Can a clothing company save the planet? Patagonia wants to find out.

Patagonia's monumental donation could inspire other companies to do the same.

September 24, 2022, 10:20 AM

If there was any doubt about where outdoor clothing company Patagonia stood on environmentalism, it was quickly put to rest last week when founder Yvon Chouinard and his family donated their ownership to efforts that would protect the planet.

"Earth is now our only shareholder," Chouinard wrote on Patagonia's website.

But can the generous donation from a billionaire -- this one valued at more than $3 billion -- and the spoils from his successful retail company move the needle on finding solutions to mitigate global warming?

Experts told ABC News that the unprecedented move itself won't be enough to make significant strides in curbing emissions and the rise in global temperatures. But the domino effect that results from inspiring future philanthropists to make similar donations could reverberate throughout the climate fight, they hypothesized.

The drastic nature of the move is emblematic of the dire consequences that could result if major action is not taken, Hans Cole, head of environmental grants, campaigns and impact for Patagonia, told ABC News.

"It really just acknowledges the increasing urgency around the crisis -- around climate, around biodiversity, and around how those impact people and communities around the world," Cole said.

In this undated file photo, a petrochemical plant is shown in China.
STOCK IMAGE/Getty Images

Here is what experts have to say about the monumental donation:

How the Patagonia donation is different from other billionaire philanthropy

Donations from the wealthiest Americans occur on a regular basis but rarely draw as much attention as the gift made by Chouinard.

The donation differs from most billionaire philanthropy for two key reasons.

First, the donation involves the giving away of Chouinard's company. Chouinard gave up nearly all of his shares in Patagonia and vowed to donate the company's annual profits. However, the maneuver draws on a two-tiered stock system of voting and non-voting shares, allowing Chouinard to retain control of the company.

Under the arrangement, Chouinard donated 98% of his non-voting shares in the company to a nonprofit, the Holdfast Collective. However, 2% of the shares -- which make up all of the company's voting shares -- will be retained in the Patagonia Purpose Trust.

"The Chouinards have total control of Patagonia through the trust, and they're giving everything else away," Daniel Hemel, a law professor at New York University, told ABC News.

The move is "unusual but it's not unique," Hemel added, noting that dual-class share structures are used at companies such as Google and The New York Times. He also cited a similar model of philanthropy undertaken by Facebook CEO Mark Zuckerberg. "Zuckerberg has mostly control of Facebook through the shares he's retained and he's giving some of it away," Hemel said.

Hemel said he lends "credence" to the rationale for continued control of Patagonia offered by Chouinard, who said the maneuver will allow him to protect the company's commitment to environment-friendly values.

The second feature of the donation that distinguishes it centers on the nonprofit formed by Chouinard, which will allow him to pursue political advocacy and donate to political candidates.

Most large-dollar philanthropy made by wealthy people goes to 501(c)(3) organizations, such as the Gates Foundation, Hemel said. Donations to such organizations are tax-deductible, but the groups are forbidden by law from participating in political campaigns or giving to political candidates.

However, the nonprofit created by Chouinard as the recipient of this donation, the Holdfast Collective, is classified as a 501(c)(4), which means the gift forgoes an income tax deduction but the organization can participate in politics. The Collective "can advocate for causes and political candidates in addition to making grants and investments in our planet," Patagonia said on its website.

In this undated file photo, Torres del Paine mountain range is shown in Patagonia.
Steve Fleming/Getty Images, FILE

Philanthropists have made giant donations to the climate fight in the past

The donation from Chouinard, valued at more than $3 billion, joins a flurry of large-dollar philanthropy in recent years focused on the climate. While Chouinard's donation is smaller than that of some of his peers, the Holdfast Collective differs from other climate philanthropy because of its capacity to participate in political campaigns.

In 2020, Amazon Executive Chair Jeff Bezos pledged $10 billion to address climate change with the formation of the Bezos Earth Fund, which does not support political candidates. So far, the organization has granted $1.54 billion to programs that range from restoring mangroves in Columbia and Fiji to empowering grassroots environmental justice groups and providing technology for farmers in India.

Last year, Laurene Powell Jobs, the widow of late Apple founder Steve Jobs, pledged $3.5 billion to fight climate change through the Waverley Street Foundation, an organization formed by Jobs in 2016.

It aims to address the problem by supporting local groups in communities worldwide that are "at work in the trenches of the battle for a livable planet," the organization said last month. As a 501(c)(3), the Waverley Street Foundation is not allowed to participate in political campaigns.

Meanwhile, the ClimateWorks Foundation, which says it has granted over $1.3 billion to more than 600 grantees in over 50 countries, uses environmental expertise to channel donations for projects worldwide. As with the Bezos Earth Fund, the ClimateWorks Foundation supports a wide range of programs, including efforts to remove carbon dioxide from the atmosphere and reverse forest loss.

The ClimateWorks Foundation doesn't participate in political campaigns, either, as it's also a 501(c)(3).

The approach from Chouinard -- a significant departure from most billionaire climate giving -- allows the organization to amplify its impact, Hemel said.

"What the Chouinards realize is that effective action to protect the planet from climate change is going to need to be government action," he said. "Three billion dollars potentially can make a difference in elections."

If they were to spend "a fraction" of the $3 billion on a U.S. Senate race, for example, that ends up changing the Senate majority, "then they could be leveraging that fraction of $3 billion into hundreds of billions in additional climate investment," Hemel added.

Harvey Dale, a professor of philanthropy and law at New York University, echoed the view that the scale of private giving on climate-related issues pales in comparison with public spending.

"I suppose if you took all the money in all the foundations in the country -- many hundreds of billions of dollars -- you would say, 'Wow, how about that,'" Dale told ABC News. "It's a tiny bit compared to the amount [President Joe] Biden recommended in legislation just a year or two ago."

To adequately address climate change, the scale of public investment must far outweigh that of the donor community, Dale said.

"The amount of money in the philanthropic sector is a drop in the bucket compared to how much the government would spend," he added.

In this Feb. 10, 2012, file photo, workers sew blue jeans in a little workshop by the street, in Xintang, Guangdong province, China.
Lucas Schifres/Getty Images, FILE

The donation follows the company's ethos of sustainability

Patagonia has decades of experience in working to make its carbon footprint as small as possible in addition to tackling aspects of the environmental crisis, Cole said.

The company says it uses materials with lower environmental impacts, has cleaned up parts of its supply chain and encourages practices such as a program that allows customers to sell or trade their used pieces.

"It has been a 50-year journey for us, absolutely throwing everything we can, all the resources possible," Cole said.

In the past few years, Patagonia has increased its environmental commitments, even changing its mission statement to saving the planet, Cole said. Customers who wear the Patagonia brand, often those committed to sports and pastimes that keep them out in nature, tend to agree with the goals.

Even after the transfer of ownership, Patagonia will continue to donate 1% of its sales each year to grassroots environmental nonprofits, according to its website.

A Patagonia store is seen on Greene Street on Sept. 14, 2022, in New York.
Michael M. Santiago/Getty Images

The unprecedented donation could inspire more

Experts say that Patagonia could inspire other companies and wealthy philanthropists to join the race to mitigate climate change.

Patagonia hopes that as many businesses and organizations as possible will replicate or take pieces of their plan and adapt it to their unique situation, Cole said.

"We want this to have legs," he said.

Tailoring to the needs of companies of different sizes and operations will also be key, John Forrer, director of the Institute for Corporate Responsibility at George Washington University, said.

"You have your own company interests, you have your own company values, you have what your stakeholders think is a good idea," he told ABC News.

With any company that dedicates funds and a portion of its mission statement to the climate crisis, it will be important that it's not done with the sole intent of "corporate greenwashing" as a cheap PR stunt, tax breaks or profit motives, Rachel Cleetus, policy director and lead economist at the Union of Concerned Scientists' climate and energy program, told ABC News.

Rather, businesses need to really care about issues such as transitioning the economy to clean energy to make a difference -- something the Chouinard family has exemplified, Cleetus said, adding that there are many businesses that claim publicly they are for climate solutions but are actually lobbying for policies that undermine climate progress.

"Patagonia is in a whole different class, they're actually walking the walk. That's what we need more businesses to do," Cleetus said.

Patagonia founder Yvon Chouinard is shown at home in Wyoming.
Patagonia via ZUMA Press

The world can't rely on the generosity of billionaires, experts say

Making meaningful gains in the urgent fight against global warming will require much more than donations from a handful of exceptionally rich individuals, the experts said. Especially since just 2% of global giving is allocated toward climate change mitigation, according to a report published in May by the Candid.

It will take systemic change across many sectors to fix a broken system that causes more harm to the planet, Cleetus said.

"The scale of the immensity and the urgency of the climate crisis is such that it won't be enough to have a few very rich people donate money," Cleetus said.

Cole added that the Chouinard family is aware that Patagonia, even with its lofty mission, can't solve the climate crisis on its own.

"We need, frankly, the entire business community and governments and civil society to work together to get this done," Cole said. "We can't do it alone. Patagonia can't do it alone."

In addition, those in charge of the funds will need to ensure they are allocated to the most appropriate sectors, the experts said.

Frontline communities -- or communities that will be most impacted by climate-related weather events as they intensify in the future -- should be prioritized, as well as impoverished and marginalized communities, Cleetus said, adding that the climate crisis is "inequitable at its core."

"It's often Black and brown and indigenous communities and very low-income communities -- so seeing where the needs are most acute," she said. "Very often, there are also communities that are bearing the brunt of pollution from fossil fuels and have for a long time."

Public policy from governments around the world to assertively address the challenge will be necessary, and philanthropy can help move the needle in that regard by providing assistance to governments when conceptualizing those policies, Jennifer Kitt, president of the Climate Leader Initiative, told ABC News.

This was evident two decades ago when philanthropies helped to pass policies to put solar panels on rooftops to generate power, which was a "huge challenge" -- especially when incorporating them into building codes, Kitt said.

The money could also be well spent on investing in new technologies that are "actually going to make a difference" in reducing greenhouse gas emissions, such as batteries and other forms of renewable power, Forrer said.

Educating the public about how the climate crisis affects them -- such as how the war in Ukraine is causing oil prices worldwide to skyrocket -- will also be a crucial way to use the funds, the experts said.

"Philanthropists can be quite influential in the ways that move too slowly and not to scale," Kitt said.

ABC News' Tracy Wholf contributed to this report.