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Annual Benefit Corporation Report ® Annual Benefit Corporation Report Fiscal Year 2019 May 1, 2018 – April 30, 2019 Introduction Patagonia Works (“Patagonia”) is an outdoor apparel company with a more than 40-year history of environmental conservation and activism. In 2018, we changed our mission statement to amplify this directive: “We’re in business to save our home planet.” Patagonia became a registered benefit corporation in 2012, on the first day we were legally able to in the state of California. In doing so, Patagonia and our subsidiaries, Patagonia, Inc., Great Pacific Iron Works, Patagonia Provisions, Inc. and Fletcher Chouinard Designs, Inc., adopted six specific benefit purpose commitments (which you’ll find listed and described within) that govern our operations at the most fundamental level. This report shares the work we’ve done during our fiscal year 2019 (May 1, 2018 – April 30, 2019) to advance public benefit and implement our specific benefit purposes. 1 Patagonia Benefit Purposes 1% for the Planet® 3 Build the Best Product with No Unnecessary Harm 6 Conduct Operations Causing No Unnecessary Harm 10 Sharing Best Practices with Other Companies 13 Transparency 16 Providing a Supportive Work Environment 19 In Closing 23 2 Fiscal Year 2019 Annual Benefit Corporation Report 1% for the Planet® Each year, we contribute one percent (1%) of our annual net revenues to nonprofit charitable organizations that promote environmental conservation and sustainability. 3 1% for the Planet ® 1% for the Planet A nonprofit we co-founded in 2002 that commits Patagonia to donating 1% of net revenues in cash and in-kind donations every year, primarily to grassroots environmental nonprofits. $116,000,000 Dollars, and dollar value of other forms of assistance, given to support environmental work since we started our tithing program in 1985. $10,000,000 Dollars of donations we made on top of our 1% commitment, using money we saved as the result of the Trump administration’s corporate tax cuts. 994 Grants funded in FY19 to 929 organizations. 450 Employees who are actively involved in grant- making and deciding which environmental organizations Patagonia supports. $5,000,000+ In grants made to groups fighting to protect lands and waters. $400,000+ In grants made to groups working to advance renewable energy. $1,000,000+ In grants made to groups working to scale many of the tenets of regenerative organic agriculture and help more farmers implement practices to improve soil health. 4 Highlights plants in the Balkans. In addition, in December the European Parliament passed a resolution highlighting the environmental $10 Million Tax Cut risks of small hydropower dams and pointing out that they are not in line with the European Union’s own environmental For decades, Patagonia has paid what we call a self- standards. And the Council of Europe’s environmental watchdog imposed Earth Tax through our commitment to donate 1% (the Bern Convention—Convention on the Conservation of of sales each year for the planet. Those funds go directly to European Wildlife and Natural Habitats) called on the Albanian thousands of scrappy, dedicated groups of people around government to halt the hydropower dams on the Vjosa River and the world fighting to protect their own backyards. Why? recommended that the issue be examined by a group of experts Because we believe these seemingly small battles are the to develop principles for hydropower plants in protected areas. most effective way to advance complicated environmental issues in the public mind. We also pay our fair share of Climate Change and Public Lands federal and state taxes. This past year, when the Trump On February 13, 2019, Patagonia’s director of environmental administration initiated a corporate tax cut, threatening campaigns and advocacy, Hans Cole, testified to the House critical services (including those required to support the Committee on Natural Resources, Subcommittee on National health of our planet), Patagonia took $10 million of the Parks, Forests, and Public Lands at a hearing titled Climate taxes saved and, instead of putting the money back into our Change and Public Lands: Examining Impacts and Considering business, put it back to work for the planet. As a result, in Adaptation Opportunities. On the same day, we delivered a FY19 we gave away an additional $10 million on top of our letter to all members of Congress outlining Patagonia’s policy regular 1%, to nonprofits committed to protecting air, land priorities as they relate to the climate crisis. One of these priorities and water and finding solutions to the climate crisis. Our is protection of our nation’s public lands and waters. An average home planet needed this break more than we do. of 24% of all national emissions of carbon come from fossil fuels Fighting for takayna / Tarkine produced on federal lands and offshore waters. As a result, land and water protection can directly reduce our climate impact In May 2018, the Patagonia Australia team launched while contributing significantly to long-term carbon storage takayna, a film about the fight for an ancient rainforest in and climate resilience for wildlife and humans alike. During northwestern Tasmania and the future of one of our last wild the same week that our testimony was delivered in D.C., the places. Tens of thousands of people watched the film online John D. Dingell, Jr. Conservation, Management, and Recreation and 270,000 signed our petition urging the premier of Act of 2019—a bill championed by Patagonia and many of our Tasmania to nominate takayna / Tarkine for World Heritage grantees—was also moving through Congress. When signed into protection. We hosted rallies and events to support the law on March 12, it became the largest omnibus lands protection cause, culminating in a race along the rugged takayna / act in over 10 years, protecting 1.3 million acres of wilderness Tarkine coastline. Pro runners and Patagonia ambassadors and 620 miles of river, and providing permanent reauthorization Krissy Moehl (USA) and Grant Guise (New Zealand) ran in of the Land and Water Conservation Fund, a federal program support of protecting takayna / Tarkine as a World Heritage established in the 1960s that uses fees and royalties paid by oil Area. Runners raised over $100,000 to support the Bob and gas companies drilling in federal waters to pay for onshore Brown Foundation, a grassroots environmental group conservation programs. dedicated to protecting Australia’s wild and scenic natural places of ecological and global significance. Challenges Regulatory Rollbacks Saving the Blue Heart of Europe The current administration has made de-regulation a top In 2018, Patagonia Europe launched its Blue Heart of Europe priority, claiming to have already canceled or delayed over campaign, aimed at protecting the Balkan region from more 1,500 planned regulatory actions. One of the president’s than 3,000 proposed hydropower projects and bringing first executive orders was to reduce regulation and control international awareness to the issue. The multimedia campaign regulatory costs. In reality, each of us bear the enormous included a website, a documentary film and a petition that costs of deregulation by losing basic protections, including delivered 125,000 signatures to the headquarters of the the right to live and raise our children on a healthy planet. European Bank for Reconstruction and Development in London, As the environmental rollbacks continue, placing polluters’ one of the big financial stakeholders in the project. One year profits above all else under the guise of reform, we will later, the European Bank for Reconstruction and Development continue to fight for a healthy environment and the freedom adopted stricter transparency standards for loans granted for to breathe clean air and drink clean water for ourselves and renewable energy projects, specifically for small hydropower future generations. 5 Fiscal Year 2019 Annual Benefit Corporation Report Build the Best Product with No Unnecessary Harm We endeavor to build the best products, while causing no unnecessary harm to the planet or its inhabitants by: 1) Designing and fabricating the highest quality products as defined by durability, multifunctionalism and non-obsolescence; 2) designing and fabricating products that are easily repaired and made from materials that can be reused or recycled; 3) designing and fabricating products with minimal impacts throughout the supply chain—including resource extraction, manufacturing and transportation—on water use, water quality, energy use, greenhouse gas emissions, chemical use, toxicity and waste; and 4) partnering with customers to take mutual responsibility for the life cycle of our products, including repair, reuse and recycling. 6 Build the Best Product with No Unnecessary Harm 9.12 49,200 Average quality score on a 1–10 scale (10 being Number of factory apparel workers who have best), against our internal Patagonia Design earned a Fair Trade premium for their labor and Quality Attributes rating system for 212 new and received improved benefits from Patagonia’s redesigned products from Fall 2019, compared participation in the Fair Trade USA program. to an average score of 9.14 in the same period last year. This rating process serves as a way to 49,578 push our design teams to improve the overall Number of people who attended Worn Wear quality, performance and environmental and Tour events in the US, Europe and Japan. social responsibility of our products. Our Worn Wear team goes on the road with repair techs who fix products—regardless of 0.39% brand—and teach customers how to repair and Percentage of quality returns in 2019 as a take care of their gear. In North America, we percentage of sales, up slightly from .36% have been to nearly 120 locations, including in the same period last year. Returns due Patagonia stores, specialty retailers, colleges, to poor fit were at 1.4% as a percentage surf towns, ski resorts and climbing festivals.
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