Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Patagonia CEO Ryan Gellert Steers a B Corp Through Turbulence
Transcript
- Lucas: When Yvon Chouinard transferred ownership of Patagonia to a trust and a nonprofit in 2022, it made global headlines. But the person actually running the company day-to-day is Ryan Gellert, and his job might be harder than any other CEO's right now. Luna: Harder how? Because Patagonia's mission is literally baked into its legal charter? Lucas: Exactly. Patagonia is a benefit corporation, which means its directors are legally required to consider not just shareholder value but also the interests of workers, communities, the environment, and the long-term health of the business. In Patagonia's case, the 'shareholder' is literally the Earth. Luna: So if a typical CEO faces pressure from activists and investors, Gellert faces pressure from activists and the planet. And he has to keep selling fleeces. Lucas: Right. The company does about one and a half billion dollars in annual revenue. It's still a premium outdoor brand competing with Arc'teryx, The North Face, and increasingly with direct to consumer upstarts. But unlike those competitors, Patagonia can't simply chase growth. Luna: And that creates real tensions. I remember reading that some retailers boycotted Patagonia after it ran a campaign telling customers not to buy its jackets unless they really needed them. Lucas: The 'Don't Buy This Jacket' campaign in 2011 — that was before the ownership change. But it set the tone. Patagonia operates under what it calls a 'circular economy' model: repair, reuse, recycle. They have a used-gear program, they repair any Patagonia product for a fee. It's built into the brand DNA. Luna: But that's expensive. Repairing a zipper on a ten-year-old fleece doesn't drive the kind of margins that selling a new one does. How does Gellert square that with running a profitable business? Lucas: That's the central tension. Gellert has said publicly that Patagonia's goal is not to grow as fast as possible but to grow in a way that doesn't harm the planet. For example, they've committed to becoming carbon neutral across their entire supply chain by 2025. But they also acknowledge they're not there yet. Luna: And that's where the rubber meets the road. Because a lot of Patagonia's carbon footprint isn't in their own operations — it's in the raw materials. The polyester for fleeces, the down for jackets, the transportation. Lucas: Exactly. So they've invested heavily in regenerative organic agriculture for cotton, in traceable down, in recycled polyester. But those inputs cost more. And if you pass that cost on to the consumer, you risk pricing out your core audience. Luna: Yet Patagonia's prices are already premium. A typical R1 fleece is around one hundred fifty dollars. I think a lot of customers are willing to pay that because they trust the brand's values. Lucas: That's the moat. But it's also a constraint. Gellert can't suddenly decide to launch a cheaper line to capture market share without diluting the mission. So instead, Patagonia focuses on durability and repairability to justify the price. Luna: What about the governance side? Chouinard transferred the company to a trust called the Patagonia Purpose Trust and a nonprofit called the Holdfast Collective. How does that affect Gellert's decision-making? Lucas: It fundamentally changes the fiduciary duty. The trust owns all the voting stock, and its purpose is to ensure that profits are used to combat climate change. The Holdfast Collective receives any dividends — about one hundred million dollars a year — and grants that money to environmental causes. Luna: So Gellert reports to a board whose mandate is not to maximize share price but to maximize environmental impact. That's a completely different set of incentives. Lucas: Exactly. In a traditional company, if you have a choice between a slightly more profitable but slightly more polluting option and a less profitable but cleaner option, the board might push for the former. At Patagonia, the board would push for the latter. And Gellert has to execute that. Luna: But he also has to manage employees. Patagonia is famous for its culture — surf breaks, on-site childcare, flexible hours. That costs money too. Lucas: It does. But Gellert sees those expenses as investments in retention and productivity. Patagonia's turnover is well below industry average. And when you're competing for talent in Ventura, California, against tech companies and other outdoor brands, that culture is a differentiator. Luna: Still, I wonder about the limits of this model. Can a B Corp really compete at scale? REI is a co-op, so it has a similar structure — owned by its members, not by shareholders. But REI has also faced criticism for not living up to its values on things like diversity and labor practices. Lucas: That's a fair comparison. REI's governance is different — it's a consumer cooperative — but it also wrestles with the tension between purpose and profit. Patagonia has the advantage of being privately held by a trust, so it doesn't have to answer to quarterly earnings calls. But it does have to answer to public opinion, because its brand is its biggest asset. Luna: And public opinion can be fickle. Patagonia has faced boycotts from conservative groups over its support for environmental activism, and it's also been criticized by some progressives for not going far enough. Gellert has to navigate that without a playbook. Lucas: He's said in interviews that he welcomes criticism because it means people care. But he also knows that if the company becomes too polarizing, it could hurt sales with the broad middle of consumers who just want a good jacket. Luna: So what's the bottom line? Is Patagonia actually making a difference, or is it just a really well-marketed brand? Lucas: I think the evidence suggests it's more than marketing. Since 1985, Patagonia has given away one percent of sales to environmental groups — that's over one hundred forty million dollars. And the Holdfast Collective is now channeling even more. Luna: But the real impact might be in influencing other companies. When Patagonia proves that you can be profitable while being sustainable, it raises the bar for everyone. Lucas: That's the hope. Gellert himself has said that Patagonia's purpose is not to be a model for other companies but to use its business to inspire and implement solutions to the environmental crisis. And he's been doing that for five years as CEO. Luna: If today was actually useful to you, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Lucas: Yeah, we don't run ads, and that's a choice. If this conversation moved your work forward in some small way, that link is the best way to keep it going. Luna: So back to Gellert — one of the things I find most interesting is how he balances the long-term vision with short-term crises. Like the pandemic, supply chain disruptions, inflation. All while staying true to the mission. Lucas: And he's done it. Patagonia's revenue has grown under his tenure, but more importantly, the company has maintained its B Corp certification and its reputation. That's not easy when you're also trying to decarbonize your supply chain and fight political battles. Luna: What do you think the biggest test will be for Gellert in the next few years? Lucas: I think it's whether Patagonia can prove that its model is scalable beyond a single brand. If they can show that a billion-dollar company can be run with purpose as the primary metric, it could change how the entire outdoor industry — and maybe other industries — think about corporate governance. Luna: That's a big if. But if anyone can do it, it's a company that legally answers to the planet. Lucas: And a CEO who wakes up every morning knowing that his only shareholder is Earth.