Patagonia sells the entire company to fight climate change

When Patagonian founder Yvon Chouinard announced last week that he and his family members would give the company away to use its profits to combat climate change, the move was hailed as historic and extraordinary by philanthropic experts.

The outdoor activity retailer, with a history of sustainability and environmental efforts, once told people to “think twice” before purchasing one of its iconic jackets. Now, in the wake of their decision to divest the company, some observers are actually thinking twice about whether the giveaway is actually that revolutionary.

According to some legal experts, it’s a typical tax move.

Chouinard, his wife and their two adult children have transferred all of the company’s voting shares, or 2% of all shares, to the newly created Patagonia Purpose Trust, the New York Times first reported. The remainder of the company’s stock has been transferred to a newly created welfare organization, the Holdfast Collective, which will inject a $ 100 million projection annually into environmental nonprofits and political organizations. Patagonia Purpose Trust will oversee this mission and business operations. The giveaway was valued at around $ 3 billion and did not deserve a charitable deduction, with the family paying $ 17.5 million in donation tax to the fund.

Although this move is revolutionary in the philanthropic world, New York University law professor Daniel Hemel told Quartz that the tribute allowed the family to reap the rewards of a tax law ploy commonly used by philanthropists. The Chouinard family paid more than $ 17 million in taxes when all was said and done, however, Hemel noted that the payment is a small percentage of the donation made and how the trusts and government organizations have functioned. however allowed the family to call the shots on both the company and its future charitable contributions.

The Chouinard family’s gift has been likened to a recent move by conservative billionaire Barre Seid, who sold his entire company for $ 1.6 billion to fund right-wing political action. When the New York Times reported on Seid, it was noted that his transaction was shadowed by dark money, while Patagonia’s was historic, despite both billionaires funneling money into 501c4 organizations. Hemel drew this juxtaposition to both Twitter and in his recent interview, in which he stated that the gifts were “substantially similar”.

Billionaires use charitable donations to address a variety of issues, from right-wing politics to wildlife conservation. Northeastern University communication and public policy professor Matthew Nisbet has been outspoken against the role played by philanthropy and billionaires in climate change and told Grist that the newly announced decision on Patagonia could be applauded by many in environmental industries, but Yvon Chouinard has essentially gone from a reluctant billionaire to a political fat cat.

“Now that they have invented this (model) and brought it to market for politically motivated billionaires, regardless of their background, everyone will do it,” Nisbet said. “This is a zero-sum political arms race escalation.” With the creation of the new 501c4 Holdfast Collective, Nisbet compared this new organization to other major political spending groups, such as the National Rifle Association and the conservative Club for Growth.

Portrait of Yvon Chouinard, the founder of Patagonia, sitting at a desk writing on a piece of paper and looking into the camera
Yvon Chouinard, the founder of Patagonia.
Campbell Brewer

A 501c4 organization, considered a tax-exempt social welfare organization by the Internal Revenue Service, is not required to disclose its donors but must disclose money granted to other organizations of $ 5,000 or more. 501c4 organizations can engage in political lobbying and support candidates related to their organizational mission. *

Nisbet feared that the influx of money controlled by an interest group would push the climate agenda in the political realm. “Do you think our policy should be decided by billionaires who can spend hundreds of millions of dollars in elections without accountability, without transparency and pick and choose winners or pick and choose issues?” he asked her.

The lack of transparency in political spending and philanthropy has tarnished public perception of charitable donations, resulting in a long-standing scrutiny dating back to the creation of its eponymous foundation by 20th-century oil baron John D. Rockefeller. The 501c4 organizations have funded Facebook advertising against the climate and directly influence climate legislation at the state level, with little knowledge of who is funding these actions. While the source of Holdfast Collective’s funding will come directly from Patagonia’s profits, Nisbet said he feared the new organization could become a way for other billionaires to donate and influence climate problems. Modern billionaires have taken climate change, the environment and agriculture under their charitable wings more often in recent years, despite the fact that 10% of the richest people in the world produce half the carbon emissions of the globe.

Future billionaire Jeff Bezos created a $ 10 billion Bezos Earth Fund in 2020, but Amazon has been criticized by watchdogs for underestimating its carbon footprint, punishing climate-focused workers, and polluting neighboring communities. Bill Gates has focused his philanthropy on agriculture and world hunger, while critics accuse him of devouring American farmland and cornering the seed market. Both Bezos and Gates have invested billions in technology-centric climate solutions, as well as Tesla founder Elon Musk has also offered $ 100 million for carbon capture innovations.

Patagonia has increased its political presence in recent years when she went to the courtroom to fight for the conservation of the Bears Ears National Monument in Utah and joined legal battles against logging, as well as commenting on voting rights. The outdoor retail giant has a long history of charitable giving, as it has donated 1% of all profits to environmental causes for decades and donated $ 10 million in tax cuts to climate advocates.

Patagonian spokesman Corley Kenna told Grist that, at this time, there are no publicly announced organizations that the company’s future funds will go to, but “all options are on the table.” He said Chouinard and the Holdfast collective are interested in addressing the root causes of the climate crisis, including protecting land and water, granting grants to groups on the ground, and solutions-focused funding policy.

The spokesperson strongly scolded criticism that the recently announced business transition is not rooted in transparency and will fuel untraceable funds, citing Patagonia’s long history of transparency over its production, donation and leadership.

“Yvon Chouinard, the Chouinard family and the Holdfast Collective are not an extension of a political party,” Kenna said. “What we are talking about here is a family committed to facing the existential crises that plague our planet.”

With big names and affluent families joining the fray, climate-focused philanthropy has grown in recent years, but still accounts for less than 2% of global donations, according to a report last year by the ClimateWorks Foundation. Shawn Reifsteck, vice president of strategy and communications for the foundation, said Patagonia is “learning a new way for companies to give back for generations to come” and hopes others will follow suit. Philanthropic strategist Bruce DeBoskey said that more and more philanthropists are recognizing that the traditional model of writing checks and giving grants has been unsuccessful in solving general social problems, and billionaires are adopting new models of giving, such as the Chouinard family giveaway.

“These are not changes to the tax laws that I am aware of,” DeBoskey said. “It’s about changes in thinking.”

Editor’s Note: Patagonia is an advertiser for Grist. Advertisers play no role in Grist’s editorial decisions.

*Correction: This story originally misidentified the political capabilities of a 501c4 organization.

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