Recreational Equipment, Inc. (REI)

A. The main facts about the activities of the company.

Recreational Equipment, Inc. (REI) is the project of 23 climbing lovers who encountered a local demand when two of them found that they could import good quality equipments at correct prices from abroad. In 1938, the couple created the cooperative for the climbing enthusiasts. Then it grew to become the biggest cooperative in the World with 125 retail stores over 32 US states selling all kind of equipments from camping and hiking to fitness and cycling.

The purpose of the company is to provide a place where customers can buy quality products that fit their expectations. To do so REI offers a 100% Satisfaction Guarantee on their products as well as the possibility to try them in the stores thanks to features such as climbing walls. Customers are also teached about how to use the equipments, in the stores, with online tutorials or through free or low-cost classes that they provide.

A particularity of REI is that it is organized as a consumer cooperative. With this model, everyone can buy a $20 lifetime membership and become part of the company. Members receive a share of the company’s profits through annual refund on their purchases and more importantly they can vote for the board of directors and access annual meetings with the purpose of giving feedbacks. The board is composed of 13 members of which10 have to be elected by the REI’s members including the President and CEO. On REI’s website we can also see the willing of transparency of the Co-op as they provide all important documents about the governance of REI.

B. The Ethical challenges this company is addressing.

REI is proud of itself to create a culture of trust, inclusion and social responsibility. REI release an annual stewardship report which highlights the social and environmental progress and the year challenges in order to demonstrate transparency to its stakeholders. REI is focused on three stakeholders to company success:

● Employee:
The company recognizes employees as the glue that holds the organization together. REI have to manage a large network of employee relationship. The organization has earned a spot on Fortune magazine’s “100 Best Companies to Work for”. One reason of the employees’ loyalty is the extensive benefit package. The employees enjoy of generous discounts in REI products, free rentals and yearly gift of gear, and also the four-week paid sabbatical after 15 years of employment. There is also a program (Challenge Grant) that encourages employees to spend time outdoors. The company contribute to the retirement of eligible employees. There is also a Pay for Performance compensation package to incentive the employees to achieve company’s goal. REI makes a yearly survey to its employees to ensure their satisfaction, 90% or more of respondents viewed the company favourably.
Additionally, REI has made diversity and inclusion an important company value to arrive a wider array of diverse customers. REI seeks workforce diversity utilizing nontraditional recruiting sources to locate prospective employees from diverse backgrounds.
Finally, REI recognizes its responsibilities toward the workers. The company has expressed its commitment to go above and beyond local laws in ensuring fair treatment for factory. The challenge for REI is to balance profitability and long-term supplier relationships with responsible sourcing to create industry-wide compliance programs and expectations for factories. As part of this collaboration, REI embarked upon a partnership with the Outdoor Industry Association (OIA) in 2006. Together, the partners created the Fair Labor Toolkit to provide advice for companies and point out ethical issues in labor compliance. REI also joined the Fair Factories Clearinghouse (FFC) in 2009. The FFC is a nonprofit organization dedicated to using software to improve workplaces and business transactions.

● Environment:
Including the environment as an important stakeholder in its stewardship report, REI acknowledges the importance of sustainability in its daily activities. Its strategic focus on environmental responsibility has enabled REI to reduce its environmental footprint.REI aspires to create effective change in the areas of sustainability throughout the industry. REI has benchmarked four areas of sustainability concern:
  Reducing gas emission / energy usage: REI wants to minimizing greenhouse gas emission and it do that purchasing carbon offsets. The company reduces 7.6% emissions in a year. REI aware that the majority of emissions came from transportation, so it has begun promoting responsible transportation and alternatives approaches like subsidizing vanpools and offering incentives for public transportation. The challenge of decreasing greenhouse gas emissions while simultaneously increasing REI business operations requires REI to do more with less energy. One way is investment in more sustainable energy sources. REI installed solar electrical systems at several stores.
  Waste and recycling: REI has set the goal of becoming a zero waste-to-landfill company by 2020. The organization is seeking innovative ways to generate less waste and recycle the waste it does generate. These efforts are focused on the entire supply chain. The idea is to reduce waste before it gets to the retail level redesigning packaging to reduce packaging waste or increasing recycling.REI’s total waste decreased by 1.4%.
  Paper usage: REI wants to ensure that the paper it uses is sourced responsibly. The company encourages the purchase of paper products sourced from post-consumer waste or virgin fiber harvested from forests certified by the Forest Stewardship Council (FSC).
  Increase Responsible products stewardship: For REI, environmental stewardship does not stop after a company sells a product because of that it makes product stewardship a key tenet of its sustainability goals. It also advocates for a universal standard that can be used to judge a product’s sustainability and, partnered with Timberland, create the Eco Index that was modified to form the HiGG Index used to measure the sustainability of apparel and footwear products. REI also supports the bluesign® system, a system to responsibly manage chemicals in the supply chain.

● Community:
Each year REI supports many local programs to further conservation and outdoor recreation. REI invites and engages its members, customers, and entire communities. REI also encourages its employees to volunteer in improving and protecting the outdoors. A primary focus for REI is youth and impulses a program called Promoting Environmental Awareness in Kids (PEAK) to teach kids about outdoor ethics while having fun outdoors. PEAK has two goals: to introduce youth to the wonders of the outdoors, and to practice responsible “No Trace” principles. REI sets aside 3% of its previous year’s operating budget to support nonprofits and other causes that promote outdoor stewardship. REI has participated in a number of endeavors supporting minority groups, including underwriting Latino USA’s “RadioNature” feature in partnership with Futuro Media.

C. What makes you believe this company is really ethical and why you trust it?

The word cooperative itself hints us that this company is somewhat different and is based on cooperation.

The purpose
There is a phrase we can find in REI’s corporate website> “…success depends on our ongoing commitment to stewardship to help protect and enhance the natural world.” Since the company’s inspiration and its main activity is to promote outdoor activities, it is obvious that firm’s profitability is directly tied to the conservation of natural places. The entrepreneurs are the nature lovers, so they are definitely sincere in willing to preserve the nature.

Model
REI Cooperative entitles all the members to company’s profits based on their purchase amount. So it could be claimed to be a customers’ company.

Engagement to customers
The inspiration of creating a company together with their passion to offer their customers the highest quality products for outdoor activities and even the tutorials how to use these properly, clearly shows the engagement with their target. By fostering the relationships with the customers (or members if they decide so), this company proves not only to make profits but to bring essential value to the market.

Other initiatives
Moreover, the challenges that this cooperative is facing stand for important ethical issues, these are related to a more efficient energy usage, paper usage reduction, recycling, etc.

We trust this cooperative because the results speak for themselves. The products offered and the engagement with the members/customers prove to bring value to the world. Secondly, REI was elected as best company to work for many years in a row (based on an anonymous survey). Thirdly, participation in various initiatives for sustainable business and nature is another ethical indicator in our society.

D.The possible challenges facing the company in the future and how you think this company may improve.

First, the current recession might create ethical dilemmas for REI and challenges its values and ethical principles. To be able to be ethical REI is selling products at higher prices than competitors. However due to the recession customers might be more reluctant to pay a higher price to get an ethical product. This might introduce a dilemma for REI between reducing costs and being potentially less ethical or keeping the price high and risking to lose significant market share. REI already had to make staff cutbacks. Even if they seemed to handle it in a good manner as they continued to be ranked in Fortune magazine’s “100 Best Companies to Work for” the followings years, they might continue to face such challenges. One way to deal with it could be to reinforce the interest of customers for ethical products by communicating more about the way they are produced or to make customers that have a membership feel more part of the company by giving them more decision power.
Another challenge that might face REI is to ensure good working conditions in factories that produce their products. REI as a very strict factory Code of Conduct that goes beyond local laws and are supposed to ensure fair treatment for factories workers. However REI is treating with third parties for the production of their product so they have less control over the factories. For this reason they are performing visits and audits in the factories to ensure that the Code of Conduct is respected. However even with these controls some minor violations of this Code of Conduct have been reported by an independent audit. REI should therefore improve the checks during these visits and the quality of their audits. Furthermore part of the products they are selling are from their own brand but other part are from other producers. In the latter case they have even less control over the chain of production. A solution to that could be to increase the percentage of the products that are sold under their own brand or to make stricter the selection process of partners.
Finally REI can also improve its actions in the domains they are already engaged. In particular even if they are taking a lot of actions to reduce their footprint their products are not 100% sustainable and they admitted themselves that there was some room for improvements.