“I never wanted to be a businessman,” begins the statement currently dominating the website of California-based clothing company Patagonia. 83-year-old Yvon Chouinard, who began making adventure clothing almost 50 years ago, continues: “As we began to witness the extent of global warming and ecological destruction, and our own contribution to it, Patagonia committed to using our company to change the way business was done.” Pioneering contributions started with making products from the least damaging available materials, through donating more than $89m via 1% For The Planet and earning certified B Corp status. Extensive employee benefits now include on-site nurseries and half-days when the surf’s up. Customer initiatives include actively encouraging the owners of Patagonia garments to keep them in use for as long as possible, and a scheme for reusing pre-loved items.
In 2018, the company changed the purpose stated in its corporate charter to: We’re in business to save our home planet. Rather than selling up to donate all the money, putting the brand at risk, or taking the company, reported by the New York Times to be worth around $3 billion, public and opening itself up to shareholder pressure to prioritise short-term profit, it’s now announced that it will instead use any wealth Patagonia creates to protect “the source of all wealth” – our planet.
The Chouinard family is transferring its ownership of Patagonia to the Holdfast Collective and the Patagonia Purpose Trust, both created to facilitate what appears to be an entirely new business model. The Collective, a 501(c)(4) not-for-profit set up to protect nature and biodiversity and support communities through political advocacy as well as targeted grants, now owns 98% of the company and all nonvoting stock (which holds economic value but no decision-making power). After reinvestment in the business, all excess profits made by Patagonia, expected to be around $100m a year, will be donated as a dividend to the Collective. The Trust, created to protect the company’s values and mission forever, owns 2% of the company and all voting stock, giving it the authority to approve key decisions, like electing board directors or changing the company’s legal charter. The plan is to serve as a beacon for the business community by proving that purpose and profits are inextricably linked.
The company will continue to be a for-profit private corporation, B Corp and California benefit corporation, and will continue to operate profitably in line with its values under CEO Ryan Gellert and the existing board. It will continue to donate 1% annually to grassroots environmental nonprofits. The biggest change in terms of the running of the business will be the additional layer of stewardship added by the Patagonia Purpose Trust. The Chouinard family will guide both the Trust and the philanthropic work of the Collective.
“Despite its immensity” he concludes, “the Earth’s resources are not infinite, and it’s clear we’ve exceeded its limits. But it’s also resilient. We can save our planet if we commit to it.”
The company is keen to stress how little will change at Patagonia as a result of this new ownership structure. With its commitment to its employees, purpose and values still enshrined in its charter, it won’t suddenly become a rutheless profit engine. It acknowledges: “the real tension we’ll continue to face between growth and the environmental impact of our operations” but aims to put the value that comes with responsible growth to work fighting the climate crisis.
It’s inspiring stuff, no doubt, but we have to ask – will it actually work? The FT puts it in the context of more and more companies shifting towards “stakeholder capitalism, balancing the financial benefit of shareholders with the interests of employees, customers, and the environment, among others”. In 2021 the newspaper highlighted the growth in popularity of stakeholder governance, which can include both new business structures and B-Corp certification, quoting Cornell University professor Christopher Marquis as describing “a growing recognition, not just on the left, about the negatives of shareholder primacy”. The New York Times, by contrast, points to the growing scrutiny faced by billionaires and corporations who claim to be making the world a better place while in effect doing the reverse. And although there are examples, including Bill Gates, of multi-millionnaires setting up and investing in their own charitable enterprises, this may be the first time anyone has effectively given away a whole company.
“Hopefully this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people,” Chouinard exclusively told the NYT. We can’t argue with that.