The outdoor clothing manufacturer Patagonia’s wealthy founder is donating the business to a trust that will use the proceeds to address the climate problem.
Yvon Chouinard, 83, said on Wednesday that he would transfer his family’s ownership to the trust and a non-profit organisation rather than selling the business or going public.
Chouinard has a net worth of $1.2 billion and rose to fame for his alpine climbs in Yosemite National Park.
He said in an open letter posted on the business’ website, which carries the words “Earth is now our sole shareholder,” that “each year, the money we produce after reinvesting in the firm will be paid as a dividend to assist combat the issue.”
We’ll utilise the riches Patagonia generates to conserve the source of all wealth rather than taking value from nature and turning it into profit for investors, the company declares.
‘Hopefully this will impact a new type of capitalism that doesn’t end up with a few wealthy people and a lot of poor people,’ the creator of Patagonia said in an interview with the New York Times, adopting a more direct approach.
“We are going to donate as much money as possible to folks who are actively attempting to save our world.”
Chouinard’s business, which was established in 1973 and has its headquarters in Ventura, California, offers outdoor clothing and gear valued at more than $1 billion globally.
The corporation itself is valued at over $3 billion, and Princes William and Harry among other celebrities and professionals throughout the globe like wearing its clothing.
Chouinard and Patagonia have a history of leading environmental advocacy in business and have donated significant amounts of money in the battle against climate change.
However, they have also drawn criticism, notably for marketing initiatives that have adopted a vehemently anti-Trump position.
Patagonia will go on as a privately held, for-profit firm, but it will no longer be owned by the Chouinard family, who had previously been in charge of it up until last month.
A newly constituted organisation created to make sure the corporation fulfils its promise to donate its revenues is receiving the voting stock of the company, which represents around 2% of the total shares.
Members of the family, including his spouse and two adult children, will be in charge of managing the trust.
The climber who created Patagonia went from making a billion dollars to surviving on tainted 5 cent cans of cat food.
Yvon Chouinard, the man who founded Patagonia, was born in the northeastern US in 1938.
When he was nine years old, his family relocated from Maine to California. He later joined a climbing club as a teenager, which further cemented his love of the great outdoors.
He promptly got to work creating and marketing his own line of handcrafted climbing gear to assist his mountaineering and other activities like surfing.
The resourceful American started Chouinard Equipment, a climbing equipment firm, in 1965 while living out of his vehicle and consuming broken cans of cat food to keep expenses as low as possible. Chouinard Equipment was a huge success.
However, the firm took off when he started selling outdoor gear in 1972 under the name Patagonia, which was inspired by the thickness and quality of rugby shirts that he had worn while climbing in Scotland.
Chouinard maintained that Patagonia must continue to uphold the fundamental principles of ecology and social responsibility even as it swiftly started to rack up the profits.
He ruled in 1985 that one percent of all revenues would be given to environmental organisations, and he subsequently launched a number of humanitarian programmes aimed at combating climate change.
Despite having an enormous net worth, he has infamously raged against a culture of luxury and has said that he hates the term “billionaire.”
“I was featured as a millionaire in Forbes magazine, which really, really p***ed me off,” he stated.
I don’t have $1 billion in the bank, I’ve said. I do not operate a Lexus.
Finding out that Chouinard gave up his 50-year-old firm in the sake of preserving the environment shouldn’t necessarily come as a shock.
Although wealthy people often donate money to charitable organisations, the Patagonia founder’s move, according to the New York Times, was structured such that he and his family would get no financial advantage and, in fact, would incur a tax liability as a result of the gift.
In the meanwhile, the Holdfast Collective, a non-profit devoted to combating the environmental catastrophe and safeguarding nature, received Patagonia’s non-voting stock, or nearly 98 percent of all shares.
The family did not get a tax advantage for their gift since the Holdfast Collective is a social welfare organisation that is free from taxes.
There was a significant cost to them doing so, but it was a cost they were ready to incur to guarantee that this firm remained loyal to its beliefs, a representative for merchant bank BDT & Co. who helped Patagonia negotiate the transfer of shares told the New York Times.
They weren’t allowed to deduct it as a charitable donation. There is absolutely no tax advantage in this.
Chouinard told the New York Times that he “never desired” a business and that the extraordinary action would guarantee Patagonia will “do the right thing” for years to come.
I had no idea what to do with the business since I had never wanted one. Now, even if I pass away tomorrow, the business will go on acting morally for the next 50 years, he remarked.
The Chouinard family, according to philanthropy commentators, is one of America’s most philanthropic families. Unlike many other billionaires who donate significant quantities of money to charity organisations, they do not stand to gain financially from their generosity.
Patagonia became the first company to pledge one percent of yearly sales to the environment when the climber-turned-entrepreneur created the “1 percent for the world” campaign in 2002.
In addition to the 1% of sales that Patagonia donates to environmental organisations each year, CEO Rose Marcario handed out $10 million in tax savings to non-profit environmental organisations in 2018.
The massive rewrite of the U.S. tax code by the GOP in 2017—which reduced corporate rates from 35% to 21%—provided a bonanza to corporations.
In a statement at the time, Marcario referred to the tax reduction as “irresponsible,” adding that “taxes safeguard the most vulnerable members of our society, our public lands, and other life-giving resources.”
Despite this, the Trump administration started a corporate tax reduction, putting essential services in jeopardy and harming the environment.
When the company launched a marketing campaign in 2011 urging potential consumers not to purchase items they don’t need, it solidified its sustainability-focused image.
The “Don’t Buy This Jacket” campaign, which advised buyers to only purchase Patagonia gear if absolutely essential and positioned the business as a manufacturer of high-quality, ecological outerwear, struck a chord and garnered praise all around the globe.
But it has also been the subject of controversy, most notably in 2020 when a number of Patagonia clothing items were sold with labels that said “vote the a**holes out.”
The tags are authentic, as Patagonia’s director of communications and PR Corley Kenna told Esquire, and Chouinard sent a letter to marketing departments approving the campaign and the usage of the term “a**hole.”
The tag’s call to action, according to the spokesman, was directed at “all those politicians who don’t feel we should do something about climate change,” although it is generally assumed the message was critical of Trump and the Republican party.
In order to address one of the challenges affecting our nation and the rest of the planet, Kenna added, “Hopefully we don’t have to keep producing tags like this. This November, we will elect some genuine climate leaders and less a**holes.”