A sign outside a Patagonia store in Tokyo, Japan, Wednesday, April 19, 2023.
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Outdoor apparel brand Patagonia has made a landmark decision to direct its profits toward fighting the climate crisis, which doesn’t surprise its employees — but that’s not to say the process isn’t stressful.
Just over two years ago, founder Yvon Chouinard and his family announced that they would transfer ownership of the company to climate-focused groups who would use the profits to help protect nature and life Diversity.
The initiative made headlines for its novel combination of capitalism and philanthropy, prompting some to question whether the shift would encourage others to follow suit.
“I think, internally, no one is surprised. It’s obviously a very inspiring and exhilarating moment because I think it’s clear now that our values will forever be etched into the company and the way we do business,” Nina Hajikhanian, Patagonia’s general manager for Europe, the Middle East and Africa, told CNBC via video call.
“They don’t want to sell the company because eventually they can recoup the profits, but this is a one-time situation,” Hajikanian said.
“It’s really about creating a new way of capitalism, you know, disrupting capitalism and inspiring other businesses to do things differently – it felt like a really natural step,” she added.
“This could be a very important moment, but for us, it’s normal.”
Patagonia founder Yvon Chouinard speaks at the inaugural Tribeca
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Patagonia told CNBC that since announcing the shift in September 2022, the company has invested more than $71 million in environmental causes. This figure does not include additional grants and in-kind donations through the 1% for the Planet program.
Holdfast Collective is a US-based charity that currently owns all of Patagonia’s non-voting shares, or 98% of the company, and in its first year of operation it has provided aid to more than 70 groups Donate. Taking February as an example, Made Donate $5.2 million to The Nature Conservancy of Alabama.
“Be nervous”
However, Patagonia’s reorganization – a critical moment in its history – has not been without its challenges.
“On the one hand, it’s a very encouraging thing for our employees to feel like, yes, we’re in the right place. We do what we say we do, we do what we say we do,” Hajihanian explain.
“I think it also creates some tension points… because at the same time you invest in the really important work to make sure we continue to move forward… when we go through periods when the business is not as strong because of the possibility of another It’s a year, and that creates certain tension points in the conversation,” she continued.
The first reason for this change is to ensure that we embed these values into our governance model, but another really important part of taking this step is to incentivize other businesses to do the same.
Nina Hajikanian
Patagonia General Manager Europe, Middle East and Africa
“For example, where does the money go? Are you investing back into our business? Or are you ensuring that through Holdfast Collective those investments are brought into creating solutions for the environment?”
“So, we always say, and I think this has always been true, if you’re not a self-reliant company from a financial perspective, you know a healthy financial business, then you’re never going to be able to be the model for other businesses. Role model,” Hajikanian said.
CEO Ryan Garrett explain At the end of September, the company needed to lay off 41 people, or about 1% of its global workforce, due to economic headwinds and some “significant internal changes.”
The Patagonia store sign is seen on Green Street in New York City on September 14, 2022.
Michael M. Santiago | Michael M. Santiago Getty Images News | Getty Images
Garrett said in a LinkedIn post at the time: “Many people have asked me what has happened since the founders of Patagonia, the Chouinard family, transferred their stock to the Patagonia Purpose Trust and Holdfast Collective two years ago. How has Patagonia changed since then?
Patagonia’s CEO said the changes were for the long term, calling them “fundamentally important” for the next 50 years.
‘A serious decision’
When asked if Patagonia hopes other companies will address the climate crisis in a similar way, Hajihanian said inspiring others is a key reason behind its structural shift.
She said a number of companies had already been contacted to discuss how such a move could work for them, although she admitted the process was far from easy.
“This is a serious decision to make,” she continued.
“I encourage everyone to think about this process, but I would say there are other ways. Assuming founders are not ready to take that step, there are many other ways to contribute (to the climate crisis).”
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