In what could be the biggest responsible business mic drop ever, owner and founder Chouinard transfer ownership to a trust, and the brand promises around $100 million annually to protect the planet.
Yvon Chouinard, founder of Patagonia, announced yesterday that he is relinquishing ownership of the company he founded nearly 50 years ago. Patagonia will now be owned by two legal entities that will ensure both that the company continues to operate to the purpose and values Chouinard embedded from the beginning, and that any money that isn’t reinvested into Patagonia will be used to support people and organisations that are dedicated to protecting the planet, an estimated $100 million annually.
The environmentally-conscious outdoor clothing and equipment brand that Chouinard created is ubiquitous in the outdoors world, and beyond. It’s hard to walk down any street or wander through any trail centre or trail head car park without seeing a cap, jacket or t-shirt emblazoned with the iconic logo.
Patagonia entered the mountain bike market several years ago, producing a limited but effective range of kit from liner shorts and baggy shorts to jackets and merino jerseys. All the kit was very well received by our product testers, and created with an eye to sustainability and longevity, rather than following trends and fashions.
Patagonia was focussed from the beginning on being a sustainable, responsible business, something which at the time was something of a rarity. It’s commercial success has, the company states in a recent press release, “demonstrated as a for-profit business that capitalism can work for the planet.”
“It’s been a half-century since we began our experiment in responsible business,” states Chouinard, Patagonia founder, former owner, and current board member. “If we have any hope of a thriving planet 50 years from now, it demands all of us doing all we can with the resources we have.”
“As the business leader I never wanted to be, I am doing my part. Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source. We’re making Earth our only shareholder. I am dead serious about saving this planet.”
New structure, same focus
Ownership of the company transfers to two new entities. First up, the Patagonia Purpose Trust, which owns the voting stock which has the power to influence the structure and direction of the brand, and whose focus will be to ensure that Patagonia remains aligned with the purpose and vision of Chouinard.
The second entity, the Holdfast Collective, owns the nonvoting stock, and this is where the money focus is. In most businesses, shareholders are the ones that reap the financial rewards of business success in the form of dividends, and are usually individuals and investors. This collective of shareholders will ensure that all profits from Patagonia are either reinvested back into the company, or distributed via a dividends which will in turn be used to help protect nature and biodiversity, support thriving communities, and fight the environmental crisis.
Patagonia estimate that this will roughly equate to an annual dividend of $100 million, dependent on business performance.
“Two years ago, the Chouinard family challenged a few of us to develop a new structure with two central goals. They wanted us to both protect the purpose of the business and immediately and perpetually release more funding to fight the environmental crisis,” shares Ryan Gellert, who continues as CEO of Patagonia. “We believe this new structure delivers on both and we hope it will inspire a new way of doing business that puts people and planet first.”
The Chouinard family will continue to be involved with Patagonia by guiding the Patagonia Purpose Trust, the controlling shareholder, in electing the board of directors and guiding the philanthropic work of the Holdfast Collective.
‘Earth is our only shareholder’
Yvon Chouinard shared a letter explaining the decision, the full transcript of which can be found below, on the Patagonia website and via the Patagonia email subscribers list.
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.
By Yvon Chouinard
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 need to find a way to put more money into fighting the crisis while keeping the company’s values intact
“Truth be told, there were no good options available. So, we created our own.”
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 has been transferred to the Patagonia Purpose Trust, created to protect the company’s values; and 100% of the nonvoting stock has 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.
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