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Patagonia, the ‘Proudly Unfashionable’ Company

Chief executive officer Ryan Gellert tackled the dilemma of how to be profitable and sustainable at the same time.

It’s a delicate balancing act — how to encourage customers not to buy things they don’t need and still run a healthy, profitable business. But over the past 51 years, Patagonia has managed to find a way.

Ever since Yvon Chouinard created the outdoors brand in 1973, a big part of its ethos has been to build a business that is functional, successful and also sustainable.

In a conversation with Archana Raum, Patagonia’s managing editor of responsible business, the company’s chief executive officer Ryan Gellert, said: “There’s an old adage, and that is, the most sustainable jacket is one that already exists. We’ve campaigned on this topic for a long time, we’ve really worked in partnership with our community and our customers to encourage them not to buy things that they don’t need.”

Those are the reasons Patagonia has embraced product resale, which it calls Worn Wear, and recycling, where it takes back pieces at the end of their life, Gellert said.

He stressed that “figuring out how to make product with a lower footprint, while critical, doesn’t do enough to negate just making too much product.”

Patagonia has long campaigned against overconsumption and Gellert said that will never change despite the world’s focus on businesses making more and more money. “I don’t think that there’s anything anti-capitalist about making high-quality product and encouraging people not to buy things that they don’t need. I certainly recognize it changes the model from the current one, which is a bit of a race to the bottom on how much can we sell, but I don’t think the growth in consumer goods that we’re navigating as a species is sustainable. This has to change.”

He said Patagonia customers “think deeply about these issues and in addition to making purchasing decisions that reflect their values, they generally are more active in protecting our home planet and engaging in civil society in a variety of ways.”

But as the CEO of a company, Gellert acknowledged that he wrestles with the question of where “profit sits next to purpose.” Over the past half-century, Patagonia has managed to “ride that knife edge,” he said, and never lose sight of its mission statement, which is: ‘We’re in business to save our home planet.’”

But Patagonia can’t do it alone, he said. “If we’re going to solve the climate and ecological crisis, it’s going to require government, civil society and the business sector all working in unison. I think the business sector has been missing in that conversation. We’re a business. We’re an ascendant business. We’re a profitable business. We’re a successful business. We make products and we provide services that people appreciate. And I think in doing that, we can be an example of a different form of business.”

Gellert said it didn’t take Chouinard long to realize that the products he was making for himself and other climbers who enjoyed the pristine outdoors would ultimately negatively impact the environment he loved so much. So he did an about-face to “clean climbing,” a philosophy that still drives Patagonia today.

Gellert said as a result of the company’s history, size and scale, Patagonia can now participate in discussions about how a consumer goods company can encourage people to think differently about consumption while also tackling the role business needs to play in the face of “the climate and ecological crisis” the world is facing.

He admitted that the hardest part is getting other business leaders to participate while “the most fertile ground is talking to customers, to students, to employees of other businesses, and bringing creative storytelling.”

He pointed to Patagonia’s newly released film, titled “Shitthropocene,” which addressed the dilemma facing the fashion community — an industry that accounts for up to 10 percent of carbon emissions and whose products overflow landfills around the world. He said the film not only educates people but also provides alternatives and “ways that people can engage in activism.”

Studies show that by 2030, the apparel industry could actually account for 50 percent of carbon emissions, but there is still time to address the problem if businesses step up and take responsibility.

“I don’t think that there is a place in our future for any model described as fast fashion, the notion of triggering people to buy things they don’t need, making things of low quality and then building an infrastructure that allows you to just toss things away,” he said. “That whole model is flawed. We’ve got to create an environment where that’s no longer acceptable.”

In addition, he said Patagonia has never followed the traditional fashion calendar and created seasonal product. Instead, it promotes quality products that can be repaired and can work in a wide range of environments. “We joke a lot that we’re proudly unfashionable,” he said. “But it’s creating timeless product. And that includes timeless colors. And that does kind of fly in the face of what the norm is in the industry.”

Gellert concluded his remarks with a piece of advice for other apparel industry brands: “You need to understand what your values are and commit deeply and permanently to making decisions across the breadth of your business — including in your supply chain — in relationship to all the impacted stakeholders: employees, customers, those that make your product and beyond. I think it’s understanding your footprint, being very consistent and addressing every challenge that you can. And understanding that it’s a journey really without an end.”

Founder Arnaud Frisch recounts his favorite memories of the Parisian club's pop-up, including the time Marion Cotillard cooked with Jean Imbert, and Isabelle Huppert shot a scene with Hong Sang-soo.

Silencio is celebrating the 10th anniversary of its Cannes pop-up. The venerable Paris club designed by David Lynch decamped to Cannes in 2011 (it took two years off during the pandemic), and has grown from its first intimate rooftop location to a cavernous club venue inside the Palais des Festivals.

Founder Arnaud Frisch first set up stakes at the Five Hotel on rue d’Antibes. The quiet, poolside restaurant perched above Cannes quickly became the go-to address, with the likes of Sean Penn and Steven Spielberg stopping by in its first year. Catherine Deneuve, Wes Anderson and David Cronenberg are some of the other big names that roll off of Frisch’s tongue.

“We had so many talents who showed up, for their film or just to enjoy,” he said. “The first location was very small.”

Silencio quickly moved to the more spacious private penthouse of Casino des Fleurs on rue des Belges the following year.

Early on it became famous for after parties, such as the “Clouds of Sils Maria” fete that brought the film’s stars Juliette Binoche, Kristen Stewart and Chloë Grace Moretz to the rooftop. It was a year before the “Heelgate” controversy, which changed the festival’s red carpet footwear policy, and Stewart famously changed out of the teetering high heels that accompanied her sparkly Chanel pantsuit on the red carpet into comfier running shoes for the film’s celebration.

The maze of rooms, with a restaurant at one end and staircases to a series of gardens, led to some intimate interactions among celebrity guests.

One night, Marion Cotillard popped by to step behind the stoves and help out friend and chef Jean Imbert, who was helming the kitchen.

“Jean was so young, and it was the first time we were working together,” said Frisch of the “Top Chef” winner, who is now head of the city’s Palme d’Or restaurant, as well as Monsieur Dior in Paris, among other high-profile venues. “He was still a young chef coming from TV and we did this first year, and there was a night Marion Cotillard came and cooked with him. She had come from the red carpet [but] she had changed out of her dress.

“They were really good friends and she was just helping for fun,” he said. But the actress took her role seriously with responses of “Yes, chef,” as required. Stewart, by then a Cannes regular, also hit the kitchen with Imbert that year.

Frisch and Imbert’s working relationship grew from there. They collaborated on the opening of Silencio’s Ibiza outpost in 2021.

The second Silencio location also ended up in the 2018 film “Claire’s Camera,” directed by Hong Sang-soo and starring Isabelle Huppert. Hong and Huppert had worked together on 2012’s “In Another Country” and after a casual meeting in Cannes, decided to shoot a film during the festival with the city as a backdrop. The off-the-cuff filmmaking style saw the team drop by Silencio one night for dinner — and to shoot a scene.

“Stars at Noon” director Claire Denis joined; it was she who introduced the pair at an art gallery in Paris years before. Those kinds of serendipitous moments made Silencio special, Frisch said.

That year was one for the history books: it also saw Palme d’Or winner Ruben Östlund pass through before he won his Palme.

Cast dinners were held earlier in the evening, with the “members only” club opening up at midnight to those granted a temporary Cannes card. Those coveted credentials went to specially selected festival-goers like actors, producers and distributors — meaning the movers and shakers of the film festival — as well as the film-adjacent spheres of fashion or music who were in town.

In 2019, Silencio moved to the Club Boulevard de la Republique, where it gave carte blanche to French disco-pop singer Corine. She created a Studio 54 vibe with mirrored interiors, colored neon lights, disco balls and lots of velvet, plus a menu that included candy apples.

After the pandemic cancellation in 2020 and a truncated edition in 2021, Frisch wanted to reopen the club, making it bigger and bolder.

“Since COVID[-19], we thought people wanted more to join together and to be in a different mood, so we took over the club inside the Palais and started programming great DJs during the whole festival, to make it the place to go after dinner,” he said. It’s quadrupled from its original capacity; the new location can host 800 guests.

That’s led to bigger parties, including French electronic duo Justice spinning for the after party of Quentin Dupieux’s “Smoking Causes Coughing” premiere in 2022. Diplo also hit the turntables that year, invited by Pigalle Paris designer Stéphane Ashpool.

Dup Lipa stopped by in 2023 on the arm of Romain Gavras for the afterparty of Elias Belkeddar’s “The King of Algiers.”

“We’ve had some really cool moments where it was really fitting between the music, the film and the people that were there,” Frisch said. The new space is connected to the Palais, which makes it easier for people to pop in as soon as a premiere receives its last ovation.

Even the busiest man in Cannes, festival general delegate Thierry Frémaux, made an appearance after the screening of Catherine Corsini’s “Homecoming” last year.

The original Silencio was designed by David Lynch. Its cultural ties with cinema are so strong that it has since opened its own theater in Paris in 2021, where it hosts special screenings and invite-only talks with directors such as David Fincher.

The team that handles programming at the Paris locations year-round turns its attention to Cannes each spring.

This year, the group is working with fashion show lighting designer Lancelot Rumney-Guggenheim and cocktail creator Rémy Savage, and has booked some powerhouse musical names: Skepta is on the star-studded lineup.

While the team traditionally plans ahead for the venue, it’s always a last-minute scheduling scramble as the festival finalizes its film premiere schedule just days before the opening gala. “We are in contact with agents and PRs for the films, but usually they are selected quite late. Then we have discussions at the last minute for the parties for the films,” Frisch said.

This year’s invites are still TBD, but he wouldn’t give away that info anyway. It’s not called Silencio for nothing.

But does he partake in the partying?

“Yeah, when it’s not in Silencio,” Frisch jokes. On any given night, he’s busy making sure things run smoothly for the many stars who attend, as well as trying to make other social calls up and down the Croisette. “I prefer to dance where it is not my club, but sometimes it happens.”

Ilya Sutskever, who was the startup’s chief scientist, offers praise for its leaders as he departs

OpenAI’s chief scientist and co-founder, Ilya Sutskever, is leaving the artificial-intelligence company about six months after he voted to fire Chief Executive Sam Altman only to say he regretted the move days later.

Sutskever and the company’s current leaders praised each other in announcing the news on Tuesday, a sign of ongoing leadership reverberations at OpenAI following Altman’s temporary ouster in November. OpenAI has since replaced nearly all its directors and said it would instill stronger governance practices.

Sutskever, a technical visionary highly regarded in the AI field, said in a post on X that he is working on a new project, but didn’t explain why he is leaving now. He expressed confidence that OpenAI will build artificial intelligence that is safe and beneficial. “The company’s trajectory has been nothing short of miraculous,” he said. “It was an honor and a privilege to have worked together, and I will miss everyone dearly.”

“Ilya is easily one of the greatest minds of our generation, a guiding light of our field, and a dear friend,” Altman wrote in a statement announcing that the company and Sutskever would “part ways.” Greg Brockman, OpenAI’s president, described Sutskever as an artist, saying: “His vision and gusto are infectious.”

Left unmentioned by all three was any reference to Sutskever’s role in firing Altman last year just before Thanksgiving.

Sutskever was among the researchers who showed that deep learning could be deployed to solve pattern-recognition problems at a previously unthinkable level. This sparked further advances in the AI field, ultimately leading to tools like ChatGPT.

He later joined OpenAI as a co-founder and board member with Altman, Brockman and others. His presence helped OpenAI recruit many of the world’s best researchers.

At OpenAI, he focused on developing artificial general intelligence or AGI—systems that could achieve broad, humanlike thinking—and ensuring that the technology is aligned with human values. He often urged OpenAI employees to “feel the AGI.”

Jan Leike, another machine-learning researcher who worked closely with Sutskever managing AI risks, is also leaving the company, a person familiar with the matter said.

Last October, Sutskever approached colleagues on the nonprofit board that oversees OpenAI to discuss what he described as Altman’s long-running pattern of pitting employees against one another, The Wall Street Journal reported last year. Among other things, Sutskever was upset that Altman had elevated another AI researcher, Jakub Pachocki.

Sutskever then kick-started a series of discussions that led to the board’s surprise decision to fire Altman, the Journal reported. Sutskever himself delivered the decision to Altman. The board in a statement at the time said Altman had failed to be “consistently candid” and lost their trust without giving specific details.

Within days, Sutskever said he regretted the decision, and Altman was later reinstated.

At the time, OpenAI officials said they hoped Sutskever would return to the company. Sutskever retained a presence on the company’s Slack channel, but he didn’t return to work. Pachocki has been informally overseeing the research division in the past few months.

Altman said Tuesday that Pachocki would officially be OpenAI’s new chief scientist, calling him “easily one of the greatest minds of our generation.”

U.S. government could seek to extend a probationary period for the plane maker or prosecute it for earlier misconduct

The Justice Department said Boeing BA 1.30%increase; green up pointing triangle violated a settlement reached three years ago over its employees’ role in two fatal jet crashes, exposing the company to potential criminal prosecution over one of the biggest crises in its history.

Boeing admitted in January 2021 that two employees misled federal air-safety regulators over facets of the 737 MAX, but it entered into a form of corporate probation that allowed it to avert prosecution at the time. Now, prosecutors say the company failed to live up to obligations that it committed to in the $2.5 billion settlement.

In January a fuselage panel blew off an Alaska Airlines 737 MAX, the same type of jet involved in the earlier accidents. The latest accident triggered a new criminal investigation and sparked fresh worries about a safety culture that Boeing was supposed to have fixed.

The company also recently told regulators that its employees might have skipped some inspections on 787 Dreamliner jets and falsified records.

The Tuesday announcement, which the department made in a letter to a federal court in Texas, doesn’t disclose the punishment Boeing might face. The Justice Department could seek to extend probation under the current deferred prosecution agreement. It could also seek a guilty plea from the company.

“For failing to fulfill completely the terms of and obligations under the DPA, Boeing is subject to prosecution by the United States for any federal criminal violation” federal prosecutors know about, the Justice Department said in the letter filed in court Tuesday.

Boeing has until June 13 to challenge the department’s finding, the letter said. The agreement had allowed Boeing to avoid prosecution for one charge of conspiracy to defraud the United States.

Boeing said it believes it has honored the terms of the 2021 agreement and looks forward to responding to the Justice Department.

“We will engage with the department with the utmost transparency, as we have throughout the entire term of the agreement, including in response to their questions following the Alaska Airlines 1282 accident, ” the company said, referring to the flight number.

The sections of the agreement that the Justice Department said Boeing violated required the company to create and maintain a compliance program designed to detect violations of the antifraud laws, according to the department.

The letter didn’t disclose what other illegal conduct Boeing should have detected and prevented or how its compliance programs otherwise fell short.

At a meeting in Washington, D.C., in April, Justice Department officials told relatives of 737 MAX crash victims and their lawyers that information about potential crimes from the Alaska investigation could factor into a determination of whether Boeing breached the 2021 criminal settlement, according to people familiar with the proceeding.

One senior Justice Department official said at the meeting that Boeing’s apparent lack of documentation related to factory work on the Alaska Airlines jet might amount to a breach of the deal’s compliance provisions.

Paul Cassell, a lawyer representing relatives of 737 MAX crash victims, said Tuesday: “This is a positive first step, and for the families, a long time coming. But we need to see further action from DOJ to hold Boeing accountable.”

Prosecutors reached the settlement with Boeing in the last days of the Trump administration. The case focused on then-Boeing employees’ interactions with the Federal Aviation Administration over a flight-control system blamed for sending two 737 MAX jets into fatal nosedives in 2018 and 2019. One of those employees faced prosecution in 2022, but a jury acquitted him.

Prosecutors didn’t blame Boeing or its ex-employees for the crashes but said they had misled the FAA about pilot-training requirements related to the flight-control system. Boeing had aimed to avoid the FAA requiring simulator training for 737 pilots who fly the jets, a potentially expensive prospect for airline customers.

The settlement required Boeing to establish a $500 million fund for the families of crash victims and pay a $244 million fine. The bulk of the total $2.5 billion value of the deal was money Boeing had already set aside to pay its airline customers.

Boeing’s predicament is a stark illustration of how corporate probation deals, a staple of white-collar justice for over two decades, have attracted more scrutiny during the Biden administration. Officials vowed to stop handing them out so frequently, especially if culpable individuals weren’t prosecuted.

The Justice Department under the Biden administration earlier found that two other big companies violated their probation deals. In one case last year, it forced the Swedish telecom company Ericsson to plead guilty and pay a $206 million fine. In another matter, Deutsche Bank agreed to more supervision by an outside compliance monitor after the Justice Department found that the bank violated an earlier settlement on corruption and market-manipulation charges.

A conviction for Boeing could complicate the company’s ability to remain a government contractor, a potential consequence prosecutors would likely consider when determining how to proceed in this case, according to specialists in procurement law. They said, however, that the Arlington, Va.-based aerospace giant, which also makes military aircraft and weapons in addition to commercial aircraft, could potentially remain a U.S. defense contractor even with a felony conviction.

Prosecutors are slated to confer with the family members on May 31 about where the case might go next.

Efforts to delay exits may help firms avoid worst of a crunch, but the day of reckoning still beckons

Private equity employs a lot of clever people. In recent times, they have applied their brainpower to avoid having to sell assets at cut-price valuations. Bloated portfolios and high debt costs have been ratcheting up the pressure on sellers. But a fortuitous opportunity to refinance and extend leveraged loans has given the industry a chance to kick the can further down the road — and hope markets recover in the meantime.

The industry’s latest reprieve comes courtesy of the booming debt market. Investors are keen on high yields. Banks are slugging it out with private credit funds to provide financing. The result is that spreads on US term loans have tightened by almost 100 basis points in the 12 months to March, according to PitchBook LCD data. Activity in the US leveraged loan market has topped $300bn in the first quarter of 2024 — the vast majority are opportunistic swoops to refinance, reprice and extend the maturities of existing debt.

This wave of refinancings buys the industry some breathing room. It follows on from a whole series of wheezes aimed at delaying their day of reckoning. Continuation funds have given firms the opportunity to shuffle assets to a new group of investors and offer the previous lot an exit. Net asset value loans — where a firm raises debt secured on its entire portfolio, rather than on a single company — have provided a way to keep feeding capital to companies that need it.

Buying time is not as dubious a strategy as it might sound. Public market multiples have improved, albeit driven by a small number of stocks. The European initial public offering window has tentatively opened, although mainly for slam-dunk equity stories such as Switzerland’s Galderma. Lower debt costs will improve earnings, and a longer lead time gives the private equity industry time to grow companies into their valuations.

But none of this changes the basic physics of this market. The industry has amassed $3.2tn of assets, says Bain. Holding periods are increasing. And exits in the first quarter of 2024 only amounted to $81bn, down 22 per cent on the first quarter of last year, according to S&P Global Market Intelligence.

The pressure to return money to investors is rising, not least to provide them with capital to recycle back to the industry as it tries to raise new funds. While efforts to delay exits may help firms avoid the worst of a crunch, the day of reckoning still beckons.