What Patagonia’s recent business move says about NFP leadership

Patagonia handing its billion-dollar reins to a not-for-profit organisation is a timely reminder of the value the sector brings, says an industry expert.

Patagonia’s recent decision to hand the reins to a corporate trust and not-for-profit organisation dedicated to fighting the climate crisis is a strong example of corporate environmental responsibility – and a fitting demonstration of the value of NFP leadership, an industry expert says.

Associate Professor of Leadership at Swinburne University of Technology, Samuel Wilson, says the move is “a very timely signal” of the power that not-for-profit organisations hold in our communities, as a sector held in high esteem by the public.

“Charities are among the most highly regarded institutions in Australia and one of the reasons for that is because they are seen, almost uniquely, as really serving the public interest,” says Wilson.

“There is virtue-seeking and moral grandstanding and you never quite know if the professed values of an organisation match its actual values. But by [Patagonia] putting 98 per cent of its company into the hands of a charity, that’s pretty clear. There’s a lot of integrity there.”

Wilson is co-founder of the Australian Leadership Index, the nation’s largest ever ongoing survey of leadership, which tracks how people view public, private, non-profit and government institutions in areas of integrity, competence and contribution.

The most recent findings show charities outperforming other institutions in public perceptions of their leadership for the greater good. Respondents identified not-for-profit organisations being ethical, accountable, transparent and responsive to society as important contributors to this result.

“If you are overtly seen to be serving social good, then you receive an increase in perceptions of your leadership, stewardship and trust,” continues Wilson. “It seems like [Patagonia’s change] is an idea whose time has well and truly come.”

For Wilson, Patagonia’s move to entrust not-for-profit leadership reflects a rising corporate acceptance – spurred on by an increase in ESG and the UN’s sustainable development goals – that stakeholders are no longer classified as simply having a financial share in a company.

“We’ve seen over decades, the growth of what is now referred to as the extended stakeholder view – thinking about other stakeholders who may not be shareholders but who nevertheless are affected by corporate action or inaction,” says Wilson. 

“For charities, it’s not about shareholders with financial stakes. Not-for-profits seem to serve those stakeholders that don’t typically figure prominently in businesses. And for Patagonia, that key stakeholder is the Earth.”

“[Patagonia] provides a very vivid live case study in how you can do good and do well at the same time. This change of purpose I think will have great resonance,” concludes Wilson.

The change in Patagonia’s structure was created to avoid selling the company or taking it public, both of which may have impacted the values of the billion-dollar certified B Corp.

“Instead of ‘going public’, you could say we’re ‘going purpose’,” wrote founder Yvon Chouinard in a statement posted to Patagonia’s website.

“It’s been nearly 50 years since we began our experiment in responsible business, and we are just getting started. If we have any hope of a thriving planet – much less a thriving business – 50 years from now, it is going to take all of us doing what we can with the resources we have. This is another way we’ve found to do our part.”

Two per cent of Patagonia and all of the decision-making authority will now be owned by the Patagonia Purpose Trust, which was created to protect the company’s mission and values. The remaining 98 per cent will go to the Holdfast Collective, a not-for-profit organisation aimed at fighting the environmental crisis and protecting our biodiversity. 

Each year, Patagonia will donate the money it makes after reinvesting in the business to the Holdfast Collective. It will also continue to donate one per cent of sales each year to grassroots environmental charities.

Chouinard and his family will remain involved in the company through the Patagonia Purpose Trust, Patagonia’s board and by guiding the philanthropic work performed by the Holdfast Collective.