hypothermia.

Refinements continued. Working with fabric manufacturer Malden Mills, Patagonia created a finer, softer version called Synchilla in colors like sea-foam green and garnet red. Sales exploded, and the company became known for the "fleece jacket." Later, when Patagonia discovered it could make Synchilla using discarded soda bottles, Chouinard saw a way to reconcile his expanding business with his angst over manufacturing's destructive effects: by conducting an "environmental assessment" of all materials. Could recycled materials be used in a product? Could the product itself be recycled? Which materials caused the most harm to the environment, and which the least?

"We didn't have any of the answers," Chouinard recalls. "There was no book you could pick up and say, Here's what we need to do. We didn't know that making clothes out of a synthetic was better than making them out of a natural material. And so what about rayon? It's made out of cellulose, which is made out of trees--that seems like a good product. But then you find out they use really toxic chemicals to convert it." It turned out that hemp was the most responsible fiber but only if grown in cold, wet climates. Wool, too, could be good or bad: "If you get it from sheep grazing in alpine meadows," Chouinard says, "that's damaging as hell."

Greener materials

Conventionally grown cotton was especially heinous. Heavily dependent on noxious pesticides, insecticides and defoliants, it's an environmentalist's nightmare crop. "To know this and not switch to organic cotton would be unconscionable," Chouinard says. In 1994 he gave his managers 18 months to make the change. Given that organic cotton, rare at the time, cost between 50 percent to 100 percent more, and that a fifth of Patagonia's business came from cotton products, this was no small risk. There was pushback from the ranks; suppliers defected. Chouinard delivered his ultimatum: Do it, or we never use cotton again.

The gamble paid off. Patagonia's cotton sales rose 25 percent and, more important, established an organic-cotton industry so that other companies could cross over. Demand grew and prices decreased, leading to even more demand. In 2006, Wal-Mart became the world's largest purchaser of organic cotton.

You'd think this would make Chouinard happy. And it does, to a point. He's ecstatic over Wal-Mart's green initiatives. But when executives from Sam's Club came to Ventura last month to meet him, he told them they needed to go further. "Even organic cotton is bad," he says. "It's better to make clothes out of polyester if you can recycle them into more clothes, and keep doing it -like we do with aluminum cans - instead of growing more organic cotton and selling cheap clothes that people just throw away."

In the early 2000's, the Japanese fabric company Teijin, a partner of Patagonia's, invented a process by which used polyester can be almost endlessly recycled. Patagonia, which makes a line of polyester base layers known as Capilene, encouraged customers to send back their worn-out underwear. (It now also accepts products made from fleece, nylon and organic cotton.) Recycling polyester, Chouinard says, is a home run: "We use 76 percent less energy than if we'd made it out of virgin petroleum."

The questioning continued. Chlorine disappeared from Patagonia's wool products, replaced by a patented slow-wash technique. Instead of adding antimicrobial silver, a groundwater pollutant, to its underwear lines, it used a product made of crushed crab shells for odor control. It became the first California company to use renewable sources like wind and solar to power all its buildings, and one of the first to print catalogs on recycled paper.

After discovering that airfreight requires more energy than shipping by ground or sea - at least eight times more, according to Luke Tonachel at the Natural Resources Defense Council - the company advised customers to "ask yourself if you really need that pair of pants sent overnight."

But Patagonia does offer that option, which brings up an inconvenient truth: No matter how careful the choice of materials or methods, all companies leave a footprint. This is Chouinard's conundrum, and you get the sense it keeps him up at night. "Patagonia will never be completely socially responsible," he writes gloomily at the end of his book. "It will never make a totally sustainable, nondamaging product. But it is committed to trying."

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.