Since the dawn of corporate social responsibility, Patagonia has been its pioneer and poster child. The company was founded on the principle that the business's bottom line was more than just monetary. As early as 1974, founder Yvon Chouinard published an essay in the Patagonia catalog urging climbers to be more conscious of their motives and to tread lightly on their climbing environments. Today, the company's mission is defined in terms that clearly reach beyond profit: "Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis."
Patagonia's history may explain why 72-year-old Chouinard was literally first in line at the California Secretary of State's Office on Tuesday to register the company as a Benefit Corporation, a new legal status for businesses. Legislation creating this new designation in the state of California passed into law back in October and came into effect at the start of the new year. The new legal structure provides businesses with a way to integrate considerations for social and environmental efforts more fully into their operations while also giving them legal protection from shareholders concerned solely with protecting their financial interests. Under the current corporate law, shareholders can sue company boards for using company money to pursue social or environmental issues in the name of maximizing profits.
By registering as a Benefit Corporation, a company is committing itself to:
- Creating a material positive impact on society and the environment
- Expanding its fiduciary duty to require consideration of non-financial interests when making decisions
- Reporting on its overall social and environmental performance using recognized third party standards