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Patagonia Road Tests New Sustainability Legal Status

Among companies with altruistic streaks, Patagonia has long stood out for the environmental philanthropy championed by founder Yvon Chouinard. The maker of outdoor clothing and gear has redirected a portion of profits to green causes since 1986 and discloses the chemicals it uses in its products. Patagonia appeared to take this spirit to its logical extreme on the retail industry’s “Black Friday” in late November, when it bought a full-page advertisement in the New York Times showing a picture of its R2 Jacket beneath the words “Don’t Buy This Jacket,” an ironic, or at least equivocal, plea to consume less.

Today the law has finally caught up with Patagonia’s do-good efforts -- California law, to be precise. The company, based in Ventura, announced it will become one of the state’s first “Benefit Corporations,” a new legal structure that gives directors legal cover to consider social and environmental missions over financial returns. The law creating the Benefit Corporation is one of two state measures that went into effect January 1. They’re each designed to embed goals beyond profitability into companies’ missions. The other law establishes “Flexible Purpose Corporations,” a model with greater leeway than the first. Governor Jerry Brown signed them both into law on Oct. 10 after political jockeying among supporters of each approach.