In September 2021, Patagonia was recognized as the world’s most responsible company and in September 2022, the sustainability juggernaut took its support for the planet to a whole new level by donating the entire enterprise to environmental causes. As explained in the company’s mission, “We’re in business to save our home planet”.
Sustainability is woven into Patagonia’s DNA. Although many companies now make this claim, in Patagonia’s case it is true. Patagonia is a long-time sustainability leader, in the 80s the company started donating to the “1% for the Planet,” and it has since donated $140 million to environmental groups as part of the initiative. More than ten years ago Patagonia was recognized by Bschool, as one of 10 companies that were great before it was cool, and in 2013 Ethiosphere named Patagonia one of the world’s most ethical companies. Patagonia is also a b-Corp company, and it shares best practices through the Sustainable Apparel Coalition’s Higg Index which won Environmental Leaders’ Project of the Year Award in 2014. In 2019 the UN gave Patagonia the Champions of the Earth Award for its sustainability efforts.
Patagonia is a three-billion-dollar company that has established itself as a sustainability leader at the forefront of corporate social responsibility and now the planet-focused brand is giving the entirety of its profits amounting to about $100 million per year to the interrelated issues of climate change and biodiversity loss. The half-century-old Ventura California-based company will combat biodiversity loss through ecosystem protection, primarily the preservation and restoration of wilderness.
Yvon Chouinard’s environmental activism
“As of now, Earth is our only shareholder,” the company announced. Yvon Chouinard, the company’s 83-year-old founder had earned himself a place in history as a sustainability pioneer long before he donated his company to fund projects that help the environment. In a statement on the company’s webpage, Chouinard wrote, “ALL profits, in perpetuity, will go to our mission to save our home planet.” The company has pledged to “use every dollar received to fight the environmental crisis, protect nature and biodiversity, and support thriving communities, as quickly as possible.”
The company will continue to operate as a for-profit enterprise, however, the proceeds and all future non-reinvestment profits will go towards efforts to “protect the planet”. “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.”
The Chouinard family, comprised of Yvon Chouinard, his wife Malinda Pennoyer, and two children Fletcher and Claire, have transferred ownership of Patagonia to a newly created decision-making body called Patagonia Purpose Trust which will own and run the company. The vast majority of the company stock (98%) will go to a climate-focused non-profit known as the Holdfast Collective.
The powerful message behind “going purpose”
Chouinard could have sold the company or taken it public and donated the proceeds, but this would have changed the company’s values, so he decided to put the company to work for the planet in perpetuity. The company announced the move saying they are “going purpose” rather than going public. The reason that Patagonia is going purpose instead of going public is outlined in Chouinard’s book, “The Responsible Company.” It largely comes down to larger risk tolerances in the service of environmental goals. This appetite for risk is also about leading the business community away from the traditional mold.
“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,” Chouinard said in a statement. “This is another way we’ve found to do our part.”
This move is a rebuke of shareholder capitalism and a nod to the circular economy. The myopic focus on profits is the cause of our current state and it is not well suited to address the problems it created. Patagonia’s board chair, Charles Conn wrote about this in a Forbes article in which he said: “Instead of exploiting natural resources to make shareholder returns, we are turning shareholder capitalism on its head by making the Earth our only shareholder.”
Reaction to Patagonia’s climate philanthropy
The reaction to Chouinard’s announcement was swift and enthusiastic. A wide range of individuals lauded the news. “I’m in awe. And that takes a lot to achieve at my age,” basketball legend Kareem Abdul-Jabbar was quoted as saying in Essential Sports. “Mr. Chouinard’s actions cheered me up and renewed my faith in altruism, as I hope it does for you.”
As reported by Yahoo Finance, Salesforce Chair and Co-CEO Marc Benioff, one of the most climate-focused philanthropic executives in corporate America, called Chouinard’s bold move, “inspiring and incredible.” Benioff told Yahoo Finance Live. “[Chouinard] led with his values through the entire lifetime of the company,” Benioff added. “And he is setting a high mark for what is possible for entrepreneurs. I think entrepreneurs in the future will look to Patagonia as the way to do it.”
Benioff also said that Chouinard’s decision has pushed him to consider what else could be possible on the charitable front. “It’s honestly just very inspiring to me — that there’s many people out there who believe that business is the greatest platform for change and that they can use their businesses to improve the state of the world,” Benioff said.
The forefront of a trend: Sustainability that deemphasizes profits
Patagonia is setting a high bar, but it has done very well by putting values ahead of profits and prioritizing collaboration over competition. Chouinard is once again setting an example, but intentionally or otherwise, he is further distinguishing the Patagonia brand from the rest of the field, emboldening existing customer loyalty and attracting new patrons. “When I went to college, the business of business was business,” Benioff said, “and today, the business of business is improving the state of the world. You look at the Patagonia founder, but I can give you many examples of many CEOs who realized they have incredible corporate resources, and they can use those corporate resources to improve the world.”
Chouinard’s idea of corporate goodness may seem far removed from where the corporate world is today, but many things that seemed impossible have come to pass. Not the least of which is the Democrat’s game-changing Inflation Reduction Act.
An Accenture / U.N. Global Compact CEO study found that there is a growing recognition of the need for corporations to respond to global challenges like climate change. Almost all of the CEOs who participated (97%) said they believe such efforts are critical success factors,
As explained in the Conversation, Indiana University scholar Ash Enrici, says Patagonia is at the forefront of multi-billion dollar climate donations. Enrici cites Amazon founder Jeff Bezos who put $10 billion into the Earth Fund which along with 8 other philanthropic organizations pledged $5 billion to conserve almost one-third (30%) of the Earth by 2030. Steve Job’s widow Laurene Powell has pledged to donate $3.5 billion to fight climate change.
As Enrici explained, Chouinard has set a precedent and created a new model for large-scale donations. He has also set a great example for other business owners. The logic behind the motives of the apparel giant are both powerful and unavoidable. If as Chouinard said: “Denying climate change is evil” so is failing to do everything we can to combat this crisis. This logic has already found its way into boardrooms around the world and it may soon become an imperative that cannot be ignored. The logic behind efforts to address the interconnected crises of biodiversity loss and the threat to human civilization is impossible to refute. Our suicidal genocide against nature must stop if not as a function of our moral responsibility than as a matter of self-interest
To go all in and bring the full weight of Patagonia’s corporate might to bear, Chouinard and his children have leveraged their most valuable asset. At present corporations devote only a small fraction of their resources to environmental causes but in the wake of the Chouinard family’s gift, more corporate giving may follow.
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- Bschool.com’s “10 Great Companies Who Were Green Before It Was Cool”
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