Earlier this week, when news broke that Yvon Chouinard and his family had relinquished ownership of Patagonia, mixed emotions came from fans and the wider business community.
By transferring all ownership of the company to the Patagonia Purpose Trust and Holdfast Collective, the Chouinards once again reminded other companies and their leaders of their commitment to transforming their company structure to address climate disasters. It forced them to face the problem of how to reconcile them with their goals. And guess what? Whatever they do, their customers will face it. Just as Patagonia has helped supply move the sustainability goalposts in his chain and speak out on social and environmental issues, it’s important for companies to truly demonstrate their values well beyond his ESG and CSR strategies. established a new standard for how to walk into .
Linkedin users said, “Wow, the Patagonia founders just handed over their company to Mother Earth! What an inspiring example of environmental stewardship!!” innovation lead.
— sai✦ (@replysai) September 15, 2022
There have been many accolades and accolades from afar, including within major global companies. But as with its sustainability implications, many will see Patagonia’s move as the luxury of being a private company without the handcuffs and obligations of public shareholders.Five-decade career of founder Yvon Chouinard Others who favorably ignore the precedent and trajectory of , will see it as a creative legal means to avoid huge tax bills, albeit dubious.
Don’t expect Exxon or Amazon to see Patagonia’s news and be prompted to follow suit immediately. Even Patagonia’s peer group in outdoor apparel is often nested within larger conglomerates that have difficulty emulating this particular structure. But Chouinard is thinking about the future of the next generation of entrepreneurs and the companies they build, not just Patagonia.
“This is definitely an inspiration,” says former CEO Rose Marcario, who led Patagonia from 2014 to 2020 and is now a partner at ReGen Ventures, which exclusively invests in companies working on regenerative technology. . She also sits on the boards of both her electric car company Rivian and plant-based meat startup Meati. “We also have a new generation of founders who grew up in the face of the climate change crisis and the social justice crisis,” she says. “It’s in their DNA. They see issues in their own way, and they incorporate purpose and philanthropy into her IPO. [Rivian CEO] RJ [Scaringe] Just like Melanie Perkins did with Canva. ”
In 2018, I wrote about Patagonia’s flywheel of justice, stating that the more you invest in its beliefs and products, the better your company will perform, develop creative solutions, and lay out a blueprint for other businesses to follow. This breaking news is no exception. In this week’s opinion piece, Patagonia board member Charles Conn said the key is for companies to be transparent about their commitments to a purpose that makes sense for their business and be held accountable by their communities, ultimately leading to more investment. , better employees, and deeper customer loyalty. “This is not ‘awakened’ capitalism,” Conn wrote.
Dan Fitzgerald, managing partner at ReGen Ventures, has been talking to partner companies since the news broke, saying that Patagonia and the Chouinard family have been working with people to align their structures with their mission. It gives permission to be creative and innovative. “It will open people’s eyes to the possibility of creating permanent funding structures to fund the most existential challenges facing humanity,” says Fitzgerald. “A case study of what happens when an iconoclastic founder of a generational company passes the baton.”
The problem with Patagonia, especially with its previous private company status, was that it was always seen as an outlier. A company that, because of its past and lack of accountability to shareholders, was able to push boundaries in ways other companies were not free to do, Phil Graves, vice president of business development during his seven years at Patagonia realized that these imaginary bindings were mirages. Graves originally joined Patagonia from Deloitte, where its investment arm, Tin Shed, where he helped run Ventures and is now a provider of bison meat, an early Tin Shed investment. Buffalo is his CEO of his company.
“I always compare Patagonia’s growth, profitability and key financial metrics to our competitors,” says Graves, who supplies jerky to Patagonia Provisions and makes leather for the company’s work boots. says. “We were in the top quartile of key financial metrics most of the time. We were doing this while doing everything leading up to jackets and board shorts doing these things and maintaining financial returns that were on par with or better than our competitors who didn’t do these things. Being able to do that has always fascinated me.”
We’ve heard the phrase “it’s easy because they’re Patagonia” before when Patagonia transforms its supply chains and accuses politicians whose policies are destroying the planet. So, of course, they’re repeating the same tired lines in news of the new ownership structure. DanoneWave’s former CEO Lorna Davis predicts a huge consumer response that other companies will surely take note of. In 2016, when Patagonia announced that it would donate all of its Black Friday sales to grassroots environmental groups, she made a record $10 million that day and won 24,000 new customers.
Today, every day feels like Black Friday for many Patagonia customers. “Anyone who wants to buy a jacket will think, ‘Wow, I can buy the jacket and all the profits will go to my important cause,'” he says Davis. “The values are perfectly aligned. It is fully aligned. [Chouinard’s] history, and it matches the amazing product quality. I hope that this beautiful movement will inspire many people. Personally, I hope Amazon’s board of directors and Jeff Bezos will devote their company’s profits to protecting the forests that stole their name. ”
I don’t hold my breath with it. Still, perhaps like Patagonia’s response to other initiatives, its continued success in the market will motivate others to take action: Patagonia’s commitment to sustainably supplying his chain of materials. As we strengthened, so do competitors such as The North Face. Years after Patagonia invested heavily in regenerative agriculture through Patagonia Provisions, some of the world’s largest food and beverage companies, including Walmart, General Mills and Anheuser-Busch, are stepping up their interest and investment in the field. doing. This is where we see the biggest impact.
“We need massive change now,” says Marcario. “These legacy extractive industries that have fueled fear about ESG and awakened capitalism are really oblivious to the fact that our workforce, our customers and our world have changed. It’s a new game and you have to take a bus, and this move from Patagonia is at the heart of the emergency we’re facing.”