Patagonia Founder Explains Why He Gave the B Corp Away

Patagonia has a new—and only—shareholder: Earth.

Founder Yvon Chouinard revealed Wednesday that he and his family have ceded their ownership to a pair of specially designed entities that will invest the outdoor-apparel brand’s profits in environmental causes around the globe.

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Though the “Don’t Buy This Jacket” firm was already giving away 1 percent of its revenue away every year, this fell short of addressing the climate crisis, the reluctant businessman wrote in a letter that the Ventura, California-based retailer published on its website. In 2021, Patagonia donated a record $10 million in Black Friday sales to conservation-centered grassroots groups. Still, it wasn’t enough.

Chouinard toyed with the idea of selling the company he founded half a century ago, but he couldn’t be sure that a new owner would stay true to the pioneering B Corp’s mission of social responsibility. He then considered taking Patagonia, which is reportedly valued at $3 billion, public. Again, he couldn’t guarantee that selling off its stock wouldn’t 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,” the former rock climber said. “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.”

Chouinard and his family have transferred all of their voting stock, equivalent to 2 percent of the overall shares, into an entity known as the Patagonia Purpose Trust, which will ensure that the clothing purveyor will stay true to its values. This extends to the ease with which it mixes business and activism. Eschewing the political neutrality most other brands prefer, Patagonia eviscerated the Trump administration for its environmental rollback. When the former president slashed the size of Utah’s Bears Ears National Monument by 85 percent, the Worn Wear operator responding by sued him. It also took threatened to boycott the Outdoor Retailer show over Utah’s adversarial relationship with its popular public lands.

The remaining 98 percent of the company’s stock now belongs to the Holdfast Collective, a nonprofit organization that will use any remaining profits that are not reinvested back into Patagonia to “protect nature and biodiversity, support thriving communities and fight the environmental crisis.” The retailer predicts that it could pay out an annual dividend of roughly $100 million, depending on the business’ health.

The Chouinards are not receiving any tax benefits for their largesse. In fact, because they donated their shares to a trust, the family is on the hook for around $17.5 million in gift taxes.

“It’s been a half-century since we began our experiment in responsible business. 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,” Chouinard said. “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.”

The company itself will remain for-profit, with capitalism working for the environment rather than against it, Ryan Gellert, CEO of Patagonia and a Patagonia board member, said in a statement.

“Two years ago, the Chouinard family challenged a few of us to develop a new structure with two central goals,” Gellert said. “They wanted us to both protect the purpose of the business and immediately and perpetually release more funding to fight the environmental crisis. 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.”

Patagonia’s announcement was dramatic, if on-brand for a company that “has always been focused on sustainability and doing right by the environment,” said Neil Saunders, managing director of retail at GlobalData, a data analytics firm. It’s also consistent with Chouinard’s unconventional way of doing business.

Still, Saunders doesn’t think there will be much of a difference in the way Patagonia will function.

“It is still a for-profit business rather than a charity giving things away for free; it’s just that its profits will now go to good causes rather than into the pockets of shareholders,” he told Sourcing Journal. “As such, the business will need to remain commercially focused and responsive to consumers. Of course, the fact that buying Patagonia now more directly helps the environment will be very appealing to some core customers and may increase their loyalty to the brand.”

While the move is very much “on-trend” as concerns about the impact of businesses continue to come under scrutiny, Patagonia’s move doesn’t signal a “big shift” in the way most corporations work, Saunders said.

“It is highly unlikely that most fashion founders will give away their businesses,” he said.” Nor will listed companies suddenly be scrambling to change their status. What’s more likely is companies will increase their links with charitable organizations and look for ways to bolster their green credentials. So the industry’s adaptation is much more subtle compared to Yvon Chouinard who has done something radical.”

That said, the fashion industry, he noted, has room for many alternative models. REI, for instance, is a cooperative that gives profits back to members. In the United Kingdom, the department store John Lewis is operated by a trust that makes every employee a part-owner of the business.

“These are exceptions rather than the rule of business, but Patagonia will now join these exceptional ranks,” Saunders said.

“The Chouinard family’s unprecedented gifting is most likely unique to their values and aspirations,” Tensie Whelan, director of the New York University Stern Center for Sustainable Business, told Sourcing Journal. “Patagonia has long been a leader in sustainability and aiming toward a broader societal purpose and this decision seems to be an extension of those values. It has been reported that they see billionaires as a problematic outgrowth of shareholder capitalism and are putting their money where their beliefs are.”

Patagonia’s approach to sustainability has broader lessons for the apparel industry, however, Whelan said.

“They have created competitive advantage and growth through generous treatment of workers, repairing and recycling used clothing, leading the development of new sustainable materials, comprehensive sustainable sourcing, and the development of industry standards through the Sustainable Apparel Coalition,” she said.

More recently, Patagonia has been driving up the amount of recycled content in its threads, which reduces the strain on virgin resources. Last month, it unveiled a line of Fair Trade Certified T-shirts derived from a blend of post-consumer castoffs and Patagonia factory waste. On Thursday, the brand announced it’s making workwear with Eastman’s Naia Renew ES fiber, which combines ​​molecularly recycled waste material, recycled cellulose and renewable wood pulp.​ Circularity, it has said, is another issue where it hopes to lead by example.

Patagonia has also been championing resale. In 2020, the retailer rolled out its “Buy Less, Demand More” platform, which juxtaposes secondhand options from its Worn Wear refurbishment program next to brand-new styles.

Some fashion campaigners would like to see Patagonia further decouple its profits from new clothing production, as well as wean itself off petrochemicals altogether. They also point out that the firm didn’t support the California Garment Workers Protection Act, which requires that garment workers receive the minimum wage, when it made its rounds a couple of years ago. And despite its commitment to become net zero by 2025, Patagonia’s carbon emissions, by its own admission, continue to rise.

“It’s important that critical voices are still present, otherwise we limit ourselves and others to following just one company’s strategy and just one sector of society—the private sector—for delivering ‘solutions,’” said Lynda Grose, a fashion professor at the California College of Arts and a board member of the fashion advocacy group Remake. “All sectors and members of the public have contributions to make and we need many solutions to tackle the climate crisis.”

People must not shy away from asking the difficult questions, Grose said.

“Patagonia is a halo brand and Chouinard is considered a leader, so it’s quite difficult to provide critique when people ‘believe’ in the company so strongly, that no one would think to ask for clarification on what ‘doing the right thing’ or ‘company values’ actually means,” she added. “Patagonia have set themselves up as an ‘experiment’ and in so doing shield themselves from critique.”

Still, the company, which rakes in some $100 million in profits every year, has shown that sustainability can also be good for the bottom line, Whelan said.

“Our work with apparel companies such as REI, Eileen Fisher and Reformation demonstrates that sustainable approaches drive better financial performance through increased customer loyalty, reduced risk, increased employee retention and productivity, sales growth and other benefits,” she added. “Patagonia has shown the way.”