How Patagonia managed to make planet Earth the beneficiary of a for-profit company
Patagonia, renowned for its sustainability efforts, has adopted an innovative ownership model that harmonizes purpose and profit. Through a stewardship trust and a non-profit organization, the company has realigned its values with financial success, marking a significant step in its commitment to the planet.
Patagonia has a long-standing tradition of being a front-figure for sustainability and recyclable products, truly living up to its purpose statement: ‘We’re in business to save our planet’[1]. Patagonia’s core values are quality, integrity, environmentalism, justice, and not bound by convention[2], which act as a testament to Patagonia’s purpose-driven nature. However, alongside Patagonia’s pursuit of fulfilling the purpose statement, it has relied on financial success[3]. The company has aimed to strike a balance between achieving the necessary financial success to fuel the company and fulfilling its purpose to 'save our planet'.
Despite its immensity, the Earth’s resources are not infinite, and it’s clear we’ve exceeded its limits. But it’s also resilient. We can save our planet if we commit to it.
In Yvon Chouinard’s pursuit to make this commitment to our planet, he has since the 1990s contemplated the future ownership model for the company. Two of the main objectives for the new ownership model were to continue working towards the purpose statement and to use the value and profits built over time to realize this pursuit[4]. In 2020, this culminated into a project named ‘Project Chacabuco’, which works towards the goal[4].
The three overarching goals for Project Chacabuco were to: 1) utilize Patagonia’s significant company value to fight climate crisis, 2) provide ongoing stewardship toward the purpose for the next fifty years, and 3) reduce the burden on the leadership and risk for the family and future generations. Ultimately, a fourth objective emerged: 4) create a new and alternative company model for capitalism[4].
Project Chacabuco took close to two years to come up with an optimal solution for the new ownership model, reviewing numerous options, including intergenerational transfer, public stock offering, sale to a private equity group or competitor, Employee Stock Ownership Plan (ESOP), and finally, creating a non-profit foundation owner that would have control over the company.
The company envisioned the new ownership structure for Patagonia where, despite being privately owned and for-profit, it still managed to enshrine the purpose statement of the company[4]. Yvon Chouinard and his family transferred voting control of Patagonia to a stewardship trust and their non-voting interests in the company to a nonprofit organization[5].
This innovative ownership model centers around the Perpetual Business Purpose Trust, which will continue to manage Patagonia as a for-profit company with an emphasis on employee well-being. However, instead of distributing profits among shareholders, the profits will be transferred to a non-profit organization that supports efforts to address climate change and protect undeveloped land[6]. With this model, the setup of Patagonia resembles that of Danish companies such as Carlsberg and Novo Nordisk, which are owned by their respective foundations[7].
[1]Patagonia: ”Company History”, n.d.
[2]Patagonia: ”Our Core Values”, n.d
[3]Harvard Business Review: “What Happens When a Company (Like Patagonia) Transfers Ownership to a Nonprofit?”, 2022
[4]Harvard Business Review: “Patagonia: "Earth Is Now Our Only Shareholder"”, 2023
[5]Groff & N. Gary: “Patagonia, Purpose Trusts, and Stewardship Trusts -Business with a Purpose”, 2023
[6]Forbes: “How Will the Patagonia Perpetual Purpose Trust Terms be Enforced”, 2022
[7]Forbes: “Chouinard’s Donation of Patagonia is Big and Bold but Not New”, 2022