Giving 1% of profits each year and cajoling others to do the same to help save the Earth that Patagonia’s customers regularly explore is no longer enough.
Almost 50 years after its 1973 founding, billionaire Yvon Chouinard and his family will surrender all ownership of the privately held outdoor clothing retailer, valued at about $3 billion, to two entities that will divert profits toward combating climate change and protecting undeveloped land, the former rock climber-turned-executive said in a letter Wednesday.
Chouinard, his wife and two adult children have transferred their ownership to preserve the company’s independence and ensure that all of its profits — some $100 million a year — are used as they intend. Going forward, all voting stock (about 2% of the total) is now controlled by the Patagonia Purpose Trust, while the other 98% is under what’s called the Holdfast Collective.
Chouinard told his management team and staff that he mulled other ways to increase capital and profits to eventually steer more toward environmental and resource-saving initiatives, such as a public stock offering, or an outright sale of the company. But he said those options could not guarantee the survival of Patagonia’s values. Going public was never an option, he said, thanks to Wall Street investors’
ceaseless pressures to create short-term gain, sometimes at the expense of long-term responsibility. In fact, “Reimagining Capitalism” is the blurb that announces the company’s change.
The new structure is unusual to say the least, but there’s at least one high-profile example — Ben & Jerry’s fight with its parent company Unilever
— that mirrors some of the same do-good intentions, but also the complexities in seeing those efforts survive as intended.
Patagonia founder Yvon Chouinard was one of the leading climbers of the “Golden Age of Yosemite Climbing.” He and his company cofounded 1% for the Planet, which has led thousands of companies to commit 1% of annual sales to environmental causes.
The extreme weather recorded in recent years may have swayed Chouinard’s decision.
The ravages of costly heat, drought, flooding and more largely pinned to climate change and the burning of fossil fuels
have picked up faster and with more intensity than earlier data indicated, a new report combining the efforts of the World Meteorological Organization and other climate change-monitoring bodies said earlier this week.
The past seven years were the warmest for Earth on record. And looking forward, there is a 48% chance that during at least one year in the next five, the annual mean temperature will temporarily be 1.5 degrees Celsius higher than 1850-1900 average. That’s the temperature limit set at a Paris global climate conference and it’s the goal that guides most climate-change policy these days. But even with that target in mind, as global warming persists, breaching “tipping points” in the climate system, such as a major Arctic thaw, cannot be ruled out, the group’s findings warned.
“‘Instead of “going public,” you could say we’re “going purpose.”‘”
— Yvon Chouinard
While the report noted global pledges among countries and corporations to cut emissions does show some realization among leadership of the risks ahead, those plans may fall short, it warned.
In the letter posted on Patagonia’s website, Chouinard detailed company efforts to date to help preserve the outdoors that his customers flock to. That includes products using materials that cause less harm to the environment; donating 1% of sales each year; and establishing the company as a certified B Corp and a California benefit corporation. In fact, many observers believe Patagonia is why benefit corporations exist at all. More recently, in 2018, the company’s purpose was rewritten as “We’re in business to save our home planet” and it is famous for “flex time” that encourages its employees to hike and climb when they might otherwise be at work.
But Chouinard said he realized these efforts would not be enough.
“We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact,” he wrote. “Truth be told, there were no good options available. So, we created our own. Instead of ‘going public,’ you could say we’re ‘going purpose.’ Earth is our only shareholder.”