This new separate structure of Patagonia can be seen, in a way, like a checks and balances system. The Purpose Trust does not receive dividends, and its main goal is to make decisions that benefit the environment, employees, and the community. The Trust is, therefore, not able to access the value or profits of the company. This way, the Patagonia board, controlled by the Trust, is not financially incentivized to maximize shareholder value or profits. On the other hand, while the Holdfast Collective receives dividends, it does not hold decision power, preventing profit-oriented decisions that could go against the company's core values and purpose.
Even with several details yet to be clarified – for example, how succession in leadership will take place or who and how the Purpose Trust terms can be enforced – this structure set a new standard for corporate commitment to purpose as it turned good intentions into fully embedded and binding structures.
“Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility. … Truth be told, there were no good options available. So, we created our own.”
Yvon Chouinard
Cultural researcher, José Luis de Vicente, suggests that first one must think about the box in itself – how and why it was built in a particular way – so they can go on to create a more fitting one. While completely dividing business from profit may not be an option for every company, Patagonia's case is one example of how long-established structures can be repurposed for the collective good.
Some other ideas on how to do that?
1/ SHARE THE CREDIT
Musicians are crediting the planet as a collaborator on their songs to ensure that a percentage of royalties generated will be given in perpetuity to EarthPercent, a charity that raises money from the music industry to fund environmental activism.
2/ GIVE PURPOSE A SEAT
This UK-based brand made Nature a director of the company giving it voting powers on how the company is run.
3/ RETHINK YOUR INVESTORS
Startups are leveraging the power of Web3 to explore community-ownership options to build more equitable businesses.
4/ DEEP (LEGAL) DIVE
Countries have different legal systems and you need to know the box before creating yours. For example, some countries, like Canada and USA, offer companies the option to become a Benefit Corporation, a model that allows them to opt into a stakeholder governance structure and consider anyone that is materially affected by a company’s decision-making in the process.
In business, we tend to think about limits and constraints as something bad. In this newsletter, we tried to show that is not always true. As Patagonia demonstrates, embedding purpose and values into strict boundaries can be the way to ensure they'll be maintained for years to come.
If you wish to go deeper into the topic, here are some other articles that we recommend:
