Look at the nonprofit world and you’ll see all sorts of organizations that are midway between nonprofits and corporations. There are organizations like the Chan Zuckerberg Initiative, which are corporations rather than nonprofits because they want to feel free to invest in entrepreneurial activities rather than be limited to giving grants to 501 c 3’s.
Finally you have B Corporations. As I understand it, there are several definitions of B Corporations and I’m not sure whether or not they’re legally different from more traditional corporations, but these are social enterprises that engage in philanthropic activities while making a profit. One of the largest and oldest of these is the clothing company Patagonia, whose co-founder, Yvon Chouinard, is profiled by Nick Paumgarten in this New Yorker article.
Chouinard was born in Maine in 1938, and in many ways comes across as a rugged Yankee eccentric. There are three or four months every year where he spends hiking or fly-fishing, usually in the woods of Montana or Wyoming. He doesn’t have a cell phone and refuses to use email, so the only way his wife and co-founder Malinda Chouinard can keep in touch with him is to send emails to people she thinks he might be in touch with during his time in the woods.
On the surface, you’d think Chouinard would be someone impossible to like. He’s a hard-left environmentalist who thinks the world is on the edge of ecological apocalypse. Paumgarten got him to listen to Hillary Clinton’s acceptance speech at the Democratic convention, and after hearing her devote one sentence in the speech to saying, “I believe in climate change” before moving on to other topics, responded, “That’s abysmal. Jesus Christ. We’ve got another Obama—a city kid who’s never been out in nature.”
Moreover, the sorts of people who buy lots of Patagonia products—well, let Paumgarten describe them:
“In its presentation of hale young adventure athletes, living righteously in Edenic locales, all of them with just the right amount of dishevelment and duct tape, the catalogue can emanate the passive-aggressive piety of a food-co-op scolding. It unwillingly celebrates a kind of countercultural conformity. This neo-Rockwellian idyll of desert-dawn yoga sessions, usefully toned arms and abs, spectacularly perilous bivouacs and bouldering slabs, hardy kids and sporty hounds can feel like a rebuke if you are in a sofa in the city.”
This sort of “eco-conscious fun-hoggery” extends to Patagonia’s corporate headquarters in Ventura, California. Go there and you’ll find the receptionist calls himself “Chipper Bro,” is a former freestyle Frisbee world champion who extends invitations for dawn surfing sessions to strangers and concludes conversations with, “Nice hangin’ with you.”
However, after reading the article, I not only had a lot of admiration for Chouinard but respect for Patagonia’s corporate values and their philosophy of giving.
Chouinard’s enterprise began as a sideline for his passion for mountain climbing. He realized the pitons he used to climb were made of iron and had to be left in the mountain. So he taught himself blacksmithing and learned to make reusable pitons from chrome steel.
At one point in the early 1960s he was jailed for 18 days for “having no visible means of support,” but climbers respected his pitons and his business grew slowly, especially after he began to add sturdy clothes to his merchandise. They had all sorts of other innovations, most notably fleece. The company had a major financial crisis in 1991, which it solved by borrowing money from Argentine investors who wanted to take their money out of that country’s floundering economy.
As a sideline, the company created a day care center, which now takes care of 80 children. “We’ve raised fifteen hundred kids so far,” Chouinard says. “None of them have been in prison—that I know of, anyway.”
Patagonia was one of the first companies to qualify as a B Corp. Some of this came from certifying that its suppliers treated their employees decently and paid them reasonably well. Another part comes from a rule the company has that it doesn’t want you to buy its clothes unless you need them. Some of this seems like the sort of marketing comparable to those Sprite ads where LeBron James insists, many many times, that he’d never tell you to drink a Sprite. But Patagonia has a lifetime guarantee on its products and also has sections in its stores where customers can get their clothes repaired and buy used clothes. These practices make good sense to me.
Patagonia decided to go beyond the usual corporate practice of donating 10 percent profits to a larger commitment: one percent of their sales. They say this has amounted to $75 million in the past decade.
You might cringe at this, but according to their grant guidelines here are organizations they won’t fund:
- “General environmental education efforts”
- “Land acquisition, land trusts, or conservation easements”
- “Environmental conferences”
- “Endowment funds”
- “Political campaigns”
What they do like are “small, grassroots, activist organizations with provocative direct-action agendas.” The example in Paumgarten’s piece is a grant to a filmmaker who stopped a dam on the Sustina River in Alaska after showing how the dam could hurt salmon. So they do engage in politics, but to local groups directly involved in a local campaign.
Patagonia should get points for not funding giant national organizations that spend most of their time inside the Beltway lobbying Congress and the EPA. I’d prefer that they not spend any money on politics, but they at least get points for stressing localism.
We can all learn from Yvon Chouinard—how to create a company that follows your principles, and how to give without having your wishes compromised by third parties. The rules about donor intent apply to everyone, and Patagonia is a good example of an organization that spends its grants on causes that its creators strongly support.
Whether or not you like the groups that Patagonia funds, everyone can learn valuable lessons from Yvon Chouinard’s philosophy of giving.