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What Patagonia’s Announcement Means for ESG

Patagonia Founder, Yvon Chouinard – the “reluctant billionaire” as noted by New York Times – revealed that company ownership would be transferred to a trust and nonprofit to ensure that all profits are used to combat climate change. While Patagonia role modeled strong sustainability and climate initiatives for decades, this was a major moment in ESG for business and investing. Chouinard’s decision has shown what billionaires and large companies can accomplish through commitment and consistent action. In today’s landscape, its commonly recognized that ESG practices must be part of business strategy and initiatives. In a 2022 governance study by Harvard University, 42% of global investors indicated that their approach to ESG is driven by client expectations and reputational concerns.

Here are some takeaways inspired by Patagonia’s move and how leaders and businesses can follow suit in their own ways:

Everyone starts from somewhere

When it comes to driving ESG impact, all efforts will look different and start from different places. Often, taking action and getting started can be the challenging part. As Chouinard puts it, “It’s been nearly 50 years since we began our experiment in responsible business, and we are just getting started.” Collective impact is made up of all sizes and types of effort and action. Instead of looking at the Patagonia announcement as an unobtainable milestone, consider what you can do and what works within your current parameters and environment. Everyone starts from somewhere, whether it’s creating a mission statement, donating 1% of company sales or increasing transparency through ESG reporting, a communications strategy to educate shareholders how the company’s ESG initiatives are measured and add value to the business and society as a whole.

People-first mentality

Chouinard and his family have been vocal in their passion for their community. “Hopefully this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people,” Chouinard, 83, said in a recent interview. Embodying a “people-first” mentality authentically in business practice is a healthy way to ensure aspects of ESG are considered, with the purpose of genuinely caring for our communities and that we are all in this together.

Long-term view for long-term gains

ESG can feel overwhelming at first, especially as regulations and standards of ESG become more top of mind although still very ambiguous. Without defined standards, companies can find this harder to measure or quantify success. That being said, ESG regulations are likely coming soon, and it is wiser to be on the proactive cutting edge than it is to be catching up when they arrive. Patagonia’s history of environmental and social responsibility dates back as far as 1973, when the company invested in ethical factories to ensure high quality and integrity. They continued to fixate on various areas of their business and their contribution to ESG principles through the years.

It doesn’t take one person to save the world. It takes all of us consistently doing our part, in whatever capacity is in our wheelhouse to do so. For billionaires, companies, boards, investors, communities and families, this will look unique. And you don’t have to go it alone. At Alliance Advisors IR, we specialize intentionally in clients with an ESG focus, or those looking to integrate ESG into their brand. We can support your strategy or help you to build one.

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