Dodging taxes or saving the planet?

Profits and politics in the fight against climate change

Since its creation in 1973, the outdoor retail company Patagonia has stood for the sustainability of its production processes and encouraged its customers and employees to appreciate the natural world. As Patagonia has grown into a mainstream brand, founder Yvon Chouinard has ensured that the company’s values continue to mature with it. Now, as Chouinard steps back, Patagonia is being ushered into a whole new direction as the first company to devote the majority of its profits towards fighting climate change, hopefully inspiring other corporations to follow in its footsteps. But is this major transition truly as good as it seems?

On Sept. 14, Chouinard’s ownership of Patagonia was transferred to two new entities specifically created to inherit the company. The first is the Holdfast Collective, a nonprofit organization that will privately control 98% of Patagonia’s stock. It will also be directing the company’s annual profits, estimated to be around $100 million a year, towards fighting the climate crisis, specifically through lobbying for climate legislation and implementing new technologies. The remaining stock will go into the Patagonia Purpose Trust, a more legalistic structure that will enforce Chouinard’s original vision of a profitable business that helps the planet. Such a transition is a global first for businesses, as well as one for sustainability efforts.

The firsts of anything can be daunting and Patagonia’s transition is no exception. There’s been almost unending dialogue about what this means for Patagonia as a business, or whether doing this will even be effective for profits or climate action. Obviously, results will not be immediate, but I believe that this new chapter for Patagonia can’t hurt. For starters, Patagonia has a longstanding reputation for its sustainability: every T-shirt comes with a tag that says how much water was used to make it, they offer secondhand purchases and now Patagonia’s profits have the chance to go straight into fighting the effects of climate change.

By far, the largest uncertainty surrounding this transfer is how it will affect Chouinard and his finances. To his credit, Chouinard built Patagonia from the ground up, but even though he has transferred ownership of the company, he’s going to remain in partial control of Patagonia while avoiding previous levels of taxation. While Patagonia has promised to direct its future profits towards climate action, taxation could’ve done that as well. So what’s the long game? Patagonia is destined to carry on Chouinard’s legacy, now as a 501(c)(4) nonprofit that can make unlimited political donations while operating exclusively to promote social welfare. As such, Patagonia can lobby for significant legislative changes and wields significantly more power than it would have had through simple taxation.

While Patagonia has the potential to be a formidable political force, Chouinard’s motives in making this transition are a bit blurred. By choosing not to sell the company but instead to essentially transfer ownership, he conveniently avoids a $700 million tax bill. I want to believe that Patagonia is in a position where its past actions and activism can advocate for the validity of its new role, but Chouinard was a billionaire up until this transfer, and it’s hard to look past that.

Is it truly admirable for a billionaire to have a conscience, or to realize that they won’t be able to use all the money they’ve amassed for themselves? Money has a lot of power in politics, regardless of partisanship, and it’s no secret that the rich often fund politicians of their choosing to further their own interests. We as consumers must ask how Chouinard and Patagonia are any different.

Since the company has devoted itself to environmentalism throughout its history, it’s expected that it will continue to do so through the new nonprofit organization. Climate change is also a pressing issue in politics, and with any luck, Patagonia’s newfound influence in lobbying can offset that of fossil fuel companies so that climate action might be more easily achieved through legislation and implementation. For this to work, however, like any other company in the public sphere, Patagonia must continue to be held accountable by consumers and constituents alike.

Ultimately, Patagonia is making a bold new move in order to maintain its company’s value of sustainability. Though other companies might not follow in Patagonia’s exact footsteps, perhaps this transition will at least get them thinking about what they can do to improve their own values of sustainability and contribute to greater climate action plans.