How Patagonia and Yvon Chouinard plan to save the earth?

An avid mountain climber, Yvon Chouinard always believed in moving on.

So, last week, when he decided to transfer all the stocks of his outdoor fashion brand Patagonia to a charitable trust dedicated to fighting climate change, it was the end of another chapter. And the beginning of the new journey.

Established about 50 years ago by Chouinard, Patagonia makes outdoor clothing and gear for sports like climbing, surfing, and skiing. Chouinard had formed the company to help fellow climbers with affordable gear. It went on to become one of the leading outdoor clothing companies in the US.

All the profits of the $3 billion company will now go towards fighting climate change and protecting land across the world. The company earns nearly $100 million yearly.

How will the profits be distributed?

Under the new arrangement, 100 per cent of the company’s voting stocks, which are close to 2 per cent of all the shares, will go to Patagonia Purpose Trust, which will take care of the “company's value.”

And 100 per cent of the non-voting stocks will go to Holdfast Collective, an NGO designed to fight climate change.

Chouinard also said that each year, the money company makes after reinvesting in the business will be distributed as a dividend

Why did they not take the company public?

In his letter, Chouinard wrote that they had two options before them. One was to sell Patagonia and donate all the money. But they were not sure if the new owners would maintain the company's values. The option was to take the company public. He said it would have put the company under pressure to create short-term gains. So, “Instead of 'going public,' you could say we're 'going purpose,” Chouinard said.

With this, the company is set to become one of the biggest players in climate philanthropy.

This bold move, Chouinard believes, will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people”.