Patagonia is a leader in the outdoor clothing market but it has always taken a unique approach to business. The company has been praised for its lifetime guarantees on its products, and its desire to make clothing sustainable.
The organization is now doubling down on its environmental, social, and governance (ESG) initiatives and is establishing two new groups, the Patagonia Purpose Trust and the Holdfast Collective.
Patagonia will put any profit that is not re-invested into the business to combat climate change. The company’s website claims this will be done through the Holdfast Collective which owns 98% of the company’s stock, although these are non-voting shares.
The collective intends to invest everything it receives to protect nature, support communities, and fight environmental change. Patagonia believes that the collective will be able to donate approximately $100 million (USD) to environmental causes every year.
To facilitate this investment, the organization’s 2% voting stock is being transferred to The Patagonia Purpose Trust.
With control of the voting stock, the trust will develop a “more permanent legal structure to enshrine Patagonia’s purpose and values.”
This includes a commitment to follow the intent of the company’s founder, Yvon Chouinard, and show that “capitalism can work for the planet.”
Why commit to ESG?
Chouinard released a statement about the decision: “It’s been a half-century since we began our experiment in responsible business. If we have any hope of a thriving planet 50 years from now, it demands all of us doing all we can with the resources we have.
“As the business leader I never wanted to be, I am doing my part. Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source. We’re making Earth our only shareholder. I am dead serious about saving this planet.”
Dr Ayana Elizabeth Johnson, board member at Patagonia, added: “Every time you read a new scientific report, it’s clear the climate crisis is happening faster than we thought and it’s worse than we thought. The stakes could not be higher.
“If we want to protect nature and support communities, businesses can’t continue to adhere to the prevailing economic model. Patagonia has been breaking the mold for decades, and now they have shattered it. Now I want to know, which companies will be next to step up?”
Will more companies invest in ESG initiatives?
There is no doubt that helping fight climate change is the right thing to do. However, time has shown that for many businesses this won’t be enough impetus to alter wasteful business practices.
For those who are not taking significant action, there is a serious cost. Marketing agency LEWIS found that only 19% of those between 18 and 25 would work for a company that did not share their ideals.
With this hiring market in mind, every business can benefit from committing to environmental policies, and most importantly, the world we live in could be improved significantly.
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