by Charlotte Schur, Leuphana University of Lüneburg, Germany.
Patagonia is maybe know to the most as an outdoorbrand which sells clothes for outdoor activities at a rather higher price range. But the Company that was founded in 1973 by Yvon Chouinard, after he and his co-founder Tom Frost decided to not maintain their old business in selling climbing pitons. The reason for that might be different from what other CEO’s would have done. Chouinard and Frost wanted protect the rock from the damage that caused the classical climbing pitons.
The entrepreneur had a very early focus on protecting the environment. From 1985 they started to donate 1% of their annual revenue to environmental causes. To inspire other companies as well the launched the “1% for the planet” initiative to encourage others to donate as well.
In addition to that Patagonia was also very innovative in the development of there clothes as well as their employees. The business was constantly growing, so that the global revenue of 2021 was over 1 billion USD. Nevertheless Yvon Chouinard annouced in 2022 “the Earth is now our only Shareholder”. That means that Patagonia no longer runs as a company that is privately owned.
Patagonia was taking over by a so called steward-ownership. That means that the company is now owned by a trustee organization and foundation and no longer by the Chouinard-Family. With this change Patagonia has turned more or less into a non-profit business, since all the profit is either going to be reinvested into the company or donated to environmental purposes. This ensures, above all that no investor have an influence on Patagonia no more and therefor can not be dissuaded from fulfilling her values by any outside influences. Patagonia show thereby that radical sustainability, corporate governance and value-based management are not in contradiction to economic success.
In contrast to the steward-ownership stands the social-enterprise-systems. These systems try to combine profit objectives with a binding enviromental purpose. Yet these systems have the problem, that they are often dominated by the shareholders und the different goals are hard to manage. This effect is known as a „mission-drift“. The steward-ownership has the advantage that the company’s are not controlled by a private owner that is primarily oriented towards a profit maximasation. This makes it possible to donate almost every cent they earn for social and ecological purposes. Patagonia show a well thought step in terms of a huge change in management and taking the risk of failing this project.
But for founder Yvon Chouinard it is clear to go this way. They also publish an anti-campaign on back Friday 2011 with the slogan “Dont buy this Jacket. With this, they wanted to get customers to buy less and, above all, think about their purchases. Nevertheless, they were able to increase their turnover with their campaign.
Patagonia shows that it can also work, if zu change everything radically and maybe that is the fact why they are so popular and market leaders.
However, it is very important that you also look at everything with a critical eye. Because Patagonia also has to listen to accusations such as the tax evasion and greenwashing.
