To Change Business, Reject It

News broke last week that Yvon Chouinard, the Founder of Patagonia, gave his company away for the sake of “fighting the environmental crisis and defending nature.” [1]

Yvon has repeatedly defied the expectations of business. He built Patagonia into a leading example for almost everything in the realm of what it means to be a “responsible business.”

Heck, Yvon might be responsible for inventing the term.

As noted in his announcement, since its inception, Patagonia has charted a course to see if business can in fact be done in a different, less destructive way.

Bit by bit, Patagonia was made into an example of doing business differently as Yvon again and again rejected business conventions, even “necessities” as they were:

• They first looked at their materials, where they sourced them, whether they were organic, what they could/couldn’t recycle.
• They started giving away 1% of their top-line revenue each year to grassroots environmental organizations and were responsible for creating a community of businesses doing the same.
• They became a Certified B Corporation and the FIRST California Benefit Corporation when that corporate structure was permitted.
• They changed the company’s purpose, summed up in their purpose statement, “We’re in business to save our home planet.”

They designed products to last to encourage customers to buy less often. They gave employees days off to surf when the waves were good and ski when there was fresh snow. They offered flexible parental leave and provided on-site childcare. [2]

These are all steps worth appreciation, and still Yvon continues to push things even further.  At 84, Yvon has rejected business conventions again to settle Patagonia’s destiny.

Over what sounds like years of deliberation behind the scenes, he made this monumental decision. The details from Yvon himself:

“Here’s how it works: 100% of the company’s voting stock transfers to the Patagonia Purpose Trust, created to protect the company’s values; and 100% of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature. The funding will come from Patagonia: Each year, the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis.”

The Chouinard family gains nothing financial from this decision [3], no big sale, no big tax windfall, just involvement with the Patagonia Purpose Trust to see to it that the company remains true to the environmental commitments that have dictated decisions in the business since its inception.

It seems in this move, Yvon and his family not only forewent a big sale (Patagonia is valued at roughly $3 billion), they also forewent major tax benefits.

Reports detail that gifting 2% of the voting stock to the Patagonia Purpose Trust, cost the Chouinard family $17 Million.

— —

Craftsman vs. Businessman

“I never wanted to be a businessman. I started as a craftsman…” as Yvon opened his letter.

Despite his resistance to the title, it’s hard to argue that Yvon didn’t become a businessman, an extremely successful one at that. But, it’s the type of businessman he became that’s remarkable.

“Truth be told, there were no good options available. So, we created our own.”

Ooof, if that isn’t a more perfect two sentences to describe Yvon’s approach to building Patagonia, then I don’t know what is. After initial challenges, when Yvon finally found consistent success with Patagonia, he didn’t like what he saw from the business community around him.

No good options.

For all of these reasons, the recent move set the purpose-driven business community ablaze.

Yvon is the most notable anti-business business person. A craftsperson first, he resisted the business identity as long as he could.

He provided repeated public reminders that he never wanted to build a business. For nearly 50 years, he found ways for his growing company to be less like all the other businesses he saw.

If he was told to look for role models for building Patagonia in the early days, Yvon might’ve said, “No good options.” Yvon saw what it meant to be a business person at the time he was getting started and thought, “That’s no good.”

So, he rejected the identity as it was and went about crafting his own. Thankfully for us, it turned out to be for the betterment of the business community overall. [4]

Yvon and the company have inspired a whole generation of businesses and business leaders to run their companies with a conscience. [5]

And it’s worth underscoring here what’s continued to be most remarkable about this milestone for Yvon, Patagonia, and the movement of “purpose-driven business.”

We are celebrating the fact that Yvon chose impact over immense personal gain (for him and his family) even though he could justify doing the opposite. Not making the decision he did would’ve simply been business as usual. Important in this alternative universe is that “business as usual” here includes and perpetuates systemic inequalities.

And if he were to approach the succession of Patagonia in a more conventional way, there wouldn’t be condemnation, but there also wouldn’t be any celebration, here. And most likely, I wouldn’t be writing about it.

So I think it’s important to note who and what this party is for.

— —

What’s Next?

I’ve written before about how one American surfer changed what was believed possible for the big wave surf community.

Garrett McNamara, the surfer I’m referring to, was the first person to surf the monster waves at Nazaré. When he surfed a 78 foot wave, he set a new world record. What reverberated from that feat, was more and more surfers taking on the waves.

And, a couple more surfers set new world records.

Yvon’s decision here, as his many decisions before, might be the Nazaré for the purpose-driven business community.

Both, worthy and admirable in their accomplishment, but also, possible to be topped.

So, it’s worth discussing what we’re celebrating with this milestone, to understand where business must go from here.

Is it Patagonia’s conventional business success (i.e., size and value) that we are celebrating—that we can do well and do good? I mean, Yvon is giving up BILLIONS OF DOLLARS. Of course, that will shake the business world and beyond.

Or are we celebrating that there’s no excuse for not doing good? I mean, Yvon is giving up billions of dollars and he still DECIDED TO DO GOOD.

I think it’s the latter worthy of celebration.

If Yvon surfed a 78 foot wave, then what’s the 100 foot wave that’s yet to be surfed?

There is legitimate criticism in the conversation that much of the money Patagonia is making available to climate action will go to undoing harm that Patagonia itself contributed to (and still is) by virtue of its size and operations.

Patagonia reported itself on Patagonia.com, “that as of 2020, 39 percent (12 out of 31) of our apparel assembly factories are paying their workers a living wage, on average.” That’s after a decade since launching their “living-wage strategy.

Patagonia also spent a year figuring out whether or not Uyghur slave labor was involved in the making of their products in the Chinese province of Xinjiang only to give up and withdraw production as they couldn’t get an answer with any certainty.

I think they made the right decisions in light of these challenges given the context of where they are at as a business. But might it be more simple if they’d made decisions, worthy of the celebration we are having now, earlier in the process?

What’s the new standard? Ensuring a living wage from day zero, or taking a decade to confirm that 40% of workers involved in your supply chain now can sustain a “decent standard of living” for themselves and their families.

It’s much easier (and lower impact) to navigate and turn a kayak than a cruiseliner.

Businesses and business people are out there every single day rejecting conventions of business to do what’s right.

One of those conventions, might be seeking to build the biggest business they can in the first place! Some businesses and business people believe it’s best not to expand and grow unless all ethics and measures of sustainability are accounted for.

Don’t get me wrong, Yvon’s decision is worth the praise! But what are the next steps from here? What’s the 100 foot wave that’s yet to be surfed?

Perhaps this milestone, the bar Yvon has raised time and time again, might change the convention of what’s expected and celebrated within the business community (at least the “purpose-driven business” community).

Should we celebrate the “sustainable brand” that goes public? Or, the brand that goes deeper into their purpose? Yvon explained the former would’ve been a “disaster,” anyways… [6]

Do we celebrate record-breaking profitability and returns for investors? Or, sustainability and complete transparency?

Yvon might be done surfing his record-breaking waves. We’ll have to look somewhere else to get our cues for what progress looks like in shifting the conventions of business.

Do we need to look for another billion-dollar company? Or, do we look for the company doing unprecedented good?

Conventions remain conventions as long as we let them. What are the things that we discount as “just the way it is” within the context of business that shouldn’t be?

What other conventions of business might we reject for the sake of changing business and our communities for the better, even without Yvon pointing it out?

— —

Footnotes:

1. Read Yvon’s full open letter published on Patagonia.com.

2. For Patagonia’s product design philosophy, history of employee benefits, and Yvon’s overall life and business philosophy, I recommend reading Let My People Go Surfing: The Education of a Reluctant Businessman. I also wrote a review on the book, here.

3. Although others of course argue the contrary. By not selling Patagonia, Bloomberg Journalists Devon Pendleton and Ben Steverman say Yvon “skirts $700 million tax hit.” I’m not sure Yvon has a problem with paying taxes, however, it’s neglected to mention how much he and his family would make in their article. Patagonia is valued at over $3 Billion…

4. It’s worth acknowledging that the outsized influence of private interests in America is bad. It’s convenient for us that Yvon is not some bat shit crazy person like Peter Thiel (in my opinion). I’m very glad Yvon’s favorite author in his 20s wasn’t Ayn Rand like many other billionaires and wish-they-were-billionaires types.

5. When I first started the podcast, I asked guests what companies inspire/inspired you? Patagonia was far too common of an answer, so I stopped asking the question!

6. I’ve questioned the implications of “sustainable companies” going public for a while now, Yvon’s exact quote here is certainly being stored in my notes for a future argument: “Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.”

— —