Patagonia: Putting Other Corporates To Shame

Mahi K

In a world where large corporations focus on the bottom line of making a profit, Patagonia paves the way to a more sustainable future.

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23 September 2022

By now, I’m sure you’ve heard that Patagonia has done the “unthinkable” in corporate America and given away the company in the fight against climate change.

An American retailer of outdoor clothing founded by Yvon Chouinard in 1973, Patagonia was always known for being environmentally conscious. I remember whilst studying at university, having to analyse Patagonia for its socially responsible model. Since 1986, Patagonia’s self imposed “Earth Tax” has involved contributing at least 1% of annual sales revenue which is provided to environmental non-profits around the world. With 2022 revenue being a whopping estimated USD$1.5billion, that 1% contribution is no joke.

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In addition, they’ve consistently made an effort to be responsible, not just to the environment, but also socially. There’s just so much that Patagonia has evidenced over the years in their contribution to environmental and social responsibility. From fabric sourcing being ethical, to having 87% of the sewing being Fair Trade Certified, to 64,000+ workers being supported by the Fair Trade program, Patagonia is an exemplary corporation.

As the focus on Environmental, Social and Governance has increased over the last couple of decades, and pressures from external stakeholders and investors on companies which apply those non-financial factors to their business, a lot of businesses tend to undertake this as a box ticking exercise. More companies are now trying to get a “B-Corp” certification which requires evidence of its commitment to social and environmental impacts. Despite the genuine effort of some companies to be more socially responsible, there’s also been a trend to revamp and makeover companies with an ESG tick. Recently there’s been heightened scrutiny on billionaires and companies alike on the hypocrisy of this window-dressing and that the very same corporations that are claiming their mission is to make the world a better place and provide for the planet are the very same people that are causing detriment to the Earth.

Patagonia is a true testament to the fact that some corporations, despite their size and net worth, will prioritise the planet over profits. Chouinard claimed that he was never a businessman, and has made numerous statements on his stance on capitalism. Stating that “Capitalism Will Lose Its Customers”, implying that at the rate we are going, there will be no people or planet with the continuation of such unsustainable practices; a notion which I wholeheartedly agree with.

On September 14, Chouinard made the ultimate commitment to our environment when he transferred his family’s ownership interests in the company (valued at approx. USD $3 billion) to special purpose entities designed to help combat climate change.

With an impactful statement of “Earth is now our only shareholder”, Chouinard has done the unthinkable.

Chouinard stated that “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.” With that, all voting shares in the company were divested to a newly established trust called the Patagonia Purpose Trust (which protects the company’s values) and all non-voting shares were transferred to Holdfast Collective; a non-profit dedicated to fighting climate change and protecting nature. Therefore whilst the company will continue to operate as a private, for-profit corporation, ownership interests have been relinquished.

What’s more ironic is that whilst companies who attempt to garner an environmentally responsible status make such donations to attain additional tax benefits, the Chouinard gains no financial benefit from taking such action and by gifting their ownership interests to the Patagonia Purpose Trust are actually faced with a gift tax (of approx. $17.5m!).

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With an impactful statement of “Earth is now our only shareholder”, Chouinard has done the unthinkable. Likely causing many people on Wall Street’s jaws to drop to the floor that day, Chouinard paves the way for more corporations to look beyond a bottom line of profit. I’m not expecting this to cause a wave of billionaires to give away their entire company, but I hope this urges large multinational corporates, who wield immense power to make a colossal impact on the environment, to reflect on Chouinard’s exemplary actions and reconsider their impact on the climate.

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