The Founder Of Cotopaxi On How To Use Capitalism As A Force For Good

The role of business has traditionally been to make money and increase profits for shareholders—but a cultural shift may be underway that’s prompting more businesses to also make giving back part of their mission. This shift is being fueled by events such as long-existing inequities being amplified during the pandemic, an increase in environmental disasters sparked by climate change, and consumers using social media to put increased pressure on brands to take a stand on social issues.

Rather than placing profit above all else, leaders can also measure value by how their businesses benefit people, communities and the environment. The increase in companies posting jobs related to environmental, social and governance (ESG), and sustainability, as well as the surge in companies becoming B Corp certified, illustrates this growing trend. This essential paradigm shift may be key for the sustainability of our workplaces, our country, and our planet.

An example of a leader using business as a force for good is entrepreneur Davis Smith, founder of Cotopaxi, an adventure gear company that uses repurposed, recycled and responsibly-sourced materials. Cotopaxi is a certified B Corp that fights poverty by allocating a percentage of their revenue to the Cotopaxi Foundation, and is also a member of 1% For The Planet, committed to donating at least 1% of their annual revenue to environmental causes.

Smith’s mission to create a company targeted at nature, travel and giving back was shaped in large part by his childhood. He was born in Utah, but his father’s job with the Church of Jesus Christ of Latter-day Saints led the family to live in places such as the Dominican Republic, Puerto Rico and Ecuador (Cotopaxi is named after a volcano in Ecuador near where he lived as a child).

“Growing up in the developing world, I always knew I had a responsibility to find a way to use my life to help others,” says Smith. “My family didn't have a lot of money by U.S. standards, but compared to the people we lived around, it seemed like we had so much. I recognized that I had different opportunities not because I was smarter or harder working or more deserving, but only because of where I'd been born.”

While in college, Smith read an article about Steve and Bette Gibson, successful entrepreneurs who sold their business and used that money to teach entrepreneurship skills to returned missionaries in the Philippines to help lift themselves out of poverty. A chance meeting with Steve Gibson in an elevator at Brigham Young University, where Smith went to school, gave Smith the chance to pitch himself for a job at Gibson’s nonprofit. However, Gibson advised he could make a much bigger impact being an entrepreneur than a nonprofit worker.

So Smith embarked on his entrepreneurship journey right after college, starting PoolTables.com with his cousin and making $1 million in revenue in their first year alone, but he hadn’t yet discovered how to tie that business to social impact. He then got his MBA and co-founded another business, Baby.com.br, before leaving that company and founding Cotopaxi in 2014.

“Being an entrepreneur is not easy, and you're certainly not guaranteed success, but I've had a little bit of luck and I've built a couple businesses before I started Cotopaxi that prepared me to be able build this brand,” says Smith. “It was about finding a way to use capitalism as a force for good in the world.” Here are some lessons from Smith about how to build a business that gives back.

Find an idea that can scale

Smith always loved the outdoors. Growing up, Smith would go on survival trips with his Dad and brothers where they’d spear fish and gather coconuts for food. He still goes on backpacking trips with his family. In terms of developing a business idea focused on his passion for the outdoors, he was also looking for an idea that was big that he could really scale.

“If I wanted to have the impact and be part of eradicating poverty, I knew I needed to build a business that could be a billion dollars or more,” says Smith. “The outdoor category is very large and frankly, I felt there was an opportunity to expand it. It was also very exclusive, and there was an opportunity to welcome a more diverse community into the outdoors. And so that was one of the visions for this category. And the other part [pertaining to eradicating poverty] is there's maybe not an obvious link between the outdoors and poverty, but I felt like people who love the outdoors have experienced something bigger than themselves, and those who have traveled and connected with different people understand why this matters and our mission.”

Identify where you can make an impact

Smith says when he started the adventure gear company, he knew he didn’t want to do a one- for-one model, which is to give one product away to someone in need for every product sold. “There's a lot of great companies that do that, and I think it's wonderful and don’t want to criticize companies doing good in the world,” says Smith. “But for me, after having seen poverty for so much of my life and having lived in the developing world, I knew if we sold a backpack and then gave a backpack to someone, it really wouldn't change much for them—they would still be living in poverty. What I really wanted to tackle were the core roots of poverty. So we identified healthcare, education and livelihood training as the three pillars that we believe are inextricably linked to poverty alleviation. Our efforts are focused on those three pillars.”

Know your core values and put people at the center

Cotopaxi’s core values are people, adventure and innovation. “We knew what our core values were before we sold a single backpack, and we intentionally built rituals and traditions that reinforced these values,” says Smith. “While those rituals and traditions change over time, the core values never change.”

For example, before Cotopaxi shifted to remote work during the pandemic, Smith believed people needed to be in the office together to intentionally build culture. Now that Cotopaxi is remote, he is a big believer in remote work. With people being a core value, he wants to maintain a culture where people feel a sense of purpose and belonging. Cotopaxi adjusted their rituals to fit the new environment, such as by having the team do a virtual hike every other Friday. Afterwards, someone from the team does what he calls a “lifeline,” where they present to the whole company their life story. “Maybe they share a childhood where their parents got divorced and they talk about how challenging it was,” says Smith. “They are human and vulnerable in this really amazing way that didn't happen when we ran into each other in the hallways at work. So we’re creating this new level of connectivity with each other that didn't exist before.”

Smith says he has seen how the switch to remote work has helped the company attract more women and diverse candidates due to flexible schedules and being able to geographically expand where they hired. Also, Smith says having purpose baked into their brand means they’re better able to attract and retain talent. For example, he recently got more than 3,000 job applicants for a graphic designer position. “Recognizing people, building these personal connections, listening, and doing service together as a team are the kind of things we think about as we think about culture,” says Smith.

Understand that purpose is profitable

Smith believes that purpose and profit are inextricably linked, and combining the two are the future of business and capitalism. “If you aren't thinking about the planet in the way you manufacture or make products; if you aren't thinking beyond your own employees; if you aren’t thinking about how to lift up communities, I think you're actually going to have less profit,” says Smith.

It took some time for Smith to prove this theory with Cotopaxi as—like many startups—the company wasn’t profitable in its first five years. They were giving away more money than they made, which was in conflict with their board and some investors, who thought it was time for the business to make money.

“Over the last three years we’ve been profitable,” says Smith. “It didn’t happen overnight, but we're showing that when you do what's right, and it's something that's deeply and authentically woven into the brand and the culture, people want to be part of that. People want to work for you, support you, wear your products. The more you can figure out how to impact the world for the better, the more profit you're going to be able to create, which allows you to do more good. It’s this beautiful cycle.”