Walking the Talk
#BusinessCase:
REI Proves Values-First Approach Leads to Longevity

News Deeply, in partnership with Sustainable Brands*, has produced a series of profiles looking at how brands are tackling some of the world’s biggest challenges. The goal is to examine trends and gather insights from a new wave of corporate citizenship – in an era when the private sector is increasingly expected to play a positive role in improving our lives and societies. This is the 10th article in* the series.

REI recently embarked on one of the most ambitious efforts of its eight-decade campaign to improve access to the outdoors, with five “Rewilding Projects” that stretch from coast to coast.

From Seattle, San Francisco and Los Angeles to Chicago and New York, the outdoor equipment supplier is teaming with nonprofit groups on a multiyear program that will improve and extend trail networks and reshape how people in those cities connect with the outdoors.

“[For] certain populations, while the outdoors may be kind of in their backyard – the ability to access that is, in some instances, decreasing,” said Alex Thompson, REI’s VP of brand stewardship and impact. “What we’re doing is convening large numbers of nonprofits to connect disconnected trails in urban environments, and connect the urban with the outdoors.”

It’s the latest initiative in REI’s long-standing commitment to partner with local, regional and national organizations to maintain and improve access to outdoor spaces. The company donates 70 percent of its annual profit to the outdoors community, totaling $9 million in 2016 and more than $77 million since 1976.

REI’s commitment has remained strong, Thompson said, because its member-owners demand it (REI is the world’s largest co-op, with roughly 16 million members). As long as the membership continues to push the company to seek sustainable practices, work with environmental nonprofits and advocate for a life outdoors, Thompson said, the company will do so.

News Deeply recently talked with Thompson about REI’s unique take on what it means to be sustainable, and how that shapes the company at all levels.

How do you use brand stewardship and public advocacy to achieve the objective of leaving the outdoors healthier?

Alex Thompson: I will just start by saying, we are a cooperative. You pay a once-in-a-lifetime $20 fee and then you’re a member of the co-op and, therefore, an active participant in our community, forever.

That’s a really important grounding fact because that enables us to act in the interests of the membership base, and we see the membership base as people who are structuring their lives around the outdoors. When you look at life outdoors and you think about that through a sustainability lens, and you think about what a cooperative can do, it manifests in lots of different ways.

More than 70 percent of our profit, annually, goes back to the outdoor community. We do that in a number of ways: to the employee community, to the membership base, and it goes back to our nonprofit network – about 300 nonprofits. And if you think about the engine of that, of the $2.6 billion cooperative, it’s an economic engine that puts money back into the outdoors.

I’ll give you a tangible example. Last year, we opened a LEED Platinum distribution center – it’s the first LEED Platinum and net zero energy distribution center of its kind in the world. It’s slap-bang in the middle of the Arizona desert, [and] REI is pursuing ways to minimize water use inside and outside the building, particularly for cooling and landscaping needs. And as a cooperative, we’re able to spend a lot of money on developing that kind of facility because our employees, our membership base, are able to give us the permission to do that. They expect that type of leadership.

One of the things that we’re fortunate to have is purchasing power. We’re working with our top brands and encouraging them to innovate in gear design. Last year we gave Columbia an award for the Eco Extreme jacket. We were able to recognize Columbia for its product innovation among its peers. And, of course, that then gives them a higher status within REI.

What are the challenges with trying to implement this kind of sustainability as a business, and how do you overcome those challenges?

Thompson: I think the role of business has fundamentally shifted. Consider the role of the company today with its employees: We provide health benefits. We help people spend time with their family, outdoors. We, as an employer, are actively engaged in any number of things that, in generations past, might be perceived as the role of government. And we’re also expected to live up to and advocate for our values. So, I think my first thought is that because the role of businesses has shifted so much in the public consciousness, the breadth of topics that you might be involved with presents a very real risk of diluting your impact if you spread yourself too thin.

I believe that picking and being very, very clear on what is the highest-order goal that you are working toward as an organization – not as a sustainability team or anything like that, but as an organization – is the most important thing for any sustainability executive or, frankly, any executive who cares about the impact of their organization on the world.

REI is one of a number of brands that encouraged the Outdoor Retailer Tradeshow to leave Utah, in response to the state government’s stance on the use of public lands. Do you see that kind of involvement in public policy as part of your sustainability goals? Is that something you are trying to encourage more of as you move forward?

Thompson: Public advocacy is part of our sustainability goals and is reported transparently in our stewardship report. And importantly, working with a network of nonprofit advocacy organizations, transparently, to positively shape the future of the outdoors is absolutely a part of our work.

[Regarding the trade show], our CEO was constructively engaged with elected officials in Utah to articulate that we were very concerned with the legislation that was coming out of Utah. And we felt, from an integrity standpoint, that it was not right for the outdoor industry to bring $40 million of investment, annually, in these two trade shows if Utah was, in fact, a source of the resistance to public land. We felt like it was an integrity issue and so we, therefore, strongly supported the decision to move the show.

A lot of other companies will want to know, ‘How has this work affected REI’s bottom line?’

Thompson: I think you have to look at the health of REI over decades, not months.

And consider that a cooperative that was founded in 1938 has grown to become an organization with 16 million members and $2.6 billion in revenue. It’s steady, sustainable growth that has outpaced others in this space, significantly.

It’s ample evidence that when you put your values first, instead of share value, your organization can be very healthy over a long period of time. In the past three years we have seen 10 percent, 9 percent and 5.5 percent growth. If you know retail, those numbers are breathtaking.

But we see sustainability work as an end, in and of itself. If the business can be healthier as a result of that work, that is a very good thing because we get to invest more money back into the outdoors and into our efforts. And so, we see this as a sort of self-sustaining cycle, where strong performance delivers greater impact from a sustainability standpoint.

Are there any upcoming sustainability milestones?

Thompson: On July 10, the comments period closed for [U.S. citizens] to articulate their love of public land, and the importance of national monuments, and the recommendation will be issued by the secretary of the interior, Ryan Zinke, to the president, on what should be done with 27 national monuments.

We are very, very focused on this right now. We feel very strongly that our public lands and our national monuments should be preserved for future generations. We’re looking very closely at how we can constructively engage on both sides of the aisle and help both Secretary Zinke and the administration follow in the footsteps of Teddy Roosevelt and at least 16 presidents, going back a hundred years.

I think as a community, we have to do a really great job of showing that setting your purpose and your values first – acting in a long-range rather than short-range, and in a community-centric fashion – is a competitive advantage. And we have to keep doing that.

I’m excited to see where the generations that follow take the notion of purpose-led business.