Patagonia's profit giveaway sought to turn capitalism upside down — but it hasn't been stress-free

• Patagonia's move to dedicate its profits to fight the climate crisis didn't surprise its employees — but that's not to say the process has been stress-free.
• Just over two years ago, founder Yvon Chouinard and his family announced that they were giving away their ownership of the outdoor clothing brand to climate-focused groups that would use the profits to help protect nature and biodiversity.
• The outdoor apparel brand's restructuring — a pivotal moment in its history — has not been without its challenges, however.

A landmark decision from outdoor clothing brand Patagonia to dedicate its profits to fight the climate crisis didn't surprise its employees — but that's not to say the process has been stress-free.

Just over two years ago, founder Yvon Chouinard and his family announced that they were giving away their ownership of the company to climate-focused groups that would use the profits to help protect nature and biodiversity.

The move, which made headlines for being a novel marriage of capitalism and charity, prompted some to question whether the transformation would encourage others to follow suit.

"I don't think, internally, anyone was surprised. It was obviously a very inspiring and uplifting moment because I think it became clear that now our values will be enshrined forever into the company and the way that we do business," Nina Hajikhanian, general manager for Patagonia EMEA, told CNBC via video call.

"They didn't want to sell the company because at the end of the day, yes, they could take the profits out but then it is a one-off situation," Hajikhanian said.

"What it was really all about was to create a new way of capitalism, you know, to turn capitalism upside down and inspire other businesses to do things differently — and it felt like a real natural step," she added.

"It may have been a really big moment, but for us, it was quite normal."

Patagonia told CNBC that since announcing its shift in September 2022, the company has committed more than $71 million to environmental causes. That figure is separate from additional grants and in-kind donations made through its "1% for the Planet" program.

The Holdfast Collective — a U.S.-based charity which now owns all of Patagonia's nonvoting stock, or 98% of the company — made contributions to over 70 groups during its first year in operation. In February, for instance, it made a $5.2 million grant to The Nature Conservancy in Alabama.

'Tension points'

Patagonia's restructuring — a pivotal moment in its history — has not been without its challenges, however.

"On the one hand side, it is something that is very inspiring and gives our employees a sense, yes, we are at the right place. We do as we say, and we say as we do," Hajikhanian said.

"I think it also brings about some tension points though ... because at the same time as you invest into that really important work to make sure that we keep moving forward … when we're going though periods where the business is not as strong as it may be another year, it brings about certain tension points in conversation," she continued.

"Like, where do the funds go? Do you invest back into our business? Or do you make sure that you bring those investments via the Holdfast Collective into the areas where solutions are being created for the environment?"

"So, what we really always say, and I think that has always been true, is if you're not a company that stands on its own feet from a financial perspective, you know a healthy financial business, then you can never also be a role model for other businesses," Hajikhanian said.

The company's CEO Ryan Gellert said in late September that economic headwinds and some "major internal changes" would require 41 layoffs at the company, or approximately 1% of its global workforce.

"Many people have asked me how Patagonia has changed since its founders, the Chouinards, transferred their stock to the Patagonia Purpose Trust and the Holdfast Collective two years ago. My answer is: Not much," Gellert said in a LinkedIn post at the time.

Patagonia's CEO said the changes were made with a view to the long term, describing them as "foundationally important" for the next 50 years.

'A serious decision'

Asked whether Patagonia hopes other firms will be tempted to address the climate crisis in a similar way, Hajikhanian said that inspiring others was a key reason behind its structural shift.

Some companies have already reached out to discuss how such a move might work for them, she said, although she acknowledged that the process was far from easy.

"It's a serious decision that needs to be made," she continued.

"I would encourage everyone to think about that process, but I would say that there are other ways as well. Let's say the founder is not ready to take that step then there are many other ways to contribute [to the fight against the climate crisis]."