Patagonia’s new stakeholder group, the Patagonia Purpose Trust, will focus on the company’s social and environmental missions.
This article was originally published on GearJunkie.
Today, seminal rock climber and entrepreneur Yvon Chouinard waved goodbye to Patagonia, the brand he helped start. After 49 years at the helm, Chouinard will step aside and transfer ownership of the company to a purpose-oriented group of trusts and charity organizations.
The group that now owns the company’s voting stock is called the Patagonia Purpose Trust, which exists to preserve the company’s environmentalist goals and ensure that all of its profits — about $100 million a year — go to fighting climate change.
Chouinard has devoted significant resources of time and opinion throughout the past several years, engaged with a personal brand of radical environmentalism that has often garnered headlines.
“While we’re doing our best to address the environmental crisis, it’s not enough,” he wrote in a statement. “We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact.”
Yvon Chouinard: in his own words
In a letter posted online, Chouinard explained his reasoning for the future of the company, and the Patagonia Purpose Trust.
Earth is now our only shareholder.
If we have any hope of a thriving planet—much less a business—it is going to take all of us doing what we can with the resources we have. This is what we can do.
I never wanted to be a businessman. I started as a craftsman, making climbing gear for my friends and myself, then got into apparel. 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. If we could do the right thing while making enough to pay the bills, we could influence customers and other businesses, and maybe change the system along the way.
We started with our products, using materials that caused less harm to the environment. We gave away 1% of sales each year. We became a certified B Corp and a California benefit corporation, writing our values into our corporate charter so they would be preserved. More recently, in 2018, we changed the company’s purpose to: We’re in business to save our home planet.
While we’re doing our best to address the environmental crisis, it’s not enough. We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact.
One option was to sell Patagonia and donate all the money. But we couldn’t be sure a new owner would maintain our values or keep our team of people around the world employed.
Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.
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.” Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth.
Here’s how it works: 100% of the company’s voting stock transfers to the Patagonia Purpose Trust, created to protect the company’s values; and 100% of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature. The funding will come from Patagonia: Each year, the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis.
It’s been nearly 50 years since we began our experiment in responsible business, and we are just getting started. If we have any hope of a thriving planet—much less a thriving business—50 years from now, it is going to take all of us doing what we can with the resources we have. This is another way we’ve found to do our part.
Despite its immensity, 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.
-Yvon Chouinard
Patagonia’s next stand
According to The New York Times, the Ventura, Calif.-based company will continue to operate for profit. Its current clip puts it at about $1 billion in sales of varied outdoor gear each year, the outlet said — now, ownership transfers away from the Chouinard family, including Yvon, his wife, and two adult children, who controlled Patagonia until last month.
In August, the family transferred all company voting stock (equivalent to about 2% of overall shares) to the Patagonia Purpose Trust. The trust will seek to ensure that Patagonia keeps operating according to its stated values of social responsibility and continues to give away its profits. The Chouinard family will oversee the organization.
The Chouinards then donated the other 98% of Patagonia, its common shares, to a newly established nonprofit called the Holdfast Collective. This group will take charge of receiving and disbursing the funds to combat climate change. Because the Holdfast Collective is a 501(c)(4), it can make unlimited political contributions, meaning the family received no tax benefit for its donation.
Each year, Patagonia will also redistribute any profits that don’t get reinvested into the business in the form of a dividend through the Holdfast Collective. The company is projected to pay an annual dividend of roughly $100 million, depending on conditions.
Patagonia will remain a B Corp, giving 1% of sales yearly to grassroots activists. The company’s leadership will not change either. Ryan Gellert will continue to serve as CEO, and the Chouinard family will continue to sit on Patagonia’s board.
“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, 83, said in an exclusive interview with the New York Times. “We are going to give away the maximum amount of money to people who are actively working on saving this planet.”
