How Patagonia Can Fight Climate Change

Earlier this September, Patagonia founder Yvon Chouinard and his family gave ownership of Patagonia away to fight climate change. Patagonia’s website reads: “Earth is now our only shareholder”. 

What does this mean? While most billionaires donate slivers of their profits in the form of philanthropy, Chouinard forfeited ownership of all profits. Patagonia is currently worth $3 billion, and earns an estimated $100 million per year in profits. 

Breaking Down The Decision

The company will continue to manufacture clothes, pay employees, and make profits; however these earnings will not go towards a single CEO or to public shareholders. The only shareholders will now be the Holdfast Collective and the Patagonia Purpose. 

The Holdfast Collective, a nonprofit dedicated to environmental protection, will receive 98% of Patagonia’s shares. The remaining 2% will go towards the Patagonia Purpose, a group of nonprofit organizations curated to protect Patagonia’s values and interests. This way, Chouinard still has some control over his company. Read more about the decision on their website.

Chouinard could have, like many owners, sold his company to the public, which would have given him enough money to fund environmental causes. However, he felt the values of Patagonia could deteriorate in the hands of the public. CNBC calls this method a “fascinating experiment”, and many critics wonder whether other companies will follow in these unique footsteps. 

An Innovative History

Abnormality is nothing new for Patagonia. In 2011, Patagonia bought an ad in a Black Friday issue of the New York Times only to shun American consumers. Their “Don’t Buy This Jacket” campaign made headlines for its unconventional approach to sustainability awareness. At this same time, Patagonia launched their “Common Threads” initiative, urging customers to return worn clothing to be repaired. 

Patagonia has also sported sustainable materials since the ‘80s. The company discovered a process that can create a single fleece material out of 25 plastic water bottles, thus creating their flagship material, “synchilla”. 

Through all these years, Patagonia donated 1% of sales each year to various environmental initiatives. Now that their profits are entirely in the hands of the Holdfast Collective and the Patagonia Purpose, how can it be ensured that Patagonia’s efforts will benefit the environment? 

Next Steps

This is a difficult question to answer. However, it is certain that the Holdfast Collective is dedicated to the protection of biodiversity and undeveloped land. The organization is a 501(c)(4) nonprofit, meaning it can participate in politics and support political candidates. This is what sets Chouinard apart from many other billionaires. 

The Gates Foundation, for example, is a 501(c)(3) nonprofit, meaning it cannot participate in politics, but it can reap the benefits of tax deductions. The Bezos Earth Fund, started by a donation of $10 billion from Amazon Executive Chair Jeff Bezos, is also a 501(c)(3), along with the Waverly Street Foundation formed by Steve Jobs. 

While Chouinard made a relatively small donation compared to other billionaires, his decision to participate in politics could have a larger impact than any act of 501(c)(3) philanthropy. 

Harvey Dale, a professor of law and philanthropy at New York University, agrees that the scale of political investment must outweigh that of the donor community in order to adequately address climate change. 

“The amount of money in the philanthropic sector is a drop in the bucket compared to how much the government would spend,” he said. Where the government spends money depends entirely on who is elected to make such decisions, and Patagonia’s $3 billion donation can make a difference in elections. The Holdfast Collective could benefit the effort to put more environmentalists in government seats.

While Patagonia is unapologetically a for-profit business, it hopes to show philanthropists, shareholders, and business owners that in our capitalist world, businesses can still serve a purpose.