What does an apparel company do when it’s already a leader in environmental manufacturing and has summited the peak of sustainable clothing? If it’s Patagonia, it decides to not only become carbon neutral by 2025 but also build a plan that inspires change across the industry.

This was the challenge set before us as Team C02 Fast 2 Furious in the 2018 Patagonia Case Competition. Such an ambitious goal would require a cross-disciplinary team of strategists, and it included Michigan graduate students Madeleine Carnemark (MS/MBA), Matthew Carney (MS/MBA), Tae Lim (Ph.D. Mechanical Engineering), Neal Patel (MBA) and Kathy Tian (MS/MBA).

As one of the 100+ teams competing, our team dived headfirst into the world of apparel value chains, regenerative agriculture, carbon offsets, material innovation and consumer decision-making. We developed a recommendation that addressed both enterprise integration and market transformation. Central to our recommendation was the launch of a Net Neutral Collection. This new collection of apparel would be an external and internal catalyst for scope 3 (indirect) carbon emission reduction. Embedded in the manufacturing of this collection would be 1) consumer appeal through enterprise crowdfunding, 2) collaborative renewable energy investments at supplier sites, 3) investment in carbon capture technologies for material production and 4) strategically offsetting carbon in partnership with The Nature Conservancy.

Our product-centered strategy, which built a carbon reduction road map for Patagonia and the industry, earned us one of the 10 spots at the competition’s finals. While specific recommendations ranged from modular clothing design to squid ring teeth polymer solutions, almost all the teams acknowledged that  progress toward a carbon-neutral future would require three main challenges to be addressed: getting consumers to care, building stronger relationships with supplier partners and peer companies, and addressing the “last mile” of carbon emissions.

Marketability & scalability: Building a case for consumers

Patagonia is a relatively niche outdoor brand with a premium price tag. Through the power of branding and an early establishment of conservationist values, Patagonia now has the luxury of demanding the true cost of sustainable apparel from its active consumer base, but passing the cost of carbon reduction to the consumer is indeed a luxury. Also, consumers expect relevant information to be delivered in 15 seconds or less. This makes education about topics like scope 3 greenhouse gas reduction and carbon offsetting difficult.

Our team kept coming back to the notion that while average consumers are not likely to pay a higher price for sustainable apparel, they will punish brands that do not align with their biospheric values. This is where companies that align with sustainable missions can shine. With the ability to ignite the biospheric fire within consumers, Patagonia can set the bar for the masses. Once other companies see the clear business case for setting similar carbon neutrality goals, they are more likely to get on board.

Partnerships & profitability: Making goals a reality

Carbon neutrality, especially in only seven years, is too ambitious a journey for Patagonia to travel alone. Every idea brought forward at the competition involved some degree of partnerships, for two main reasons. First, value chains across major apparel companies largely overlap. While companies tend to keep their value chains private, meeting the carbon-neutral goals set across the industry will require collaboration. With 80 percent of emissions coming from the suppliers and manufacturers, companies would benefit from working together to optimize value chains for efficiency. By pooling capital, these companies can reach their sustainability goals in a more cost-efficient way that keeps the financial burden off the consumer and the supplier.

Carbon offsets: The last mile

Our team considered diverse decarbonization techniques, but because many of these plans take time to implement and scale, it is critical that companies take steps in the short term to reduce their carbon footprint. As claims of “greenwashing” become ubiquitous, organizations are working to strictly define offset programs that can be externally validated. In Patagonia’s case, any offset option must meet the internal criteria of being truly additive, free from leakage, permanent and measurable. Patagonia does not use carbon offsets because of how difficult it is to meet these criteria, but the company is hopeful that these programs will soon be trustworthy enough to pursue.

Our experience at this competition underscored the importance of acting now. Companies cannot afford to wait around for perfect solutions when imperfect, but necessary, solutions are available today. As carbon-neutral goals become more prolific, companies can follow Patagonia’s lead in searching for strategic programs that reflect the true cost of carbon reduction and deliver real benefits to our planet. These programs should be coupled with immediate actions to partner across the industry and reimagine manufacturing for companies and consumers alike.

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