Patagonia, the famous California outdoor retailer, has restructured its entire business model to fully commit to fighting climate change. In an open letter shared to the company's website, Patagonia founder Yvon Chouinard announced that control of the business has transferred to two other private entities: a trust created to protect company values and a nonprofit organization dedicated to environmental activism.
"Earth is now our only shareholder," Chouinard titled the letter, which was posted the night before the business's 50th anniversary. "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."
The 83-year-old philanthropist is known as a passionate rock climber and environmentalist who became a billionaire, despite his unorthodox approach to capitalism. Over the years, he has consistently set an example of how entrepreneurs can still be successful while using their businesses to help social issues. Patagonia's most recent move sets the bar even higher, during a time when wealthy corporations are under critical observations. Chouinard and his family (his wife, Malinda, and two adult children, Claire and Fletcher) transferred ownership of the entire company to Patagonia Purpose Trust and the Holdfast Collective. The intention behind this adjustment is to maintain the company's values and culture, while also dramatically increasing the business's original donation amount to environmental causes from one percent of its sales.
"While we're doing our best to address the environmental crisis, it's not enough," Chouinard explained. "We needed to find a way to put more money into fighting the crisis while keeping the company's values intact."
With complete transparency on the transfer, Chouinard explained that 100% of the company's voting stock will go to Patagonia Purpose Trust. At one point, the corporation considered selling the business and donating the money, but couldn't trust that the new owner would maintain the company values or guarantee the security of its employees. There were also consideration given to taking the company public, but Chouinard mentioned how even the public companies with "good intentions" still experience the pressure of quick profit over the sacrifices of long-term responsibility. Because Chouinard and his family are donating all their company shares to the trust that was created to "use the wealth Patagonia creates to protect the source of all wealth," they will have to pay $17.5 million in gift taxes.
Chouinard also explained that 100% of the nonvoting stock will go to Holdfast Collective, the nonprofit organization committed to fighting the climate crisis. Holdfast Collective is structured as a 501(c)(4) and is allowed to make unlimited donations to political causes, which also means that the Chouinard family gets no tax benefits from the money that gets reinvested into the business.
Patagonia CEO Ryan Gellert will remain in his position and the Chouinard family will still be heavily involved with the business. For 50 years, the company has prioritized environmental preservation within their initiatives.
"In business to save our home planet," the company has become a certified BCorp and California benefit corporation and their products are made with materials that have less of a harmful environmental impact. "Despite its immensity, the Earth's resources are not infinite, and it's clear we've exceeded its limits," Chouinard said at the end of his letter. "But it's also resilient. We can save our planet if we commit to it."
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