Updated: Dec 26, 2022
100% ownership worth 3 billion handed to 2 non-profits aiming to fight the climate crisis
Today, I would like to discuss the recent news on Patagonia founder, Yvon Chouinard, announcing the 100% transfer of his company ownership for fighting climate change. As an advocate for environmental protection and ethical fashion, I was astonished by the news :) Nonetheless, there are some controversial opinions about Chouinard avoiding tax hits. In this article, I intend to mainly share recent information about the company and make you guys get to know the positive factors of Patagonia, but also provide you with some other possible reasons why Chouinard decided to bring a big change to the company.
Since its foundation by Yvon Chouinard in California nearly 50 years ago, Patagonia has been known for its outdoor and silent sports clothing. Patagonia now has hundreds of stores in 10+ countries across the world, and it has been working so closely with addressing the environmental crisis – the founder comments on the company's website that "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." He believes that Patagonia's efforts could influence customers and other businesses, and maybe change the system along the way.
Patagonia's Commitment to the Environment:
Patagonia became one of the first pioneers to use materials that leave less waste. Releasing its first sustainability commitment in 1985, the brand started pledging 1% of total sales to be donated each year.
In 2012, Patagonia was given the B Corp Certification which set the company apart from others. It means the company maintains the highest standards of verified social and environmental performance, public transparency, and legal accountability, as well as aspiring to use the power of markets to solve social and environmental problems. In the same year, Patagonia also became the first to adopt California benefit corporation status, which defines the company as structured for charitable purposes, not private gain. More recently, in 2018, the company donated $1 million to organizations fighting against the climate crisis and changed the company's purpose to "We’re in business to save our home planet." With this continuing purpose, Patagonia released an advertisement on Black Friday in 2011 discouraging its consumers to buy new clothes, and instead encouraging them to reuse or repair what they already have. Last year, Patagonia announced it will no longer sell corporate logo-patched products due to logos leading to a decrease in the lifespan of clothes.
Thinking the company's effort to the environment is still insufficient, the founder, Chouinard, released a surprise announcement earlier this week.
What happened to Patagonia?
As explained above about Patagonia, Chouinard has long been trying to make an impact on preserving the environment, and it became this year that he decided to bring an enormous change to the company. In the beginning, he had two distinct ideas. He writes on the website that: one option was to sell Patagonia and donate all the money, and another was to take the company public. However, neither of them ultimately attracted him as he could not be sure if the new owner would be able to keep the company's value. He knew that transforming Patagonia from private to public would change the company to maintain short-term gain at the expense of long-term vitality and responsibility.
So, here is what happened. Instead of selling Patagonia or making the company public, the company created its organization to protect the company's values: Patagonia Purpose Trust. From now on, 100% of the company's voting stock transfers to the Patagonia Purpose Trust. 100% of the non-voting stock, 98% of the company's total stock, had been given to the Holdfast Collective, a non-profit dedicated to fighting the environmental crisis and defending nature.
Possible Motives of Chouinard toward Patagonia's Ownership Transfer:
Bill Gates, the founder of Microsoft, has long been encouraging billionaires worldwide to donate more than half of their assets for environmental preservation, but what Chouinard decided to do this week – selling all stocks for a donation – is on another level. While Chouinard believes that we will be able to save our planet if we commit to it, some people cite Patagonia's no response to requests for comment about the deal's tax implications as a means of Chouinard trying to get away from the $700 million tax hit. The controversy may stir up controversy in the measure to counter climate change.