A Practical Standard for High Quality Stakeholder Engagement
Discover how businesses can unlock sustainability through strategy, ESG integration, and purpose-led action. Learn how to turn sustainable goals into long-term business success.
The Living Wage Agenda: A New Era for Leadership in Consumer Goods
For decades, the conversation around a living wage has been stuck in a frustrating paradox. As leaders in business and ESG, we’ve seen countless voluntary commitments and well-meaning policies. Yet, the reality on the ground has barely shifted. Less than 2% of global garment workers earn a living wage, and while 80% of companies have responsible sourcing policies, only a third show tangible implementation and wage improvements. This gap between intent and impact is a moral failing and an increasing business risk. The time for voluntary pledges is over. The living wage is no longer a “nice to have” ethical choice; it is rapidly becoming a mandatory legal and investor requirement. The Driving Forces of Change This shift is being driven by two powerful forces reshaping the global business landscape. Investor Pressure: Financial institutions are no longer standing on the sidelines. Coalitions like the Platform Living Wage Financials (PLWF) are actively demanding greater transparency and measurable progress on wages in global supply chains. They understand that inadequate wages are a financial risk, leading to instability, reputational damage, and operational disruptions. Furthermore, the upcoming The newly formed Taskforce on Inequality-Related Financial Disclosures (TISFD) will likely formalise these expectations, putting living wages squarely on the agenda for every board and investor. It will likely have the same level of influence on global regulation and corporate practice as the TCFD and TNFD. New Legal & Reporting Landscape: Governments worldwide are legislating where industries have failed to act. EU Directives: The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) are creating mandatory human rights due diligence and reporting obligations for large companies. This means businesses must now identify and address human rights impacts, including inadequate wages, across their value chains. National Laws: Germany’s Supply Chain Act explicitly requires companies to address human rights risks, including inadequate wages, with penalties for non-compliance. Similarly, Australia, Canada, and the UK have modern slavery acts that are compelling businesses to demonstrate due diligence on worker rights. US States: Despite a federal shift away from ESG, states like California and New York have enacted legislation requiring salary ranges and pay transparency in job postings, pushing for fairer compensation practices. This is just a snapshot of what is happening across a host of other global jurisdictions. The B Corp Benchmark: A New Compass for the New Era Navigating this new landscape requires a new compass. For 19 years, B Corp has served as the gold standard for purpose-driven businesses. Its new standards, representing the most significant evolution in 19 years, provide a clear roadmap for addressing this living wage imperative. The new B Corp framework moves away from a flexible points system towards a set of seven mandatory Impact Topics. ‘Fair Work’ is now one of these mandatory topics, making a credible plan to pay a living wage a baseline requirement for all certified companies with workers. This change is too significant to ignore, as it sets a new minimum standard for what it means to be a leading, responsible business. Key changes to the new B Corp standards include: A “Family” Wage: The definition of a living wage is now explicitly for a worker and their family, removing the concept of an individual-only wage. Action Plans: Companies that are not yet paying a living wage must have a credible action plan and take approved interim steps to close the gap. Interoperability: The new standards are designed to align with major global and EU frameworks, simplifying compliance for multinational businesses. Evolved Focus: The new standards also have a dedicated Human Rights impact topic to cover supply chain labor issues, while Fair Work focuses on a company’s own employees. This ensures comprehensive coverage of worker rights. B Lab has also expanded its list of approved providers, aligning with the IDH Living Wage Roadmap. This includes primary providers like the Global Living Wage Coalition, WageIndicator, and Fair Wage Network. Fair Wage Network is a best-in-class provider that is unique in also offering a customer-facing certification, turning compliance into a powerful marketing asset. From Imperative to Advantage: Making it Happen This shift demands a strategic, cross-functional approach. Our work with the B Corp manufacturer Active Apparel Group (AAG) is a case in point. By collaborating on a wage gap analysis and a considered roadmap for their primary factory in Ningbo, China, AAG achieved living wage verification. This certification not only enabled AAG’s customers to automatically meet their own living wage commitments but also helped one of their key partners, Lorna Jane, become the first Australian brand to achieve 5 green smiles on Oxfam Australia’s official Company Tracker. This success story highlights a key truth: tackling the living wage agenda requires a nuanced shift in mindset—from viewing it as an ESG cost to embracing it as a strategic investment. Build a Roadmap: This requires developing a cross-functional action plan with clear timelines, financial modeling, budget allocation, and stakeholder buy-in from Finance, Merchandising, and Supply Chain, with the ESG team as the central driver. Crucially, Board and Executive endorsement is critical at every step, requiring a strong business case for sign-off. Collaborate, Don’t Compete: The most effective path forward is to work with factory owners as partners, not just suppliers. This also means engaging in pre-competitive collaboration with other brands that source from the same factories to ensure a unified approach. Be sure to bring your legal team on this journey with you. This approach is fundamental to a ‘Just Transition’, where we reflect on our responsibility to take current factory partners on the journey with us, particularly those smaller suppliers, rather than leaving them behind. Prepare to Get Uncomfortable: This journey requires courage. Be ready to take the business case for a living wage to the highest levels of governance and navigate new legal and financial dynamics. You’ll need to develop the skills to build a unified business case that quantifies both risk and opportunity. This involves collaborating with key internal functions like Finance,
Brand Power: Fashion’s Unseen Asset. Why Brand Strategy and Capability are Non-Negotiable in Fashion’s Future
This article was first published on Ragtrader. Ragtrader has been providing comprehensive news, analysis and opinion on the Australian clothing, footwear and accessories sector since 1972. The Australian fashion industry, dynamic and ever-evolving, is a landscape where brand is paramount. Yet, an alarming trend continues to undermine the potential of once-iconic labels: the systematic erosion of brand DNA following changes in ownership. It’s a phenomenon that speaks volumes about a critical oversight in valuing intellectual property and, more importantly, the crucial leadership skills required to nurture it. As a brand strategist with over three decades of experience, including sixteen years in global and regional leadership roles at powerhouses like Nike and Levi’s, and having navigated the complexities of the Australian market, I’ve witnessed firsthand the devastating consequences of what I call “brand blandification.” This isn’t merely about a decline in sales; it’s a lamentable loss of unique identity that disappoints loyal fans and leaves a void in the market, ultimately leading to the economic erosion of a once-valued asset. Consider Sass & Bide. Once the undisputed darling of Australian fashion, a brand synonymous with a highly distinctive design handwriting crafted by its visionary founders, it was snapped up by Myer in 2013. What followed, however, was a masterclass in how not to manage a brand post-acquisition. The original essence, the very soul of Sass & Bide, was seemingly left undocumented, uncodified. There was no “codes and cues handbook” to capture its unique spirit, no clear mandate to preserve its distinctive aesthetic. The result? A brand that, to its original devotees, became a shadow of its former self, struggling to differentiate itself from high-street and private label offerings and, regrettably, losing its compelling edge. Whilst revenue today is reportedly just a fraction of what it was at the time of the transaction in 2013 (when the store footprint was many times larger), it is the value of the brand as an asset that is most eroded. Sass & Bide is far from an isolated incident. We’ve seen similar fates befall Marcs, Willow, and Lover – brands once celebrated for their unique brand pillars, now seemingly bereft of their original identities, reduced to brand marks applied to private label offerings. And the most lamentable stories are those of brands that, having lost their way after a change in ownership, ultimately succumbed to oblivion, such as Alannah Hill and Charlie Brown. While it’s easy to point fingers at the new owners, the reality is more nuanced. The issue isn’t simply the change of hands; it’s the profound misunderstanding and undervaluation of brand as a living, breathing asset. In my experience leading private equity assignments for premium retail businesses, a brand-led approach is crucial for maximising exit value – and a truly healthy brand should always be sale-ready. In an acquisition, the purchase price often exceeds the fair market value of the tangible assets (like buildings, equipment, inventory) and is recorded as “goodwill” on the acquirer’s balance sheet. A significant portion of this goodwill is attributable to intangible assets, and the brand (its reputation, customer loyalty, recognition, and future earning power) is a major driver of that. I’ve experienced firsthand that there are strategic acquirers who deeply understand the power of brand, and empower leadership teams to drive growth and equity through a consumer-first, brand-centric approach. The notion that private equity inherently strips value is a dated generalisation; in reality, brand mismanagement can occur under any ownership, be it trade, private equity, or otherwise. Leader businesses understand that a brand’s name alone is not enough. They powerfully capture their brand cues, embedding them in rigorous brand guidelines, and then work tirelessly to keep them alive while continuously making them relevant and compelling to new audiences. Chanel is the quintessential example. Long after Coco Chanel’s passing in 1971, her iconic design cues – the quilting, tweed, gold chains, pearls, camellias, and monogram buttons – have been meticulously carried forward. Karl Lagerfeld, and later Virginie Viard, masterfully reinterpreted these signature elements, ensuring their resonance with emerging consumer groups. As we eagerly await Matthieu Blazy’s vision for Chanel, we can be confident that whilst his artistic direction will be fresh, the brand’s core cues will be powerfully reinterpreted, not erased. Critical lessons for new owners So, what are the critical lessons for new owners keen to preserve and indeed amplify the value of these intellectual property assets, using them to fuel continued growth? The first is to acknowledge that a brand is an asset of profound value, not merely a logo or a name. It is the sum of experiences, perceptions, and emotions that resonate with consumers. This asset must be nurtured, protected, and continuously modernised without losing its essential characteristics. Zimmermann, a global success story, exemplifies this beautifully. Its private equity owners have wisely retained the services of the original founders, Nicky and Simone Zimmermann, understanding that their vision is intrinsically linked to the brand’s enduring power. Similarly, Ksubi’s resurgence, propelled by the return of a brand impresario like Pip Edwards, demonstrates the profound impact of re-igniting original brand DNA for a new global customer base. The second and perhaps most crucial learning concerns leadership capability. Far too often, particularly in the Australian market, managers appointed to lead acquired fashion businesses come from a high-street retail background, where brand is often secondary. While their operational expertise is valuable, they frequently lack the intrinsic brand management skills honed through experience with global icon brands or the rigorous brand discipline learned in branded consumer packaged goods. This skill set simply doesn’t cut it when the task is to preserve and evolve a brand’s unique identity. Another error that is often made is to leave the work of defining brand to newly appointed design leaders, yet this function also often lacks the intrinsic skill if they have not had experience in global leader brands, having come instead from high-street retail where the default approach is to take inspiration from global catwalks versus truly conceptualise a distinctive signature. This is
Why Governance Matters More Than Ever
“The fashion industry is increasingly targeted as needing major reform to bring it into the circular economy world.” This article was first published on The Fifth Estate, Australia’s leading online news source for sustainability and ESG in the built environment. As I conclude my term as acting Independent chair of Seamless, Australia’s clothing stewardship scheme, I’m reminded more than ever of the vital role governance plays in shaping a future that honours both present realities and long-term objectives. Seamless is Australia’s clothing stewardship scheme and the world’s first circular product stewardship scheme. It aims to make Australian clothing circular by 2030 and significantly reduce the 222,000 tonnes of clothing that currently go to Australian landfills each year. We help Australians choose, enjoy and recycle clothing more responsibly by working together with retailers and key stakeholders so that people and nature thrive. We are building a critical mass for collective progress, with nearly 60 brands and retailers registered as stewards, and more than 110 supporter organisations across the clothing value chain. In these complex and often turbulent times, balancing today’s needs with tomorrow’s aspirations is not simply a duty, but a strategic imperative demanding the attention of every Director across every Board. Governance, at its core, establishes the rules, practices and processes that ensure accountability, transparency, and ethical behaviour in the pursuit of an organisation’s objectives. It’s the framework that guides decision-making and ensures things are run well. At Seamless, robust governance is foundational for ensuring sound and sustainable financial stewardship as we pursue our purpose. It becomes even more critical when we consider our specific stakeholder deliverables – the essential environmental and social benefits we are obligated to create for the natural world and its inhabitants, and which can only be fully achieved through industry-wide participation. There’s no denying that almost every sector, including apparel, faces significant headwinds. Some of these are impeding how our economy can be reshaped into one that thrives whilst generating value for a broader group of stakeholders. The term “poly-crises” hardly seems sufficient. The majority of Australians are confronted by a cost-of-living crisis squeezing discretionary spending. As a result, ultra-fast fashion continues to grow relentlessly, gobbling up mainstream fashion market share, as financially constrained consumers trade down. The anti-ESG agenda of the new US administration has been embraced by some corners of the Australian business community. Growing geopolitical unrest and the economic threat posed by trade wars loom large. And the politicisation of critical social and environmental issues by select segments of the media diminishes the importance and respect these matters urgently deserve. Yet, amidst this, positive disruptors are emerging. The growth of the clothing resale, rental, and repair markets is rapidly accelerating, with the global resale market growing at double the rate of new fashion sales, according to ThredUp. Global regulatory shifts, including the EU Green Deal and its many directives, are accelerating the adoption of circularity, transparency and consumer empowerment. China’s emergence as a clean energy superpower is setting the pace for other global economies. Australia’s mandatory climate reporting signals a growing national commitment to embedding environmental accountability within our economy, incentivising sustainable practices across all sectors, including clothing. These forces, both negative and positive, require a strong and steady strategic response. We must double down on our commitment to build better systems that prioritise human and environmental wellbeing without compromising financial rigour. Now more than ever, it is imperative to reframe ESG not as a short-term expense but as a long-term investment. To do this, directors need to be confident that operational teams can demonstrate to stakeholders and shareholders that sustainable transformation drives immediate returns and long-term resilience. It has been my observation that truly competitive businesses build resilience to these risks and leverage material issues like sustainability as a core driver of motivation, innovation and growth – “good” can, and must, be good for business. The responsible organisations that have joined Seamless recognise that the benefits of best-in-class sustainability practice are leading to stronger employee engagement, greater industry collaboration, commercially sustainable innovation, improved access to capital, and deeper customer loyalty. These outcomes are measurable and essential. I shared these sentiments in the first episode of the Seamless Leadership podcast, and many executive leaders who also featured in the podcast series shared similar workplace realities. I believe that governance is not just a framework; it is the foundation of vision, resilience, and legacy. So, my counsel on strategic action for directors and decision-makers undertaking purposeful transformation is to: Maintain fortitude for the moral obligation: We must articulate the business case behind every initiative, whether driven by risk or opportunity, and demonstrate the economic value creation in sustainable transformation – yet we must also acknowledge the profound moral obligations inherent in these issues and summon the courage to champion them. Elevate governance: The “g” in ESG is more critical than ever. Strong governance frameworks embed sustainability into strategy, protect against short-termism, and uphold trust with your most critical stakeholders, starting with employees and extending to customers. Backtracking on commitments risks eroding stakeholder trust and causing lasting reputational damage, outweighing any fleeting gains. Harness stakeholder purpose: In directorship, actively seek to contribute to a larger, lasting purpose. Embrace connection and collaboration with other purpose-driven leaders and critical stakeholders to fuel your optimism and drive the action needed to tackle the complex and interconnected systemic challenges facing our organisations and our industry.
Modern Slavery Risks and Compliance: What Boards and Executives Need to Know
Modern Slavery is the umbrella term spanning illegal acts that remove people’s freedom. The United Nations defines modern slavery as “an umbrella term covering practices such as forced labour, debt bondage, forced marriage, and human trafficking. Essentially, it refers to situations of exploitation that a person cannot refuse or leave because of threats, violence, coercion, deception, and/or abuse of power.” Despite being illegal globally, modern slavery persists in all regions of the world, including Australia. Globally, Modern Slavery is Increasing not Decreasing Modern slavery is a gross violation of human rights. Global authority, Walk Free Foundation based in Australia, calculates that 50 million people worldwide are trapped in modern slavery, with an estimated 41,000 of them in Australia. This is a 10 million increase on the numbers estimated in 2016. Forced Labour is the Most Prevalent Problem which Makes it a Business Issue 28 million – nearly two-thirds of all cases are forced labour cases, linked to global supply chains, impacting workers across a diverse range of sectors and at every stage of production. Past reports from Walk Free revealed that a horrifying 12% of those in forced labour are children. Walk Free Global Slavery Index 20231 identifies the top five high risk sectors are electronics, garments, palm oil, solar panels and textiles. With such high % related to labour practices there is a significant responsibility on businesses to identify and fight it. This involves actively identifying, preventing, and mitigating slavery risks within operations and supply networks. By thoroughly investigating and addressing issues, businesses not only protect vulnerable populations but also set a positive example for their stakeholders, contributing to wider societal efforts against modern slavery. Modern Slavery Legislation and Reporting The Commonwealth Modern Slavery Act 2018 came into effect on 1 January 2019. The legislation introduced an annual Modern Slavery Reporting Requirement for large businesses and entities operating in Australia that generate more than A$100 million in annual consolidated revenue. “The dual aim of the Act is to increase business and government awareness of these modern slavery risks, and support entities to identify, report and address the risks.”2 Attorney General’s Department A Review After Three Years Resulted in 30 Recommended Improvements Similar to the UK Modern Slavery Act process, Australia’s Modern Slavery Act 2018 was reviewed after three years in practice, to identify what works and what needs to be improved. In 2023, Professor John McMillan, AO, led the review with support from the Attorney-General’s Department. The objective was to assess the effectiveness of the Act in its first three years of operation.IFRS S1: Sets out overall disclosure requirements for sustainability-related financial information. Hundreds of Submissions Received The Review invited submissions, receiving 136 written submissions from domestic and international stakeholders, 30 responses to the online questionnaire and 496 responses to the online survey for reporting entities. This delivered extensive feedback provided valuable insights into the Act’s strengths, weaknesses, and areas for improvement. Review Recommendations The review made 30 recommendations to the Australian Government. An Australian Anti-Slavery Commissioner will be Appointed The appointment of the Australian Anti-Slavery Commissioner is the first direct implementation of a key recommendation from the 2023 Modern Slavery Act review. The Government is currently in the process of selecting the inaugural Commissioner. Responsibilities of the Commissioner: A Blend of Compliance, Education and Advocacy The Commissioner’s role will be to ensure compliance with the Act’s requirements by businesses and government agencies, raise awareness by educating the public, businesses, and government about modern slavery and its impacts, and advocacy by representing the interests of victims of modern slavery and advocating for their rights and support. The government will provide updates on its progress in implementing some of the remaining recommendations in the coming months and years. This could include legislative changes, policy updates, and additional resources allocated to combating modern slavery. Other Recommendations: Expand Scope of Legislation, Due Diligence and Reporting Quality Lower the Revenue Threshold from $100 million to $50 Million to Include More Organisations The review proposed reducing the reporting threshold from $100 million to $50 million significantly expanding the number of companies required to report. The proposed reduced reporting threshold would include specific guidance for small and medium-sized enterprises to meet their reporting requirements. Tighten Due Diligence The most substantial recommendation is to impose a mandatory due diligence obligation on reporting entities. This would require companies to assess and address modern slavery risks within their supply chains. Introduce Guidance to High Risk Sectors and Penalties for Inadequate Reporting A further recommendation is to introduce penalties for non-compliance or inaccurate reporting to strengthen enforcement. And providing tailored guidance for industries or sectors with a higher risk of modern slavery, such as agriculture and garment manufacturing, was also recommended. What Does this Mean for Boards and Executives? Recognise that Good Practice Enhances Business Value Many businesses view compliance with the Modern Slavery Act as an additional expense or a burden. However, reframing compliance with the regulations as a strategic, business practice improvement and value creating investment can deliver qualitative and quantitative benefits. Adopt an Impact, Risk and Opportunities Mindset Purposeful Boards and executives can approach Modern Slavery reporting obligations through the lenses of impact, risks and opportunities, in the same way that they approach environmental and other social responsibilities. Success Comes from a Two-part Response: Systems and Culture Walk Free estimates that $468 billion of goods imported by G20 countries are at risk of modern slavery. Systems This means modern slavery can exist in any business or supply chain, regardless of industry or location. By assuming that risks exist, you can adopt a thorough and vigilant approach to combating modern slavery. This means diligently examining every aspect of your supply chain, including direct suppliers (Tier 1) and their suppliers (from Tiers 2 to Tiers 5-6 including importers, exporters and trading companies). Culture Integrating anti-slavery measures with your company’s core values and ESG strategies underscores the importance of the issue. This alignment ensures that the fight against modern slavery
Three Defining Leadership Themes for 2023 – Liability, Legitimacy & Legacy
Co-author – Kirsty Simmonds, Reputation & Impact Strategist and ESG Advisor. There’s no doubt that the challenges leaders will face heading into 2023 will be complex and require an unprecedented level of intricate navigation. We are in a time of poly-crisis (the Davos 2023 buzzword), where the problems facing businesses, and society, are interwoven and reciprocally damaging. The challenges include continued fall-out from the global pandemic, civil unrest and conflict, climate change-driven extreme weather and natural disasters, increasing wealth and ideological polarisation, ambiguity around the impact of emerging technologies and a clock that is ticking loudly for the world to achieve the United Nations Sustainable Development Goals by 2030. Yet at the same time, we are seeing the emergence of collectivist behaviour and interconnected thinking. Leaders across business, government, NGOs and academia are acknowledging that big problems need a big combined force to drive solutions. In fact, the World Economic Forum set the scene for globalist thinking with its 2023 conference theme in Davos last month: ‘Cooperation in a Fragmented World’. The leaders that are making the greatest progress are already thinking and acting in interconnected ways. Businesses with a headstart in this area are implementing operating models that drive awareness of the interconnectedness of issues. Certified B Corps are a good example. There are three powerful themes that will set the scene for business leaders in 2023, that will help them not only steer through the many challenges, but also realise the once-in-a-generation opportunities before them. The three L’s: Liability, Legitimacy and Legacy. First identified in November 2022 by our partners, global foresight leaders, The Future Laboratory, these three themes challenge organisations and their leaders to embrace a new behavioural model in order to successfully lead, collaborate and become effective pathfinders. Liability The legislative and regulatory landscape is evolving rapidly, and the onus is on businesses to become more rigorous in mapping and reporting risks and impacts caused by their operations and their supply chains. Legislation is becoming increasingly complex, with more localised and topic-specific laws coming into effect. Recent examples include the US’s Uyghur Forced Labour Prevention Act, France’s Environmental Labelling law 2022-748 and the upcoming New York Fashion Act, expected to be passed later in 2023. And in Australia, the 2018 Modern Slavery Act is undergoing its first review, with more stringent deliverables for boards expected to be part of the recommended amendments. But liability is about much more than legal compliance. It is increasingly about the fact that there is an expectation from all stakeholders – customers, employees, suppliers, community partners, shareholders, environmental custodians and others – for organisations to act with accountability, to assume greater ownership and responsibility, and take proactive action in working on solving the global problems in which they are implicated. In which areas must your organisation step forward to do the right thing before legislative and regulatory changes force you to? Legitimacy Legitimacy is about social licence, which is in turn based on trust. It is earned by evidence of actions. Here organisations are expected to prove their expertise and earn their share of voice through listening to their many stakeholders, engaging with them and demonstrating genuine understanding through their actions. The consequences of not recognising this notion of ‘social permission’ to conduct business is the commercial disruption and reputational damage that comes through sophisticated stakeholder activism, as recently experienced by organisations like Shell and Coca-Cola, amongst others. Business leaders must look at their impacts through a materiality lens, focusing increasingly on those external impacts that are truly important to their stakeholders and where they may inadvertently have negative impacts on people and the planet. They are expected to have comprehensive mitigation and remediation strategies, where the needs of stakeholders are considered and addressed, and where an ongoing dialogue is established with each stakeholder group. How will your organisation engage with stakeholders to uncover, prioritise and address the issues that will lend your business credibility and support? Legacy And then finally there is Legacy. This is about leaders needing to shift their focus towards positive long-term impact. It’s about the intergenerational implications of decisions made today. This is where business leaders can be the most creative and innovative, making the shift from seeing ESG exclusively as a compliance imperative and beginning to view it as a strategic opportunity for leadership. Leaders can inspire action and accelerate change by acting with intentionality as higher-order, globalist thinkers. It’s where they can move in collaboration with other stakeholders, and build the capability of their people, to deliver against a vision of next-generation business structures that are regenerative and human-centred. Three-horizon thinking has never been more important. But the new key to success will be looking at horizon three through the lens of legacy and to focus increasingly on laying the foundations for profound intergenerational change. What will be the legacy of your leadership tenure 10 years from today and beyond? Kirsty Simmonds is a Reputation & Impact Strategist and ESG Advisor, with 25+ years’ experience working with leading B2B2C organisations, including with listed businesses like AMP and IBM. Kirsty leads The Growth Activists’ Responsible Business practice and is an accredited B Consultant and GRI-trained.Rosanna Iacono is Managing Partner at The Growth Activists. With over 25 years experience in global leadership roles with multinationals Nike and Levis and C-Level roles with some of Australia’s leading brands, Rosanna leads The Growth Activists retail & consumer goods practice.
Patagonia’s Big Move – When Stakeholder Capitalism Meets Legacy
Patagonia’s recent announcement that the Earth would become its only shareholder sent shockwaves through the global business community. It was the ultimate throwdown to Milton Friedman’s long-standing edict that the sole responsibility of a business is to deliver profit to shareholders. This move is not only the most high-profile example of a major for-profit organisation embracing stakeholder capitalism – the idea that companies must deliver value to a broader group of stakeholders, including the environment and society – it’s also bold in the way it legally enshrines the intent. The Chouinard family transferred ownership to two new entities: Patagonia Purpose Trust which owns all the voting stock (2%) and plays a governance role, and Holdfast Collective which owns the remaining stock (98%) and ensures that any profits not reinvested into the business will be used to fight the climate crisis. The company expects an annual dividend of approximately USD $100million. Patagonia founder Yvon Chouinard said, “Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source.”. The announcement should have come as no major surprise to anyone who has been watching the business over recent years. What we have witnessed is a gradual evolution from authentic outdoor apparel brand to activist organisation that happens to make outdoor apparel. In fact Patagonia’s stated company purpose reads ‘We’re in business to save our home planet’. Patagonia’s Big Move – When Stakeholder Capitalism Meets Legacy B Corp global leader When Patagonia first certified as a B Corp in 2011 it achieved an exceptional score of 107.3 (it takes 80 points to certify and the average business scores only 50.9). But when the business re-certified in 2019, it achieved a staggering 151.4 points and was recognised by B Lab as extraordinary and leading in supply chain poverty alleviation, philanthropy, resource conservation, land and wildlife conservation, toxin reduction and remediation, and for its commitment to arts, media and culture. Responsible Consumption advocacy & education The brand’s infamous ‘Don’t Buy This Jacket’ ad, launched on Black Friday in 2001, challenged consumers to buy only what they need. Any scepticism was rapidly displaced when the company launched its Ironclad Guarantee, offering free repairs on all Patagonia garments and gear. Its Worn-Wear program allows customers to buy and trade-in used gear. The brand also uses 87% recycled materials in its product and is striving to close the loop and achieve circularity through continuous investment in material innovation, as evidenced in the recent film The Monster in Our Closets. Environmental Activism One of Patagonia’s gutsiest moves came in 2018, when the company moved to sue the Trump administration for its decision to reduce Utah’s Bears Ears National Monument by 85%. A company statement read: ‘This is not about politics; it’s about protecting the places we love and keeping the great promise of this country for our children and grandchildren. We won’t let President Trump tear down our heritage and sell it to the highest bidder’. That same year Patagonia took a USD$10m tax break granted to the business, after the Trump government’s new tax code lowered corporate tax, and donated all of it to fighting climate change. ‘Existential Dirtbag’ Founder But the business’s most profound evolution towards social and environmental sustainability was driven through the values of founder, Yvon Chouinard. A rock climber who discovered a niche for rugged technical clothing back in 1970, Chouinard founded the company with the philosophy that financial success should also enable the achievement of other goals , like ensuring Patagonia was an outstanding place to work for its employees and providing funding for environmental activism. On-site childcare and meals, and paid time off for working on environmental projects are just some of the many employee benefits. In 2002 Chouinard also founded 1% For The Planet, an international organisation whose 3400+ members contribute at least 1% of sales to environmental causes and includes businesses like The Honest Company, and Australia’s Flora & Fauna. Chouinard’s core business philosophies were related in his 2005 memoir ‘Let My People Go Surfing’, where he explains how embedding doing good and pursuing adventures into the business model ultimately drove Patagonia’s financial success. Despite the business’s stellar results, Chouinard despises hearing himself described as a businessman, and once told a journalist he would rather be described as a ‘dirtbag’. When challenged by the journalist that a billionaire cannot be a dirtbag, his defiant response was “Being a dirtbag is a matter of philosophy, not personal wealth. I’m an existential dirtbag.” Criticism The company’s ground-breaking move has not gone without criticism, with a number of high-profile fashion eco-warriors pointing to the organisation’s prolific use of petro-chemical derived materials. They’ve argued it should focus on overhauling its entire operations and move out of fossil fuel derived fibres entirely. In the company’s defence others have pointed out that Patagonia is one of the most prolific users of recycled materials of any brand of its size and also one of the most active in sustainable material innovation. The brand must also remain true to its purpose of providing ‘performance’ apparel to athletes, and at this time there are not yet viable non-synthetic substitutes to replace technical materials like Cordura or Gore-Tex. Supporters have also been quick to point out that this recent event is about much more than a material strategy and will have a profound influence on the global business community, challenging them to re-think their business models to create value for more stakeholders. Legacy It has been argued that the rise of ESG in recent years is about much more than Millennials and Gen Z’s influence as the most principled generations in history, but that it is also being driven by Baby Boomers re-thinking their legacies. Do they want to be remembered solely for the financial growth and earnings they delivered as business leaders, or also for lasting positive change on society? At 83 Chouinard may well be approaching his twilight years, so it is natural that he is considering
Retail Leadership Skills of the Future
A new breed of retail business is emerging to take the place of those who failed to innovate for the new economy.