What is Conscious Capitalism and What Does it Mean?

January 30, 2014

- Posted by Stephen Chapek

conscious capitalism

A new business ethos is taking hold among top performers, called conscious capitalism. While this is a relatively newer term, many businesses, like us at Brilliant, are starting to adopt its principles.

For a lot of our clients, they love that we’re a conscious capitalist business. However, for those that may not fully understand what that means, this article will help you understand it better by answering three important questions.

What is conscious capitalism and why is it important?

The business environment of the last five years has been challenging to say the least. The Great Recession has sent many people and businesses into bankruptcy. Consumer confidence is down, spending is down, and many industries are in transition, the victims of changing technology and a softening market place. And yet there are some silver linings: the stock market is at an all-time high; many innovative companies are challenging established paradigms and attaining record profitability; the housing market and consumer spending are slowing bouncing back.

In these challenging times, we see a mixed dynamic. In the business world, top performers and innovators are rising to the the top and thriving. The other side of the coin is that under-performers and average performers are losing ground and falling behind. In a winner take all world, there isn’t much room in the middle to maintain the status quo.

What are some examples of conscious capitalism in action?

So what is it about these top performers that are making them excel? You could chalk it up as new technology and new players exploiting new market niches, but there is more to it than that. One of those “it” factors I believe is a move away from simply marketing new products and services and moving towards a new philosophy in doing business.

That new philosophy is more holistic, people-centric view of the world that values engaging consumers on a more personal basis that takes into account people’s deeply held values. Beyond the product or service, when consumers buy something, they are also engaging in a search for meaning and values, whether they realize it or not. After all, people enjoy doing business with individuals and organizations that share their values and make them feel good about their impact in the world. And the companies that are responding to this trend in kind are gaining market share.

There is a new movement that is springing up, and it is gaining traction among start ups as well as Fortune 500 companies, that addresses this shift. And it is called “Conscious Capitalism.” What started out as a small movement embraced by small scale entrepreneurs and academics is slowly starting to become mainstream.

Who are some examples of companies practicing this model and what are their results?

We can say this with confidence because some of the largest, best-known and most successful companies in the world have adopted conscious capitalism as a business model to various degrees, companies like Starbucks, Google, Amazon.com, Whole Foods Market, UPS and Southwest Airlines. In part, due to their leadership and market position as trendsetters, we can see that this movement  is starting to supplant the mainstream business convention of “Profit above all else” that was so in vogue in the 80’s.

Conscious Capitalism can come in many different forms and can be practiced in many different ways, but let’s talk a look at some of the essential elements of this new megatrend.

Whereas the old way of business might be summed up as regarding profitability as the only measurement of success in business, and ethics be damned, the new measure takes into account the multifaceted and interconnected complexity of life that we all have a stake in. Individuals are not just consumers and data-points, individuals are people first: spiritual beings who are members in families and communities, civic organizations and part of a rich biological and economic ecosystem with many inputs and outputs.

Here is the bottom line with Conscious Capitalism; there is not one bottom line (profitability), but three: people, planet and profits. In other words, to satisfy the criteria of conscious capitalist, enrichment needs to flow to all three of these areas. And it should also go without saying, this credo also means that no harm should be done in these three domains. Because if a corporation is causing harm to consumers or the environment through toxic policies or products, then they can’t rightfully claim to be conscious capitalist, even if they are doing other things right, like paying their employees well or donating to a charity.

The Key Concepts of Conscious Capitalism

Another fundamental concept of conscious capitalism includes creating ‘shared value’ among all of the different stakeholders in a business. In traditional capitalist thought, the only stakeholders that matter are the shareholders and investors who own the business and provide its original funding. In conscious capitalism, the concept of who is an important stakeholder expands to include all the important groups that make up a functioning business: employees, consumers, suppliers, investors of course, as well as the community-at-large (which might be directly impacted by a company’s business practices, or those who are simply neighbors) and last but not least, the physical environment itself.

This is a much broader community to engage with and it requires a more sophisticated approach in conceptualizing a business and its effects. Conscious capitalist recognize the interdependency of the different stakeholders to create the whole. A part of the recognition is in creating a culture that supports the stakeholder culture. That entails discovering what the true purpose of a business is (other than making money, how does a business serve its customers and its community), involving the stakeholders in the process of determining ends and means, as well as investing in conscious leadership and creating a conscious culture that moves a business in the direction and fulfillment of its higher purpose.

That means having to come up with specific efforts and programs to make a real difference in each of the bottom lines of the business. So concretely, helping out the people aspect of the business might mean improving the employee benefit program, or nurturing a wellness and healthy living  culture in the workplace, creating community outreach programs or the use of fair trade materials for manufacture or sale, or even providing assistance to communities who supply the raw materials, like coffee farmers in Central America, for example.

These type of initiatives would be repeated throughout the organization and target each of the bottom lines of the business. In terms of serving the planet and mitigating the polluting effects of one’s business might involve instituting an extensive recycling program, using green energy at the workplace or factory, such as solar and wind, purchasing materials from organic and sustainable farmers for food companies, or adopting sustainable product packaging. Many top corporation have already been using programs such as these for many years, but often in a piecemeal fashion or mainly to get good PR. But the for conscious capitalist, these efforts would be systematic and comprehensive as well as integrating deeply with a company’s higher purpose, perhaps even to the extent of evolving and improving a company’s state purpose. While this might result in good marketing and PR, these gains are more like a by-product of the main goal, instead of just trying to make oneself look good.

But doing good to others doesn’t exclude doing good for yourself, either, particularly in the realm of profitability, which after is one of the main bottom lines. And profitability is what distinguishes a consciously capitalist business from a social enterprise or non-profit. It is still in business to make money, and if it can’t, it might not survive as business, even if it is doing good.

But luckily, many businesses that do actively practice conscious capitalism, or even just parts of it have done rather well for themselves. That is because people like what they are doing, and want to continue to do business with organizations that provide a valuable service as well as helping those who come in contact with it. So it turns out conscious capitalism is a pretty good business strategy after all!

Conscious Capitalism, the Win/Win/Win

One of the main conscious capitalist evangelists, John Mackey, who is the co-CEO and founder of Whole Foods Market, had this to say about the practice, “People need to start thinking in terms of synergies instead of trade offs in business. When you have a win/win/win situation, a win for the consumer, a win for the employees and a win for the community, that results in greater sales and in happier customers, and in turn greater profits.”

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Topics: Concious Capitalism

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