The woman driving Patagonia to be (even more) radical

Then she laughs, not so much at the joke but at herself and that period of her life—the weeks she spent meditating alone in Rishikesh, India, the temple town along the banks of the Ganges that the Beatles once visited and made famous. Marcario, 50, is telling the story of how she ended up at Patagonia, where she’s now CEO. It’s a roundabout tale that begins with her burning out on a private equity job in 2006 and ends with her here at Patagonia’s headquarters in Ventura, Calif., north of L.A., leading the iconic outdoor clothing and equipment maker through the most profitable and expansive era in its history. Sitting in a small conference room near her desk—she has no office—and casually dressed in a Patagonia down vest with prayer beads on her wrist, she couldn’t seem more at peace with her journey.

But back to the burnout and to India. It’s key to understanding Marcario’s nature and how she approaches the problem of running a company that sells outdoor apparel, sure, but would also like to help out with the minor task of saving the world.

By the time she bolted to Rishikesh, Marcario had been a practicing Buddhist for 20 years. She grew up among Italian Catholics on Staten Island and then, after her parents divorced, in Southern California. Her manner of speech and general demeanor are a mix of these different worlds: a laid-back SoCal lilt bundled into direct, no-nonsense sentences. With the practice of Buddhism, she says, “comes looking really deeply at things, looking beyond just your generation, looking at how your actions impact broader groups of people.” This way of thinking did not match up with the short-term focus of her daily grind.

Before joining private equity firm Capital Advisors as an executive vice president, she had worked at a couple of tech companies—including as CFO of General Magic, a spin-off from Apple (AAPL) that closed in 2002—and in all of those positions her job was to obsess over quarterly results, meeting demands of investors. It all seemed, to her, to fuel a level of greed and poor decision-making that was not just unethical but also bad for people and the planet.

As Marcario became more successful, she says, “I felt myself more and more divided from my values.” She was learning more about herself through her study of Buddhism. “I felt like, ‘Wow, I’m transforming as a person, but my work isn’t reflecting that,’ ” she says. So she quit, went to the banks of the Ganges, meditated, and pondered what to do with her life. After some time in India and Nepal, she flew back to Los Angeles, not sure what was next.

A friend mentioned that Patagonia was looking for a CFO. By now it was 2008. Marcario was skeptical at first. Wouldn’t jumping back into the same role at a different company really just be more of the same? People around her whom she trusted told her that Patagonia was different. But how could she be sure? Then Yvon Chouinard called her up.

Chouinard describes himself as a “dirtbag at heart”—by which he means that he’s a millionaire for whom material things hold little appeal. He founded Patagonia in 1970 as an extension of his business forging pitons and other rock-climbing tools. Chouinard never took Patagonia public, and his iconoclastic ways have spawned a kind of cult around him and his business—a company that tells its customers not to buy what it’s selling and ends up more in demand as a result.

He mentions his dirtbaggery by way of explanation: It’s a big reason he thinks that Marcario was intrigued enough to come onboard. “We have kind of a gonzo company,” he says by phone from Wyoming, where he spends most of the summer fly-fishing. “I come up with crazy ideas. I have these eco things that people think I’m nuts to want to do, and she’s right there on it, into it.” Chouinard, 76, still comes into work when he’s in town, and his beat-up wooden desk is across a small room from Marcario’s. It’s noticeable because it has no computer, only a Reagan-era landline phone.

Marcario says that from her initial conversation with Chouinard she was awed both by his commitment to his causes and trueness to himself and by how that was reflected in his company. This was something she aspired to—was in fact searching for. He is, she says, someone who “has exemplified living the examined life.” Chouinard, for his part, says Marcario is the best leader his company has ever seen—including himself and the seven CEOs who followed him before her.

When Marcario arrived as CFO in June 2008, she launched a rigorous review of Patagonia’s supply chains—looking for ways to streamline production and save costs by identifying waste, both financial and environmental. Instead of shipping items in a bulky box, for instance, Patagonia switched to mailing stuff in recyclable bags. She also pushed the company to cut back on its expanding selection of leisure wear and return the focus to its core outdoor products. (It was decided that men’s capri pants, for example, were a mistake.) And she devoted a lot of resources to improving the company’s e-commerce capabilities. Patagonia had historically grown sales carefully and methodically. The company owns only 32 stores in North America and 36 more worldwide. (The rest of its retail sales come from its many partnerships with other retailers). But since Marcario’s arrival e-commerce sales have skyrocketed—though the company, which remains closely held, declines to disclose detailed figures.

It quickly became clear to Chouinard—who with his family owns 100% of Patagonia—that he had found someone special in Marcario. She moved into the job of COO and then, in 2013, succeeded Casey Sheahan as CEO. She has continued to deliver results. Patagonia is on track to have the most profitable year in its history in 2015, according to the company, with expected sales reaching $750 million. All told, the compound annual growth rate since the year after Marcario joined as CFO has been 14%, and profits have more than tripled since her arrival.

If Patagonia were a larger company, Marcario’s track record would surely merit a spot as one of the Most Powerful Women in Business ranked in this issue. The executives on our list typically run operations with billions in sales. But Marcario earns recognition for both her success and the outsize influence the Patagonia brand holds in the business world—as well as her role in extending that sway.

Her approach represents a middle way in which business success doesn’t mean ignoring your community or leaving the planet worse off than you found it. “Rose is really a whole person, a well-integrated person,” says Etsy’s Chad Dickerson (ETSY), a fellow socially conscious CEO (and fellow adoptive parent). She’s “not just a business person—she brings a full perspective.” Chouinard praises her in more radical terms: “She understands the need for revolution.”

The revolution begins, on this morning, with a meeting of the Footprint Council. This group of 10 Patagonia leaders gathers once a month to scrutinize the company’s “scale of operations”—which has doubled under Marcario. One striking fact: seven of the 10 executives in attendance are women. Indeed, Patagonia employs nearly as many women (755) as men (760) and is close to parity at the top. It also has some of the most forward-thinking child-care benefits around, including an award-winning on-site day care and preschool that opened in 1984.

“Rose understands business better than I ever did, and she understands the need for revolution. She’s the one who’s ­going to lead us there.”—Yvon Chouinard, Founder of Patagonia

The Footprint Council is the company’s vehicle for staying on top of the rigorous sustainability goals it has set for itself. Four years ago Patagonia formalized its commitment to sustainable practices by becoming a B Corp—meaning that it is certified by a nonprofit called B Lab as a company committed to socially and environmentally responsible practices. What Fair Trade status is to coffee, B Corp certification is to enlightened companies.

Marcario keeps the council meeting moving at a steady clip. They look at the proposal for a study—commissioned by the council—to be conducted by UC–Santa Barbara graduate students about the possible effects of microplastics from Patagonia’s recycled polyester materials entering the water supply after washing. Marcario asks about microfibers, which come from recycled poly, and how they fit into the larger problem of microplastics, particularly the small beads in soaps. The goal is to identify just how large the problem might be (the science so far has been spotty) and then define best practices, alert suppliers, and get ahead of the situation. There is a lot of talk about leading by example. “We aren’t Nike,” (NKE) Marcario says at one point, musing about how her small company can maximize its influence. “But how do we make it uncomfortable for other businesses not to follow us?”

It isn’t just that Marcario and everyone else at Patagonia think their processes and practices might be better; it’s that there’s real financial strength in numbers. Patagonia invests heavily in new manufacturing and sourcing processes, many of which don’t make fiscal sense if they can’t scale—which means that others must join to make them work. When the company released its Yulux brand of wetsuits, which uses a material made from a desert shrub native to the Southwest, it made its patented “biorubber” available to the whole wetsuit industry rather than keep it proprietary.

The same basic principle applies with B Corps. Patagonia has helped guide dozens of other companies through the process of becoming B Corps over the past few years, including Natura, a publicly traded company and Brazil’s largest cosmetics manufacturer (see box “Building a ‘B Corp’ Network” at the end of the article). Marcario and Chouinard launched a VC arm of Patagonia called $20 Million and Change to identify and assist ecologically minded startups. One company Patagonia has funded makes skateboard decks out of melted-down plastic from discarded fishing nets.

Not that Patagonia is immune to problems. In 2011, the same year that it became a B Corp, the company audited its tier-two fabric suppliers in Taiwan and found that migrant workers in some factories were being held under forced-labor conditions. Patagonia partnered with Verité, a nonprofit that works to create fair conditions for workers globally, to create a comprehensive migrant-worker standard and explain it to all of Patagonia’s suppliers.

Near the end of the Footprint Council meeting the group stares at a huge grid of pie-in-the-sky ideas—the company’s “planetary goals.” They stretch as far out as 2050 and include all the usual buzzwords about fair trade and sustainability, but also living wages for workers and influencing animal-welfare policy. “I look at 2050,” Marcario says, “and I feel like it’s way too late. Too late for the planet. Too late for us.” They begin to talk about issues they can latch onto quickly through Patagonia products. Each new material or source that comes up is the beginning of a conversation about better, more sustainable processes.

As Marcario plows through more meetings—on marketing, finance, employee activism—she makes it a point to give equal weight to two ideas: profitability and world improvement. Observing her dual focus, one is reminded of the Buddhist precept about two contradictory truths, and how it is possible for both to be true only after you have learned to hold them in your mind.

It’s not easy to think about the business and the holistic benefit at the same time, and Marcario is often tested. During the meeting on employee activism, she brings up an issue that recently arose at some stores in Japan, Patagonia’s second-largest market after the U.S. All employees at Patagonia are encouraged to engage with their communities, either through volunteer work or by marching for a cause or hosting a meeting at a store (after hours). Activism is so ingrained in company culture that it hosts an annual conference, called Tools for Grassroots Activists, that brings together instigators of all types, including many who work at Patagonia.

The problem, Marcario says, is that sometimes this kind of corporate encouragement can send a confusing message to workers. What seems like a gentle push or show of support can, through a different lens, be interpreted as mandatory. In Japan a few stores had recently hosted civil-disobedience and nonviolence training before a protest at a nearby dam. (A recent Chouinard-produced film titled Damnation covers the environmental devastation wrought by dams around the world.) Some Japanese employees felt as though they had to get arrested to prove their loyalty to the company cause. “We should be asking them, ‘What kind of activist are you?’ ” says Lisa Pike Sheehy, who oversees activism at the company. “What are the options, if not on the frontlines picketing, holding signs? Because not everyone is going to be comfortable being there.” Marcario, agreeing, says they should explain this clearly, and if it takes a meeting after normal work hours, “we should pay for their time to stay longer and listen.”

Patagonia’s activist-friendly vibe can lead to unplanned endorsements. Perhaps the most visible ambassador for the Patagonia brand at the moment is a gay black man named Deray McKesson, who has emerged alongside the #BlackLivesMatter movement and now has 224,000 Twitter followers. His signature piece of clothing is a blue Patagonia down vest, similar to one that Marcario wears. The vest is famous enough to have its own Twitter handle: @deraysvest (though it has a mere 3,000 followers). He has said he wore it because it felt like a shield—he feels invincible in it. “I kind of feel like that when I wear my vest too,” Marcario says. McKesson, a twentysomething former educational consultant, says he was absolutely aware that Patagonia was a good company when he bought the vest. “I knew they had a commitment to social justice,” he says. But mostly he wanted something warm, light, and packable. He liked the fact that the company would repair the vest if it ever got damaged. “I just felt good about buying it,” he says.

This sentiment is exactly what’s so powerful about Patagonia’s brand—the general good feeling—and why the company’s SoHo store in New York City is now as prominent as its Boulder location, or why its brand ambassadors aren’t only famous climbers and outdoor types but Alice Waters, the chef, as well. Activism is hip right now. But the last thing that Marcario wants is for her customers or employees to get too comfortable. “It’s not about maintaining the status quo,” she says.

Marcario’s mission is to make the most of this moment. She wants to keep growing Patagonia to prove that her view of capitalism can work—that a company can achieve even more success when it thinks about future generations as shareholders alongside current investors. She says she will never work anywhere else. “This is my last stop,” she says, chuckling again at the situation she finds herself in. “It’s my way to keep myself from becoming so completely disillusioned, you know?”

To see Fortune’s International Most Powerful Women lists, visit MPW: Europe, Middle East & Africa and MPW: Asia-Pacific.

A version of this article appears in the September 15, 2015 issue of Fortune magazine with the headline “The Tao of Rose.”