How is Patagonia supporting climate action with its shareholder transfer?

Please note this is a summary of an article published 03-10-2022 by Belgian independent news medium Apache, written by Han Zinzen. You can read the full article in Dutch via this link. Curious to read the brand screening COSH! did of Patagonia back in 2020? Click here.

As you might have already seen on the news, Yvon Chouinard, founder and owner of outdoor brand Patagonia, has handed over his estimated $3 billion property to two organisations dedicated exclusively to climate projects. But how environmentally and socially conscious is this good deed really?

Chouinard can be described as a true environmentalist, especially looking at his company’s mission. Patagonia was one of the first companies to use organic cotton but also uses other materials known for their sustainability such as recycled polyester, offering innovative products since the 90s. 

Patagonia is currently valued at $3 billion, with annual sales of $1 billion. Being long past his retirement age, Chouinard started thinking about what to do with this money. In an open letter, he lists some options, but writes ​“there were no good options at hand, so we created our own.” Chouinard has thus developed a ​‘dual-class structure’, with a minority of shareholders (the Chouinard family) controlling the majority of shares. Besides, the Patagonia Purpose Trust and the Holdfast Collective will support the company in helping save the planet with their shares and dividend of Patagonia. Want to know the details of the outcomes? Please read the full article on Apache.

Escaping a $700 million tax bill

The non-profit organisation Holdfast Collective is a so-called 501(c)(4). Under US tax law, such a non-profit organisation is allowed to make unlimited political donations. An article by Bloomberg news agency says in this regard that donations to a 501(c)(4) do not qualify for income tax deductions. On top of that, Chouinard has to pay a 40% ​‘US estate and gift tax’ on the 2% of shares he verses to the Patagonia Purpose Trust. That amounts to $17.5 million. This way Chouinard avoids the much greater amount of taxes he would have had to pay in other constructions. 

Ray Madoff, professor at Boston College Law School, and Daniel Hemel see a problem as among other things ​“there’s a chance the rest of society will have to pay more taxes.” Additionally, this way rich people who are less inclined towards democracy can use the same construction to achieve their goals. The title of Yvon Chouinard’s open letter, ​“Earth is now our sole shareholder”, is somewhat misleading after reading this. To learn more about the consequences, please read the article by Bloomberg or Apache.

Don’t buy this jacket

According to Niki de Schryver, founder of COSH!, Patagonia knows the importance of a good marketing stunt like no other. Such as the successful ​“Don’t buy this jacket” campaign, launched on Black Friday 2011, raising awareness for overconsumption and premature garment disposal. ​“Every initiative that Patagonia launches gets an incredible amount of media attention, resulting in their sales going up and maintaining their image as the most sustainable brand.” 

Contribution to the HIGG index which is now under fire

In 2010, Patagonia, together with Walmart, founded the Sustainable Apparel Coalition (SAC), to provide solutions to reshape the fashion industry. To this end, it created the Higg Materials Sustainability Index (MSI) in 2011, which allows fashion companies to demonstrate their social and environmental impact.

Both SAC and Higg MSI are under fire, among other things for deliberately promoting polyester and other synthetic yarns as sustainable. ​“And what happens after a garment is sold, isn’t included in the analysis, but it does have a major ecological impact.” Niki de Schryver points out. 

But perhaps more importantly, according to The Great Greenwashing Machine, both the SAC and the Higg Index are notorious for refusing to provide the necessary information, and show a glaring lack of transparency. It led the Norwegian Consumer Agency (NCA), to issue a ruling against Norwegian outdoor brand Norrøna, as well as Swedish fast fashion giant H&M, stating that these brands were breaking the law when referring to the Higg Index to demonstrate their sustainability.

Dubious intentions

But the political power of the SAC remains strong. Multiple legislations that are in development are dependent on goals and reporting methods of the SAC and the Higg Index. However, dubious links can also be found between the SAC, Patagonia and unsustainable companies like from the oil industry. Read more about that in the article by Apache.

But clearly, Patagonia wants to have a positive impact on the climate crisis. COSH! found that to do so, the company wants to be carbon neutral by 2025. ​“In doing so,” says Niki de Schryver, ​“it wants to use 50% recycled polyester in all its products, as if that’s going to save the world.” Want to know why the environmental impact of recycled polyester is worse than you might think? Read it here.

As mentioned before, this is a summary of an article published by Belgian independent news medium Apache, written by Han Zinzen. You can read the full article in Dutch here. Curious to read the brand screening COSH! did of Patagonia back in 2020? Click here.

Read the full article by Apache for free