Yvon Chouinard – Supporting Stakeholder Capitalism before It Was Cool

“Denying climate change is evil,” Patagonia founder Yvon Chouinard told The Guardian in May 2019. This direct, morally anchored statement is emblematic of the worldview and business philosophy of the now-octogenarian American billionaire. Chouinard made his fortune in the outdoor gear and clothing company he established in 1973 in Ventura, California. He has become a leading pro-environment voice, publicly opposing corporate actions that jeopardize the well being of the earth and future generations. Patagonia, which posted revenues of $1 billion in 2018, has maintained a strong brand identity and focus on quality that have made it iconic among both outdoor adventurers and the broader public.

A Business Built on Passion for the Natural World

Chouinard grew up in Southern California and learned how to climb before he learned how to walk. In his 20s, he began to spend about six months a year traveling and mountain climbing throughout North America and the Alps, spending only about 50 cents daily on his needs. Chouinard founded Chouinard Equipment, his first pre-Patagonia company, out of necessity, as he was unable to find the right kind of pitons for mountaineering as a teenage climber. Chouinard’s holistic view of nature has informed his leadership over the decades. Rather than seeing nature as an inert, expendable resource from which a company can derive raw materials, Chouinard views it as a kind of life force with its own innate worth that imbues everyone and everything, including every business, with life.

“Responsible” Corporate Practices

Patagonia was initially a venture to support that original firm. As Patagonia has become a powerful corporate and social force, Chouinard has kept its focus on its beginnings in the eco-conscious movement. The company sources 100 percent organic cotton for its clothing and contributes one-tenth of his profits—or 1 percent of sales if that figure is larger—to environmental nonprofits. However, even Patagonia, Chouinard has admitted, can’t achieve perfection in this regard. He has underscored that no company can be completely sustainable, by the very nature of what it takes to manufacture a product line and run a business. But at least, he declares, one can try to minimize harmful effects. For this reason, Chouinard chooses “responsible” over “sustainable” to describe his company.

Getting Real about the Real Costs of Doing Business

Chouinard has remained cynical about the ability and desire of larger public companies and multinational corporations to follow his lead. While his business model of “responsible” manufacturing has gained numerous adherents among smaller businesses, he believes that few large corporations have expressed a genuine interest in actually doing the hard work of implementing this change. Instead, he has bluntly termed many recent corporate public relations efforts to demonstrate an environmental conscience as mere “green-washing.” Nor does Chouinard believe that government has all the answers. He sees little will among established government officials to enact the kind of regulations that would drive large corporations toward better social and environmental practices. Chouinard thinks change, if it comes, will be at the grassroots level. He views consumers as the true decision-makers and hopes that they will eventually wield their buying power to compel companies and governments to improve the status quo. In this respect, as others, Chouinard has put his money—and time—where his mouth is. He recently joined a coalition that filed suit against the Trump administration after its attempts to reduce Native American land holdings in Utah. He also led Patagonia to sponsor a documentary on the dangers inherent in the commercial salmon industry. Titled Artifishal, the film debuted at the 2019 Tribeca Film Festival and received praise for its discussion of the wide-ranging economic, social, and cultural damage of salmon hatcheries and industrial fish farming.

Turning Shareholders into Stakeholders

In his book Let My People Go Surfing: The Education of a Reluctant Businessman, Chouinard described himself and the mountain climbing friends of his youth as rebels against the prevailing consumer-oriented culture of the West. And some of his contemporaries have hailed him as a kind of Steve Jobs of environmentally aware commerce. Chouinard has long served as a visible and vocal critic of contemporary shareholder capitalism and strong proponent of stakeholder capitalism. This second perspective is now gaining traction among economists, the public, and corporations themselves. Experts point out that shareholder capitalism, the view often seen as more “traditional,” is actually a fairly recent development. Economist Milton Friedman, known for promoting a narrow, free-market view that corporations are only responsible to their shareholders and exist chiefly to increase the value of those shareholders’ stock, was the leading proponent of this perspective. Friedman’s views held sway over large numbers of business and government leaders for the last decades of the 20th century. But today’s stakeholder capitalists are reaching back to an era in which corporations understood themselves to be parts of larger ecosystems. These companies knew their long-term success hinged on making real contributions to the common welfare. In stakeholder capitalism, corporations acknowledge that customers, employees, vendors, the environment, and entire communities are key stakeholders in whatever they do. From this perspective, a company’s purpose is to generate value over the long term. Instead of working to enhance shareholder value by prioritizing immediate profit, a company should work to enhance value for all of its stakeholders in an evenly distributed way. Stakeholder capitalism’s growing number of supporters believe this idea is the basis for the healthy growth and sustainability of any company. Like Chouinard, they have made a strong case for stakeholder capitalism’s superiority to shareholder capitalism on moral, as well as business, grounds.