Conscious Capitalism

Conscious capitalism is a way of thinking about business that starts with “why” a business exists.
Credit: Will Merydith via Flickr

By staying true to its purpose, a conscious business can create transformational value for its stakeholders through voluntary, mutual exchange.

Much like a conscious person living a life of meaning and purpose, an organization is conscious when it operates in congruence with, and does not forget, its purpose.

Conscious capitalism is grounded in the following four principles:

  1. Higher purpose and core values
  2. Stakeholder integration
  3. Conscious leadership
  4. Conscious culture and management

A key aspect of conscious capitalism is its focus on stakeholders, as opposed to shareholders. While shareholders represent one group of stakeholders in a corporation, stakeholders may not necessarily be shareholders. Indeed, stakeholders may include investors, shareholders, customers, employees, suppliers, neighbors, and the general public.

While the value created for each group of stakeholders may be different, a particular stakeholder group may not be overwhelmingly favored to the detriment of the others. Conscious capitalists believe that capitalism has incredible potential for good. Furthermore, conscious capitalists believe that when capitalism is truly working properly it should not need to be defended or policed. Businesses that operate in congruence with their higher purpose are aligned with, indeed are synonymous with, social responsibility.

Start with Why

Contrary to many economic theories, the interpretation that businesses are single-purpose, profit-maximizers does not hold water.

The vast majority of entrepreneurs did not start their ventures for the sole purpose of seeking profits. Entrepreneurs start ventures because they see a problem and want to solve it.

At the earliest stages, entrepreneurs may not even be consciously aware of their purpose, but their ventures exist to solve a problem and profits are a byproduct of this entrepreneurial purpose. While very few customers actively seek to engage with companies whose sole purpose is to create profits, customers are highly interested in buying things from people who believe what they believe.

Henry Ford, for example, was a conscious capitalist in that he stayed true to his purpose of creating an affordable automobile. He believed that automobiles should be available to the masses. In the end, he democratized the roads of America, his business was immensely profitable, and he created incredible value for millions of stakeholders, including his neighbors, employees, customers and shareholders.

Another example of a conscious business is Whole Foods Market. Whole Foods exists to help people live healthier lives. In the process, it not only generates a profit, but also forges strong connections with its customers.

Whole Foods also supports local vendors, has a workforce with incredibly low employee turnover (less than 10%), and builds unique, non-cookie-cutter stores that are designed to be beautiful. When Whole Foods enters a market, home and building values typically increase.

While profit is essential for any business to succeed over the long term, singular focus on economic metrics to the detriment of everything else is often unsustainable. By chasing economic profit alone, companies often destroy value. While the public perception that large corporations, such as banks, exist purely for profit may be true, it is likely that the founders’ original purpose and values of the business have been corrupted and/or forgotten altogether.

Conscious Capitalism vs. Corporate Social Sustainability

If value creation through conscious capitalism is an inside-out approach synonymous with social responsibility, corporate social sustainability (CSR) is, by comparison, an outside-in approach to social sustainability designed by committee.

Organizations that do not have a CSR plan, often adopt them under pressure (internal or otherwise) as a form of insurance policy to monitor themselves and/or ensure that they are in compliance with laws and/or ethical standards in society. Because CSR is often a defensive measure, it does very little to eliminate the fallacy that business is inherently unethical.

CSR policies are often crafted by a dedicated department, or an outside consultant, and designed to be a set of rules that is grafted onto an organization’s business plan. CSR is commonly applied in one or more of the following forms:

  1. Corporate self-regulation (risk management)
  2. Value creation efforts
  3. A path for philanthropic endeavor

While organizations may invest heavily to leverage their CSR as a lens through which to focus their environmental and/or socially conscious efforts, it seems that we most often recognize the organization that is not operating in congruence with its higher purpose, touting its CSR for damage control or to boost its perception in the eye of the public after bad acts.

Indeed, CSR is often used as a shield by organizations to deflect or as an attempt to avoid taking direct responsibility for unethical behavior.

Connect.

Find members with green building and green business skills and experience.

Meet Pros.

AvatarJohn Tomlinson's picture
Environmental Consultant
Westminster, CO
AvatarSANDRA STEPHENSON's picture
Consultant
Fresno, CA
AvatarMatthew Janes's picture
Activist
Toronto, ON

Learn.

Relevant education and training to consider.

 
: 650-746-4261