The History of Patagonia

In September 2022, the founder of Patagonia did something no business playbook contemplates: he gave his company away. He didn't sell it or take it public. Yvon Chouinard transferred one hundred percent of the company into a structure designed so that all its future profits would fund the fight against the environmental crisis. The message was unmistakable: the Earth is now Patagonia's only shareholder.

To understand such a radical decision you have to go back almost seventy years, to a blacksmith hammering steel pitons for climbers who never wanted to be a businessman.

The blacksmith who didn't want to be a businessman

Yvon Chouinard, born in 1938, started making climbing gear in 1957. He bought an old coal-fired forge and hand-forged hardened-steel pitons for Yosemite climbers, selling them out of the trunk of his car. In 1965 he partnered with climber Tom Frost to found Chouinard Equipment, which became the largest supplier of climbing hardware in the United States.

But the pitons, hammered into and out of the rock, damaged it. In a gesture that anticipated the company's entire philosophy, in 1972 Chouinard Equipment introduced aluminum chocks placed by hand, without a hammer, and stopped making its best-selling product for environmental reasons.

The birth of Patagonia

Patagonia was founded in 1973, based in Ventura, California. Chouinard chose the name because it evoked glaciers tumbling into fjords and jagged, windswept peaks, a remote land at the end of the world. Its first store, Great Pacific Iron Works, opened that same year in a former meatpacking plant.

A company built on activism

Patagonia never separated the business from the cause. Some of its most important environmental milestones:

• In 1996 it converted its entire cotton line to 100% organic cotton, rebuilding its supply chain all the way down to the farmers.
• In 2002 it co-founded 1% for the Planet with Craig Mathews, pledging to give 1% of sales, not profits, to environmental causes; internally it calls this its Earth tax.
• It became a Certified B Corporation in December 2011 and one of California's first benefit corporations in January 2012.

Its most memorable marketing gesture came on Black Friday 2011, when Patagonia ran a full-page ad in The New York Times showing one of its jackets under the headline Don't Buy This Jacket, detailing its environmental footprint and asking people to consume less.

The Earth as the only shareholder

On September 14, 2022, the Chouinard family announced the full transfer of Patagonia's ownership to two new entities: the Patagonia Purpose Trust, which controls the voting stock and protects the mission, and the Holdfast Collective, a nonprofit that owns the rest and receives the profits to fight the environmental crisis. Profits not reinvested, estimated at around 100 million dollars a year, go to that cause.

We're making Earth our only shareholder. I am dead serious about saving this planet.

The move was not without nuance. The family paid around 17.5 million dollars in tax on the stock placed in the trust, and the chosen structure did not let them claim any charitable deduction. Company leaders insisted that avoiding taxes was never the motive.

Worn Wear and a mission with no hedging

Patagonia's consistency also shows in Worn Wear, its program launched in 2013 to repair, reuse, resell, and recycle garments, with repair workshops and videos so customers can fix their own clothes. Its mission statement is unusually clear: we're in business to save our home planet.

Patagonia remains a private company, valued at around 3 billion dollars at the time of the transfer, with annual sales near 1.5 billion.

I never wanted to be a businessman.

That confession from Chouinard explains much of his story. He built one of the most respected brands on the planet precisely because he treated business as a means, not an end. For any company wondering whether purpose and profitability can coexist, Patagonia is proof that they can, and that purpose can go so far as to buy the entire business.

The takeaway: when a company decides its reason for being is bigger than its shareholders, it can make decisions no profit-only board would ever make.

Sources

• Patagonia Works — https://www.patagoniaworks.com/press/2022/9/14/patagonias-next-chapter-earth-is-now-our-only-shareholder
• Patagonia Company History — https://www.patagonia.com/company-history/
• CNBC — https://www.cnbc.com/2022/09/15/yvon-chouinard-donates-patagonia-to-fight-climate-change-protect-land.html
• Time — https://time.com/6213780/patagonia-founder-chouinard-climate/
• 1% for the Planet — https://www.onepercentfortheplanet.org/about/story