Patagonia’s next act: Make Earth its only shareholder

Yvon Chouinard, the influential, irascible founder of outdoor apparel company Patagonia, last week announced the next bold act in a long line of moves that have challenged the status quo of how a company can succeed and hold to what it believes.

Not that it should surprise anyone who’s followed the company. In his 2005 book Let my people go surfing, Chouinard walked through the beginning chapters and business philosophy of a company determined to do things differently. 

Talking about the company’s ownership Chouinard said: “Being a publicly held corporation or even a partnership would put shackles on how we operate, restrict what we do with our profits, and put us on a growth/suicide track. Our intent is to remain a closely held private company, so we can continue to focus on our bottom line, doing good.”

In the ensuing years, while steadily converting customers, the company embraced an ever more vocal role of activism. It certified as a B Corp and spearheaded an Earth tax that donated 1% of profits to groups defending the environment, and recently reframed its mission as “we’re in business to save the home planet”.

Then last week, Chouinard announced the family were giving the whole company to planet Earth. In an open letter, he declared: “For years, we looked for a way to lock in Patagonia’s purpose and unlock more value to fight the Earth’s environmental crisis. Well, we did it. Earth is now our only shareholder.”

It seems even certified as a B Corp, and meeting those standards for social and environmental accountability, he still felt a need to protect their values into the future and find a way to dedicate more to their mission. If you’re in business for the planet, then it makes sense that the planet is who benefits most from your business. 

Tried and tested options of selling, going public or ‘going purpose’ still funnel value to investors. So in plot twist worthy of a Hollywood thriller, the Chouinard family put all the voting stock in a specially created “Patagonia Purpose Trust’, and gave the non-voting stock to a new nonprofit called Holdfast Collective. 

Read Chouinard’s letter here and his interview with NYTimes here to find out more about how the new entity will operate.

Plenty of billionaires donate lump sums to environmental causes — and then merrily continue business practices that are part of the problem. What’s different about Chouinard’s approach is he’s giving away the company valued at $3 billion, along with current and future profits of $100 million a year, to further the mission, not greenwash other activities.

Not everyone is sold. New York Times Dealbook writers take a more sanguine view of the shift. “People who transfer assets to these organisations can’t take deductions from their income taxes, but they can avoid estate and gift taxes.”

But taking potshots at Chouinard’s intentions feels petty, as few literally wear what they care about as he does. People often ask me what’s a good example of an organisation that uses the value stored in the brand to do more work. 

Patagonia is an easy pick because it’s always taken pains to stitch its purpose into the fabric of its operations. While at the same time talking honestly about the role resulting profits played — as an enabler of the impact it wants to have.

The way it does business can make Patagonia seem like a special case and its choices out of reach. But it’s worth remembering every company starts in their equivalent of Chouinard’s blacksmith shack. And every choice you make is a chance to serve your mission.