How can Patagonia survive as a company if it gives way all of it’s profits?
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The definition of “profits” could be stated as “stuff you don’t need to survive”
So if “cost” is everything you have to pay to make a product, and “income” is all the money you get in exchange for the product you make, then “profit” is what is left over, which usually the owner gets to keep as a thank you for making a business that works.
Crucially “Cost” includes not only the cost of materials, and the cost of labor to put those materials together, but also the cost of marketing and researching and developing those products. So when Patagonia sells a jacket, for less than it “cost” them to make it. That has to include the cost of paying the people who thought up what kind of jacket to make and made posters to sell it and so on.
And when Patagonia gets “income” for the sale of that jacket, they aren’t necessarily done paying for all the costs of being in business. They still have to pay their employees every week, including the employees who are going to think up new jacket designs for next year, and design and market and manufacture other things. The “profit” is only the stuff they are NOT going to use for that.
It’s a little confusing, because you hear a lot about small businesses “re-investing their profits” but it would be more technically accurate to say that they are “using money that *would have* been considered profit for more development costs”
The independent trust that now owns Patagonia is going to have to make the decision and the end of every quarter, to determine how much of the income Patagonia got needs to be used to pay for costs of their continued operation, versus how much is extra, how much is profit. Then they will use that profit to fight climate change.
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