Patagonia: Billionaire founder gives away the £3bn company's profits to ‘fight environment crisis’

Yvon Chouinard, billionaire founder of fashion firm Patagonia, has said he is giving the company away to a charitable trust tackling the environmental crisis.

Chouinard announced that any profit not reinvested in running Patagonia would be used to ‘fight’ climate change.

In a letter published on the company website, he wrote that the company, founded in 1973, would have its ownership transferred to a non-profit that was created to “protect the company’s values and mission”.

He predicted that profits to be donated to the trust fighting the environmental crisis would amount to roughly £87m per year, depending on Patagonia’s success.

Patagonia Inc is an American retailer of outdoor clothing based in California, founded by Yvon Chouinard in 1973.

Why was Patagonia given away?

The billionaire owner of Patagonia and his family have given the company to a separate trust in a ‘bid to fight climate change’.

Founder Yvon Chouinard, along with his spouse and two sons - decided not to go public or sell the company, electing instead to transfer ownership of the £3bn company to a trust and non-profit organisation.

In a statement to The New York Times, Chouinard said rather than “going public” they were “going purpose.”

"A photo of rock climber Yvon Chouinard. First published in Chouinard 1972 Catalogue."

He said: “Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth.”

Which non-profit is Patagonia's money going to?

Chouinard confirmed that “100% of the company’s voting stock transfers” would be donated to the Patagonia Purpose Trust, and “100% of the nonvoting stock” had been given to the Holdfast Collective.

Profits that are not reinvested back into the business will be donated by Patagonia as a dividend to the Holdfast Collective which reportedly will ‘help address climate change’.

According to the Patagonia website, the Patagonia Purpose Trust was created to protect the company’s “values” while the Holdfast Collective is a “nonprofit dedicated to fighting the environmental crisis and defending nature.”

However, both of these entities will still be overseen by the Chouinard family as operations remain with them.

Why is the Holdfast Collective controversial?

According to the New York Times, the Holdfast Collective is organised as a ‘501(c)4 corporation’, a structure that has received criticism in recent years.

A 501(c)4 nonprofit organisation is, in theory, one designed to promote social welfare causes, with “501(c)” being the IRS’ tax code for the group.

However, such groups are permitted to participate in politics so long as this is not their primary focus.

This permits such groups to spend untaxed donations to influence politics and conceal donors’ names, so long as it does not exceed the majority of their spending.

This could, for example, be used to influence elections via advertising.

According to the IRS website an organisation “exempt under IRC 501(c)(4) may engage in political campaign activities if those activities are not the organisation’s primary activity.”

What will happen to Patagonia as a company?

Under the guidance of Chief Executive Ryan Gellert, Patagonia will continue to run as a ‘for-profit’ business while donating 1% of its sales to environmental non-profit groups.

In an opinion piece published by Fortune Magazine on Wednesday, Patagonia’s board chair Charles Conn wrote that rather than “exploiting natural resources to make shareholder returns, we are turning shareholder capitalism on its head by making the Earth our only shareholder.”

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