Fast Company

Leap Of Faith

Meet Nau, the ultimate over-the-top, high-concept business. It makes striking, enviro-friendly clothing. It gives away 5% to charity. Can it save the world--and give us the perfect twill capri?

Somewhere between the Oscar for Al Gore's planetary-disaster epic, An Inconvenient Truth, and the canonization of Angelina Jolie by the United Nations (in association with People magazine), the message started sinking in: The cultural conversation around the environment, social change, and human rights is approaching maximum velocity. What is arguably urgent has become inarguably hip.

While celebrity moguls and business leaders of all stripes race to unleash one good work after another--from Bono's Red campaign to Wal-Mart's goal of zero waste by 2025--the ranks of the die-hard hemp-and-granola crowd have been overwhelmed by the Prius -driving, Whole Foods --shopping, fair-trade-coffee-drinking set. The new bohemians may express their values through what they buy, but they can also most likely place Darfur on a map and rattle off the relative merits of local versus organic farming. The market for "good" things that they fuel puts two questions back on the table: Can business be a force for positive change in the world? And can we have our affluence and offset it too?

The presumption that business can, and that we can, is at the heart of a new enterprise emerging from that hotbed of green goodness, Portland, Oregon. To say that Nau (Maori for "Welcome! Come in") is a new outdoor-clothing company would be a little like saying Starbucks started out just to sell a cup of joe. The ideas Nau promotes are as important as the clothes it sells.

Two and a half years ago, ideas were all Nau had. They took form in the heads of a small group of executives who had left big jobs at Patagonia and Nike to huddle together in the Urban Grind coffee shop in Portland's Pearl District and dream. Based on a shared conviction that, in addition to generating profit, companies have an equal responsibility to create positive social and environmental change, the Nau team set out to reinvent the way people shop, reshape the outdoor category, redesign the corporation--and inspire the wider business community to do the same.

"We're challenging the nature of capitalism," contends Nau's CEO, Chris Van Dyke. A tall, fit 56-year-old, Van Dyke came out of semiretirement--which involved sailing his 40-foot yacht, surfing, and fishing off the coast of Mexico for months at a time--to start Nau. "We started with a clean whiteboard," he continues. "We believed every single operational element in our business was an opportunity to turn traditional business notions inside out, integrating environmental, social, and economic factors. Nau represents a new form of activism: business activism."

Today, Nau is a business with three months of sales under its belt by way of the Web and four retail stores (in Boulder, Colorado; Portland; Chicago; and Bellevue, Washington), 92 people, $24 million raised in capital, and four clothing collections in various stages of production. The business plan projects $11 million in revenue this year, growing to $260 million and 150 stores by 2010.

Those are ambitious targets, but what's more striking is how Nau's core leadership team designed a disruptive business from the ground up. It has opted out of the industry norm at nearly every turn--from the invention of its own fabrics to the reinvention of its relationship with consumers.

It starts with a retail concept that combines the efficiencies of the Web with the intimacy of the boutique. Called a "Webfront," the Nau store integrates technology in a striking gallery-like setting. The central mechanism is a self-serve kiosk that transfers the online shopping experience to a touch screen and encourages customers to have their purchases sent home, with the incentive of a 10% discount and free shipping.

The advantage: If customers use the store as a fitting room and push purchases to the Web, Nau can build smaller stores (2,200 to 2,400 square feet compared to the traditional outdoor specialty store's 4,000-plus square feet), reduce in-store inventory dramatically, and slash operating expenses. Plus, it consumes less energy and materials.

Then there's the centerpiece of the company's "aggressive altruism": its pledge of 5% of sales to charitable organizations dedicated to solving big-ticket environmental and humanitarian problems. That is an audaciously large number, unprecedented in business. The philanthropic gold standard today is 1% of sales, practiced and preached most famously by Patagonia; the average among all corporations is .047%.

Just as important, Nau is putting the giving decision in the hands of its customers. At the point of sale, shoppers are presented with a menu of "Partners for Change" and asked where they'd like their 5% to go. Embedded in the back wall of every Webfront are two touch screens dedicated to documentary-quality storytelling (also available on the Nau site) about each partner organization so that customers will be inclined to dig deeper.

By designing a conscious choice about giving into the moment of getting, Nau is calling its customers out, daring them to connect the dots. Jil Zilligen, its vice president of sustainability, is a member of the original Urban Grind team and another veteran of Patagonia (more than half of Nau's top leadership team hails from Patagonia, a company they count as an inspiration and, in some cases, "family"--and now also a competitor), where she directed all environmental initiatives and created the One Percent for the Planet foundation. "We wanted to give people pause, a moment to stop and think and tell us what they really care about," she says. "By extension, we hope they will think about some bigger questions as well--how do our purchasing decisions impact the wider world? What's the role of a company in society?" That moment of transaction, she says, "is not where people expect to have a values confrontation. And because it's unexpected, it's powerful."

There's more. Nau's leaders aren't just interested in giving back to organizations that do good, they're committed to being good in the first place. Zilligen and her team have engaged the broader organization in approaching every aspect of Nau's operations with a sustainability and social-justice filter--from how the company designs, sources, produces, and distributes clothing to Webfront and home-office design to training (every employee undergoes sustainability training and signs a personal "sustainability pledge").

In many cases, Nau has pushed current standards to break new ground in its practices--from a minimum age for overseas factory workers to LEED-certified leased retail space. In fact, Nau puts its interests in the "environment, human rights, public health and safety, the communities in which it operates, and the dignity of its employees" on the same level as those of its shareholders; that commitment is actually written into its articles of incorporation.

All this can come across as absurdly lofty--or just a little too much. But in many ways, Nau is the inevitable product of our post-Enron, Web 2.0, neo-green era. The founders have taken all of the progressive business buzzwords--from corporate social responsibility to grassroots participation to design thinking--and thrown them into the mix. Or rather, meticulously mapped those ideas and ideals to build a brand with an impeccable backstory, the kind of brand that has a magnetic appeal for those Prius-driving, Whole Foods--shopping "conscious consumers" who happily seek out and pay a premium to companies whose values they share. Over the top or not, that's a market of some 50 million Americans alone (as documented in Paul Ray's study, "The Cultural Creatives") and worth $229 billion, according to the LOHAS Journal. The question is, can success actually be designed on the scale to which Nau aspires?

"Every element in our business is an opportunity to turn traditional business notions inside out."
--Chris Van Dyke

On a blustery spring day in Portland, Chris Van Dyke is sitting at the lobby conference table in the light-filled, open-plan Nau home office, reflecting on what happens when high concept meets harsh reality. Nau's first store was originally slated to open today outside of Portland, after endless delays, fraught real estate negotiations, epic weather, and shipping fiascoes. But just days before, yet another municipal-code hassle forced a further delay.

Recalling the road that brought him to this point, Van Dyke, who's wearing a Mr. Bill T-shirt under his Nau work shirt, lets out a burst of laughter that bears a striking resemblance to that of his father, actor Dick Van Dyke (the rubbery expressiveness of his face and buoyant attitude are two other dead giveaways). "Launching a startup is a true Mr. Bill experience," he says. He spent 20 "sleepless" months getting tossed out of venture capitalists' offices, wowing potential investors with the product only to be told the business model was insane.

After raising $14 million in two early rounds from individual investors, including Seagate chairman and avid outdoorsman Steve Luczo and Nike alum and current Nau chairman Stephen Gomez, Van Dyke needed more to take his company through launch. Facing resistance to a valuation of $51 million (without a dime of revenue), Van Dyke refined his pitch. "I decided we're cheap! Look at what we've done for $14 million: hired great people, developed great products, built fully scalable HR, IT, and supply-chain systems. We're actually a bargain at $51 million." The VCs weren't convinced. But Nau's original backers were still keen--and just as cash-flow concerns grew acute late last year, many of them kicked in more to help the company close a $10.5 million round.

Luczo, for one, likens Nau's retail approach to Apple stores, which today boast the highest sales-per-square-feet in the retail universe. "Clearly, that has a lot to do with the design of the [Apple] stores, the way the staff interacts with customers, and the fact that many buyers walk in predisposed to be fans of the company," he says. "Nau has a lot of the same elements. Is it risky? Absolutely. Nau is at the leading edge of a new kind of retail rollout. It's an aggressive experiment."

Nau does open a store, in Boulder. It's where Nau founder Eric Reynolds, an accomplished mountaineer and one of the original founders of outdoor-gear maker Marmot, spent years incubating the idea of a direct outdoor-clothing company and the Webfront concept. In the summer of 2003, he "had an epiphany" around how those ideas connected up with a much bigger idea about what he calls the "for benefit" corporation, an entity that operates for the benefit of its shareholders, its employees, the environment, the communities it operates in, and the wider world, equally.

Reynolds registered his fledgling company in his home state of Colorado as UTW (which stands for "unf--k the world") and promptly set out to recruit a team to help breathe life into those ideas. (He stepped down as chairman in early 2006.) The first recruit was Mark Galbraith, a former top designer for Patagonia, who speaks in a slow drawl and with a tart wit. For all of the lofty ideas behind Nau, Reynolds realized that "unless we have kick-ass, gorgeous, appealing stuff, none of this would matter."

By all accounts, Galbraith, now Nau's vice president of product design, and his crew of industry veterans have delivered: Their first collection, ranging from $32 boxers to the $248 "urbane jacket," has won glowing praise from Men's Vogue and Rock & Ice alike. Nau spent countless hours wrestling with the question, "Who is our customer?" The distillation of those conversations is what Nau people refer to as "our poppy"--interlocking circles that represent three customer archetypes: the multidimensional outdoor athlete, the "new activist," and the "creatives." In turn, those archetypes map to the three elements of Nau's design philosophy: performance, sustainability, and beauty. The company resolved to achieve all three--a leap in an industry where combining two of those qualities is rare.

"The challenge for us was to blow up baked-in assumptions--if you have fashion, you can't get performance, or if you want sustainability, it won't be good-looking," says Galbraith. "If you care about making a sustainable product, you don't do different sets of clothes for different sports and activities. It's not about the proliferation of SKUs and feeding the consumer disease. It's about designs that are timeless rather than trend-driven and colors that work over multiple seasons and situations."

The big challenge: how to get performance and beauty out of sustainable materials that typically got low marks on both counts. Nau's solution was to grow its own: It designed, developed, and commercialized (with partners such as Malden Mills) 28 of the 30 fabrics used in the first collection-- materials conceived specifically to deliver on the promise of high-tech performance, beauty, and sustainability. It considers all of those new fabrics "open source" and, in keeping with its mission to create positive change, has encouraged its peers and competitors in the industry to make use of them.

Working with Zilligen's sustainable- practices team, the design group established ideal product criteria, developed a restricted-substances list, and established a partner code of conduct, all third-party audited and verified. So Nau uses only renewable natural fibers--100% certified organic cotton and wool from "happy sheep"--recycled and recyclable synthetics, and recyclable renewable resources such as PLA (polyactic acid), the first commercially viable biopolymer (essentially distilled and polymerized cornstarch) with fast-wicking qualities.

Galbraith and his colleagues have made some impressive advances. In the challenging realm of high-tech, waterproof, breathable fabrics, for example, they eliminated the need for solvent-based adhesives and reinvented the soft-shell fleece. It's featured in a fall 2007 trench coat appropriately called the Shroud of Purrin for its furlike lining (a radical update on the standard nubby fleece), technical innovation (wind- and water-resistant, breathable, light, highly compressible), and flattering cut. At the same time, the designers continue to strive mightily (and transparently) in areas where they fall short, such as the use of laminates and coatings that contain fluorocarbons. As Zilligen puts it, "Sustainability isn't a milepost, it's a process. Complete sustainability is not actually achievable."

In the typical outdoor company, it takes 18 months to come out with a new line--one that generally involves 20% to 30% of the line carrying through from one season to the next, perhaps one or two completely new fabrics, and existing relationships, fit blocks, and patterns. Galbraith, on the other hand, had a "clean whiteboard" and 20 months to produce a design philosophy; create not one, but four collections (each with 100 to 150 separate styles); devise completely new fabrics; and develop product and vendor relationships (with no credit history, no brand, and the most exacting standards).

"I remember sitting down at a card table with two phones and not having much longer than the normal development cycle and thinking, 'Okay, we have to go from zero to everything,'" Galbraith recalls. "It really did feel like we were assembling a plane as we were roaring down the runway. It was a really fast, incredibly energizing, and at times quite scary endeavor."

Where Nau ultimately hopes to achieve liftoff, of course, is in customers' encounters with the products in the stores. Like Nau's clothes, the Webfronts don't scream "green." That's exactly the point, says Jeff Kovel, the up-and-coming architect and founder of the Portland-based Skylab Design Group, which worked with Nau to design the Webfronts. "Our goal was not to have a sustainable aesthetic so much as a sustainable concept." When he and his partners dug into the world of retail rollouts, they "saw it as a throwaway culture," Kovel says. "Stores come into a vanilla shell, rip it out, and start over. They're constantly putting fixtures in, tearing them down, and throwing them away. We thought a lot about how we could change that whole process rather than just use some green materials." The solution: a prefabricated, component-based environment with fully reusable fixtures that are built off-site, shipped in a flat pack, and assembled on-site in the existing store shell.

The main fixtures run the length of either wall in the long, narrow spaces preferred by Nau, starting out as a square grid and gradually deforming into a more organic shape, reminiscent of a canyon wall. Clothes hang well-spaced and gallery-like in berths of varying heights formed by the grid and from aluminum bars fixed to the ceiling. Boulderlike aluminum forms serve as display tables and a cluster of cairns made out of reclaimed wood create an environment for mannequins (made of recyclable resin) in the storefront window. The rechristened "cash bar," which is meant to evoke an outdoor bar or barbecue, forms the center of the store. On one side, sales staff serve customers at two traditional point-of-sale screens, while customers are free to check out unassisted with two touch screens on the other side.

"What does sustainable marketing look like? We haven't completely figured it out, but at the core is storytelling."
--Ian Yolles

On opening day in Boulder, a steady stream of customers pass through the store, a rich mix of thirtysomething moms with babies, twentysomething hipsters, hardened athletes right off the mountain, and retirees with dogs. Few of them "get" the meticulously designed layers of functionality and visual imagery in the store right away. On the other hand, almost everybody gets into a conversation--in fact, with its relaxed vibe and high-energy music selection, the place feels a bit like a cocktail party, even at 11 a.m. The most overheard line on the sales floor is, "That's made of recycled polyester." (Second: "That's made of corn.") And time after time, the 5% giving decision at the point of sale does exactly what it is designed to do: It raises questions, sparks debate, and gets people talking.

Which is the job of Ian Yolles, Nau's 50-year-old vice president of marketing. Yolles, a wiry surfer who sports a diamond stud in his ear and who has had a poppylike career as executive director of Outward Bound Canada, director of social inventions at the Body Shop, and director of marketing at Patagonia, is given to impressive rhetorical flights of fancy when it comes to his brand. But for all the talk about building brand and culture at Nau, Yolles and his team are applying a decidedly low-key approach. Just as the design team decided to forgo a logo on its clothes, the marketing team doesn't seem that interested in the standard tools of the trade, such as advertising, promoting store openings, and celebrity product endorsements.

"You'll hear the word 'sustainability' around here a lot," Yolles says. "At a certain point, we stumbled on the question, What would sustainable marketing look like? And it stumped us. We haven't completely figured it out yet, but at the core is storytelling. There are all kinds of interesting, authentic stories embedded in our people, their passions, the ideas behind the company, and a wider, emerging community of people who reflect the same ethos."

Yolles and crew have created a range of mechanisms and venues for that storytelling, from the Nau blog, The Thought Kitchen; to The Collective (a Web archive of documentary-style video storytelling showcasing Nau's heroes, such as Dee Williams, a woman who traded in her house for a tiny, environmentally friendly dwelling the size of a garden shed); to the Partners for Change Web pages; to the stores themselves, which are hosting a series of salonlike evenings featuring local storytellers, including alpinist/writer/photographer Topher Donahue in Boulder and bike evangelist/blogger/citizen activist Jonathan Maus in Portland.

If it all sounds a little self-conscious and bloodless (compared with, say, the slow and organic evolution of Patagonia out of founder Yvon Chouinard's own close-to-the-earth lifestyle and desire to create better, more-sustainable tools for climbers), that's the danger of bolting out of the gates with audacious ambitions and an aura of goodness. People will poke holes.

Van Dyke gets that. "We're launching this company into a culture of cynicism--and it's cynical for good reason. Business hasn't behaved itself. Our challenge is how to deal with that by designing from the ground up to try to do better in every area we can think of--and then making sure we're utterly transparent about how we're doing and where we fall short."

That doesn't mean Nau intends to pander for legitimacy. "One of our greatest goals is that a significant number of people really hate us," Van Dyke continues. "That's just perfect. You try to please everybody and you end up being nothing. The sign of a really powerful brand is one that is loved and embraced and equally hated. The deeper you pound your stake into the sand about your values, the more of both the love and the hate you're going to generate. That's what makes it exciting."

Polly LaBarre is coauthor of Mavericks at Work: Why the Most Original Minds in Business Win.

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