Wharton’s Katherine Klein speaks with Davis Smith, founder of sustainable outdoor gear brand Cotopaxi, about his firm’s mission.

Davis Smith, founder of sustainable outdoor gear brand Cotopaxi, thinks of protecting the environment as table stakes in his larger mission to alleviate extreme poverty and uplift communities across the globe.

The company allocates a portion of its revenue to nonprofits, hires refugees, works only with ethical supply chain partners, and runs a foundation that leverages donations from customers with its own charitable giving. So, it’s only fitting that 94% of Cotopaxi’s products last year were made with recycled, remnant, or responsibly sourced materials.

“Are we perfect? Of course not,” said Smith, a Wharton graduate. “But I think we’re doing things in a way that many have never done before, and we’re hoping that we can continue to lead the way in thinking about how we do capitalism differently. We have to do better because we are destroying our planet, and we’re leaving people behind in this rat race of trying to create more profit. And that shouldn’t be what business is about.”

Smith spoke with Katherine Kleinvice dean for the Wharton Social Impact Initiativeduring an episode of the Dollars and Change podcast. (Listen to the podcast at the top of this page. You can find more episodes here.)

Klein asked Smith about his worldview, which was shaped by his childhood spent in the Dominic Republic and other parts of Latin America. He realized from an early age that he wanted to help others, but he didn’t know what path that would take until he met an entrepreneur who persuaded him to launch a business with social impact.

“It’s not just about us doing things right, it’s about trying to move the entire industry forward in a better way.” –Davis Smith

“It was really great advice,” Smith recalled. “I’d never really considered entrepreneurship as a career path, but I spent the next 10 years building a couple of different businesses.”

The first was pooltables.com, which Smith started before attending Wharton. After graduation, he moved to Brazil and built Baby.com.br. An outdoorsman and adventurer, Smith got the idea for Cotopaxi while in Brazil. Although the outdoor gear market was saturated, he believed there was space for a brand that wanted to give back and help others.

It’s not just about protecting the environment. I think that’s very important, but I think these two things are very interlinked. There’s no way to save the planet if you’re not saving humanity at the same time,” he said.

Cotopaxi’s commitment to social impact is literally woven into the very fabrics the company uses to create its products. When Smith realized the amount of wasted scraps left on their factory floor in the Philippines, he asked the sewers to gather the remnants and create one-of-a-kind bags of their own designs. The result is an iconic product with a unique backstory that customers love.

Cotopaxi also uses a factory in China with a reputation for fair treatment of employees. The factory owner used to work at another facility that required employees to live on-site. The owner thought that was inhumane, so now his workers carpool every day in minivans provided by the factory. There’s also a community garden for employees to grow their own vegetables.

“None of our factories works exclusively with us, but what we found is that we can have influence,” Smith said about choosing ethical suppliers. “I think everyone benefits from that. It’s not just about us doing things right, it’s about trying to move the entire industry forward in a better way.”

Closer to home, Cotopaxi has partnered with the International Rescue Committee to employ 200 refugees who live near the company’s headquarters in Salt Lake City, Utah. The refugees, many of whom are women, write thank-you cards that are tucked into every order.

“I think what makes me most excited is proving that doing good and doing well are not mutually exclusive.” –Davis Smith

Doing Things Differently

Klein asked Smith to elaborate on how his company is different from others that espouse a commitment to social impact. He went back to Cotopaxi’s origin story. Before the company ever sold a single product, the leadership team identified the mission and values. They also reserved 1% of revenue for the foundation, which in the early days meant all of their profits. They see the 1% as a minimum bar, though, so in 2020 they made the decision to allocate nearly 3% as they invested heavily in helping disadvantaged communities respond to the pandemic.

“For us, it’s not about giving the minimum and making a commitment, and then kind of giving that,” Smith said. “It’s how do we give the most we can possibly give? How do we have the greatest impact possible?”

Like most firms, Cotopaxi was impacted by the COVID-19 pandemic. With stores closed for months and consumers isolating, sales declined. Smith and his team pivoted quickly, making shirts to raise money for pandemic response and masks that were both sold and donated.

Despite the challenges, the company managed to grow by 40% in 2020 and learned a few lessons along the way. For Smith, the biggest was about working from home — something he and his employees had never done. He found the teams became more efficient, more productive, and more creative about connecting with each other. He also discovered joy in spending more time with his wife and children.

“This transformed the way that I thought things had to be,” he said. “I thought things had to be done in a certain way, and it turns out that wasn’t true.”

Bain Capital Double Impact recently announced a $45 million investment into Cotopaxi, signaling its confidence in the company’s growth and mission. Smith said the investment is proof that the business world is thinking differently about capitalism.

“I think what makes me most excited is proving that doing good and doing well are not mutually exclusive,” he said.