Patagonia: 'The Earth is Our Only Shareholder'

What happened?

Earlier this month, Yvon Chouinard founder of US retailer Patagonia donated his company to a charitable trust. The unique ownership model will see 98% of the company and non-voting stock transferred to The Holdfast Collective, and the remaining 2% of the company retained by the Chouinard family in a new ‘Patagonia Purpose Trust’. The Holdfast Collective will reinvest all of the annual profits not reinvested back in the company into efforts to fight climate change. The trust will hold the voting stock and will be used by the family to create legal structure which ensures Patagonia’s values live on. It is estimated that Patagonia will generate and donate $100 million annually to sustainability and environmental initiatives. 

Patagonia has long supported environmental activism and has been innovative in doing so:

• In 1986, founder Chouinard pledging either 1% of sales of 10% of profits in 1986. 
• A decade later, the company switched to organic cotton only. 
• In 2011, Patagonia became a B Corp 
• Ran an infamous marketing campaign on Black Friday entitled ‘Don’t Buy this Jacket’ which listed all the environmental reasons a consumer should not buy the jacket 
• Selling clothes with a life guarantee and offering reasonable repairs 
• In response to President Trump’s 35% to 21% corporation tax in 2018, Patagonia CEO Rose Marcario donated the company’s tax cut to combatting climate change.

Commercial Awareness Topics

Which other companies are lauded as being eco-friendly? 

US footwear brand Toms:

• Every time a customer buys a pair, Toms donates a pair of shoes to communities in need in their ‘one for one’ model

Lush Cosmetics: 

• Do not test their products on animals, instead using human volunteers 
• Sell solid shampoo bars that don’t require a bottle 
• Use re-usable tubs for customers to return for refills 

Japanese car manufacturer Toyota

• Has set itself a 2050 challenge to reduce carbon dioxide omissions by 90% between 2010-2050
• Investing in hybrid, electric and fuel-cell vehicle

These are just a few examples of the innovative ways in which companies of all sectors are seeking to become more sustainable. See also: Toy manufacturer LEGO’s commitment

What are the commercial benefits of being a sustainable company?

Reduced pressure from regulators

With increasing government measures in place, including different tax rates, companies benefit from being ahead of the curve. For example, in California, all taxi serves must be fully electric by 2030 under a new mandate. In response taxi provider Uber has committed $800 million to help drivers transition to fully electric vehicles by 2025. 

Better brand image

A recent Shelton Group study revealed that 90% of millennials would choose environmentally friendly businesses over non-sustainable counterparts. As it stands, millennials are the largest consumer demographic. By committing to sustainable practices, companies can cultivate a better brand image and build an affinity with their target customer. 

Can lead to reduced costs

By axing packaging, companies save money on manufacturing. By reducing energy usage in the office, utility bills will be lower and therefore will be an overall reduction in the long-term. Although there may be short-term costs in innovating and investing in new materials or business practices, consumers are willing to pay more for their goods where they know the company has committed to sustainability. 

Talking points: Do you think any companies will follow Patagonia’s approach or is the Chouinard family a one-off?