Privately held Patagonia Inc. recently said it would change its ownership to channel nearly all its profits into a trust, Patagonia Purpose Trust, to fund non-profits and causes dedicated to helping the planet. Founder Yvon Chouinard and his family will own all the voting rights and retain control of the company best known for its high-quality, high-priced outdoor apparel.
They also will control the Holdfast Collective, which will determine where most of Patagonia’s profits go — about $100 million a year. The collective, a non-profit company led by the Chouinard family, will fund ways to help fight climate change, either through donations to charities or to political and environmental causes.
While Patagonia will primarily focus on external initiatives, Nate Boudreau, a retail executive at SAP, said he wondered what Patagonia will do within its own operations. “They’re giving all this money — it’s a great idea and it’s really cool to see — but how is the company actually operating?” Boudreau said.
Without giving away a dime, he says Patagonia could make changes using its own data and employing software that could help the company’s own operations, and those of their vendors within its supply chain, to be more sustainable and planet friendly.
“That could be as granular as what material they’re using, how is it made, where is it made and what the impact of that material is on the environment,” he said. “I wonder if their decision-making process is going to change in terms of looking at the sustainability initiatives of the companies that they’re buying from, if that’s going be number one before its money-making number one. I see a lot of people jumping on the Patagonia bandwagon now.”
Patagonia could also use its data to predict its own environmental impact and discover ways to reduce negative effects. The company can also use information technology to help ensure that its bold new strategy succeeds.
“Around $100 million will be donated,” Boudreau said. “Where is it going? How can they track what it’s doing? What are the benefits, and are really get the most bang for their buck in that money? It’s a unique situation because it’s a lot of money that’s going to be yearly. It’s not going to be a one-time payment. It’s going to be something that can be tracked over the course of years.”
Patagonia’s new plan does have its critics. Detractors are quick to point out that its fleeces are made of petroleum-based material. But the company is one of four sportswear brands that have joined together to help recycling technology get to the clothing market more quickly.
“You get a push back whenever you do something good,” Boudreau said. “I think you’re always going to have even more push back when you’re not doing it right or correctly.”
But according to a Deloitte study, Patagonia’s strategy is on the right track. The study found that a majority of consumers would pay more for products from socially responsible companies. Brands that have demonstrated a commitment to sustainability are seeing average sales growth outperform brands without demonstrated commitment fourfold. It also found that 90% of consumers would switch brands to support a good cause or boycott a brand due to irresponsible business practices.
“I think that’s really huge,” Boudreau said.