Yesterday (on 15 September 2022) Patagonia’s founder and (then) owner Yvon Chouinard announced that Patagonia was “going purpose”.

In business language, this meant that “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.”

And in plain yet inspirational English, Yvon summarised the announcement in his public letter as “the Earth is now our only shareholder.”

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Patagonia has been embodying eco-awareness years before sustainable fashion became a thing

Patagonia designs outdoor clothing and gear for the silent sports such as climbing, surfing, skiing and snowboarding. It was founded in 1973 by rock climber Yvon Chouinard (now 84 years old) and the Chouinard family had full ownership of it until yesterday’s announcement. The company is based in California, employs approximately a thousand people, and will probably generate $1.5bn in revenue in 2022.

The step that Yvon and his family took today is the latest in a long series of steps that have shaped the company into a business that does right by the planet.

Patagonia started off by making products from materials that cause less harm to the environment. From 1985 onward, it started giving away 1% of its sales each year to environmental causes. In 2012, it became a certified B Corp, one of the first Californian companies to do so. In 2018, it changed its company mission to “we’re in business to save our home planet” and has been working to align all activities in the company to that purpose ever since. In 2019, the company announced plans to be carbon neutral by 2025. And just last year, they announced they would stop putting their trademark permanent branding on products because “adding an additional non-removable logo reduces the life span of a garment, often by a lot, for trivial reasons”.

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Yesterday, Patagonia took a pioneering and philanthropic step forward

Just like Patagonia was one of the first Californian companies to become B-certified, it has now become one of the first for-profit companies to have changed its ownership structure and its governance model such that the company will make all investment decisions in service of the environment.

With this morning’s announcement, the power to make decisions that shape the future of the company as well as decisions on how money that is left after reinvesting in the business is allocated, has been given to people who are committed to preserving the environmentally-friendly values of the company (the Patagonia Purpose Trust) and unambiguously driven by building a more environmentally-friendly and equitable future (the Holdfast Collective). This is a unique ownership structure and governance model in business where no money ends up in any individual shareholder’s or any group of shareholders’ pocket(s).

Tangentially, this is not the only business model that has been created to set up a for-profit business to be able to unambiguously do good in the world. There are other (also unique) models that do just that and are not designed with shareholder profit as their main driver. I’ll give you an example from Great Britain that I am familiar with:

National Grid Electricity System Operator (NGESO) is a 1,000-people regulated shareholder-owned for-profit business. It is owned by National Grid, a FTSE100 company. In early 2018, NGESO became legally separate from National Grid, its parent company. The ownership structure hadn’t changed but some of the governance structure did. This set-up allowed NGESO up to set its own mission and strategy, independent from its parent company’s.

Soon enough, spurred by the arrival of a new director and by conversations with its stakeholders across the industry, NGESO set its own mission to “drive the transformation to a fully decarbonised electricity system by 2035 which is reliable, affordable and fair for all”. It then turned that mission into an actionable strategy and business plan. The momentum that this move created was wild. Teams became incredibly motivated to do their bit on that journey towards a better future. Industry players across the country wanted to collaborate with NGESO to play a role in shaping the future of the electricity system in Great Britain.

There is not just one way to set up a company such that it is fully driven in its operations by an unambiguous mission to change the world rather than by shareholder profit - but there are not that many that I have heard of. And Patagonia has just demonstrated that it has the innovative spirit and the courage to create a new one, one that is tailored to its beliefs, its ownership history and its courage to act as pioneers on this journey.

Importantly, they have done this completely unprompted on the contrary to National Grid Group who was invited by Ofgem (the regulator) to transition to this new governance model.

The prompt seems to have come from the Chouinard family itself - Yvon and his family - in one of the most innovative philanthropic moves I have seen in a while. The Chouinard family could have decided to give away their shareholder dividends to non-profits directly, but they decided to transfer ownership of the shares to the Patagonia Purpose Trust and to the Holdfast Collective, thereby protecting the business and its philanthropic impact even better against future challenges like (potentially) the acquisition of the company by a bigger and less purpose-led business.

And there’s another big thing I find incredibly exciting about this whole affair…

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By telling the world about this move, Patagonia is creating inspiration and momentum that people will use to transform themselves and other parts of society

Patagonia has not made those changes quietly in the corner. It’s made a big deal out of it on its website and has made sure that the news was picked up by mainstream media like the Guardian, the BBC, CNN and Bloomberg. This is being covered by all social and mainstream media. People across the planet are talking about this.

Imagine how the c. 1,000 Patagonia employees are feeling right now. Or the newly-appointed members of the Patagonia Trust Foundation, guardians of the purposeful mission and values of the company. Or the Holdfast Collective, the non-profit that will guide where the money Patagonia makes after reinvesting in the business should go.

My guess is that they feel galvanised by this innovative step that the company has just taken.

If it were me, I’d feel incredibly proud to be part of such a pioneering and purpose-led company and I’d want to pour even more of my brain, energy and heart into it. And looking at the reactions and the attention this is getting on social media, I am not the only one.

Applications from people who resonate with Patagonia’s purpose are going to pour in. It’ll be up to the company to pick who gets to join their ranks and they’ll get to choose from a long list of ambitious and talented people. It’ll also be up to the company to make sure that it is run in such a way that the people joining them want to stay - but I’m sure they know what they’re doing.

And this is not just life-changing for people who are currently working with Patagonia - or who will be joining them…

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This ‘big-bang’ announcement is creating momentum that can have a ricochet effect on businesses across the world

By taking this innovative step forward, Patagonia has set a new standard for purpose-led businesses. Being certified B Corp is not the gold standard anymore. Nor is having representatives from non-profit organisations sit on your board. Patagonia felt it wanted to do more, and by doing so - and doing so visibly - it has expanded the awareness of the business world on what it can do to help save the planet and it has set a new gold standard on how it can be done.

By taking this innovative step forward visibly, Patagonia is energising and inspiring people across all businesses and industries.

Employees, leaders and importantly shareholders will start thinking about how they - and the businesses they are a part of, collaborating with and buying from - can make a bigger difference in the world, whether it’s because they feel inspired by Patagonia’s story or whether they feel disappointed that they and their business are not doing more for the planet yet.

Their answers will not be the same as Patagonia’s - and we wouldn’t want them to be because businesses are owned and governed in different ways, with their own cultures, and because they are at varying stages of maturity on the path to becoming more purpose-led.

Some businesses that are owned by one person or one family might feel inspired and philanthropic enough to follow in Yvon Chouinard’s tracks. Some businesses that have a limited number of shareholders with decision-making power will be prompted by the most purpose-led shareholders to carve out time to sit at a table together and think about what actions they could take, even if it’s not transfer of ownership. Hopefully many businesses might simply get the impulse they needed to ‘simply’ start giving away 1% of their sales to non-profits, or to get B-Corp-certified. Maybe this impulse will come from their leadership team. Maybe it will come from their customers. Or maybe they’ll take an even bigger step forward and start renewing their business profoundly by creating their own purpose-led mission and strategy, even if they do this for just one of their departments or teams to start with.

And then some businesses might not want to do anything - or they feel they can’t. If they choose not to take action, they will slowly be putting themselves in a precarious position. As more and more purpose-led businesses and industries emerge, the ones that are not renewing themselves will see some of their customers turn away from them and towards the more purpose-led competition. Some of their employees will leave, starting with the ones who are the most visionary and hopeful about humanity’s future. At this point, those businesses will either be forced to change or they will slowly become less and less relevant in a broadly renewed and purpose-led world.

In short, Patagonia is not alone on this journey - and I don’t think we’re that far off from creating a more visible snowball effect where pioneering and inspirational purpose-led businesses help make purpose-led business-ing mainstream.

All we need is for people, individuals, to see inspiring stories like the one Patagonia has just shared, and to let themselves be triggered positively by those stories to start taking realistic and positive actions at their own scale. Most of us won’t be able to give away our £1.2bn revenue company to a well-meaning trust and nonprofit duo - but we might be able to influence the businesses that we are a part of and invest our money in companies that we feel inspired by and genuinely walk their talk.

So thank you, Patagonia. You’ve just reminded many humans that they care about humanity’s future, and that they can do something about it. Everyone and every business can find their own way of ‘going purpose’.