By Linda Fisher Thornton
What is Conscious Capitalism?
In last week’s post, I explored how Ethics Means Acting Beyond Self Interest. This week, I’ll explore the same question at the organizational level.
What are an organization’s ethical responsibilities? How is conscious capitalism a way to understand them?
Ethical Leadership is to the Moral Leader as Conscious Capitalism is to the Moral Company
While ethical leadership is the term we use to describe what a moral leader does, conscious capitalism is a term that describes what a moral company does. According to BBC News E-Cyclopedia, “conscious capitalism stands for a more moral approach to what is often seen as ‘the dirty business of business.’” (Cited in Conscious Capitalism: Dirty Business No More by Ramla at NextbyRamla.Blogspot.com)
Conscious capitalism involves thinking beyond self-interests, demonstrating care for stakeholders at the global level, using a long-term time orientation and seeing the company’s role in the world through a systems view.
Taking A Systems View on the Moral Responsibilities of Business
According to Anne Federwisch, Markkula Center for Applied Ethics, Santa Clara University in Corporate Moral Responsibility and The Ethics of Product Usage “… the idea of moral responsibility has been expanding over the years.” While businesses that followed laws used to be considered “good,” there is now so much more that they need to do in order to be considered an ethical business.
According to John Mackey, CEO of Whole Foods, quoted in A Case for Conscious Capitalism: Conscious Leadership Through the Lens of Brain Science, by Pillay and Sisodia in the Ivey Business Journal, “Conscious Capitalism is a philosophy of doing business that incorporates the principles of higher purpose (beyond profit maximization), stakeholder interdependence (rather than shareholder centricity), conscious leadership (instead of command-and-control or “carrots and sticks”) and conscious culture (in place of bottom-line obsession).”
When we lead with conscious capitalism, we assume responsibility for our impact on global markets and quality of life in addition to our impact on local communities.
“Conscious Capitalism stresses the importance of viewing stakeholders as interconnected and interdependent. All stakeholders – employees, customers, suppliers, investors, and community members – are regarded as important in their own right (not just as a means to better business results).”
“Conscious Capitalism® is a philosophy based on the belief that a more complex form of capitalism is emerging that holds the potential for enhancing corporate performance while simultaneously continuing to advance the quality of life for billions of people. The conscious capitalism movement challenges business leaders to rethink why their organizations exist and to acknowledge their companies’ roles in the interdependent global marketplace. ”
What is Conscious Capitalism? Conscious Capitalism, Inc., consciouscapitalism.org
In conscious capitalism, we don’t have to choose between caring about our business and caring about society. In an interview with Tom Palmer of Atlas Network, John Mackey explained that:
“A false dichotomy is often set up between self-interest, or selfishness, and altruism. To me it is a false dichotomy, because we’re obviously both. We are self-interested, but we’re not just self-interested. We also care about other people. We usually care a great deal about the well being of our families. We usually care about our communities and the larger society that we live in. We can also care about the well being of animals and our larger environment. We have ideals that motivate us to try to make the world a better place… I think that capitalism and business should fully reflect the complexity of human nature.”
What are the Benefits of Conscious Capitalism?
What are the benefits of thinking about and implementing business in a conscious way? How does conscious capitalism help businesses succeed in the global marketplace?
While conscious capitalism benefits people and communities, there are also clear benefits for the businesses that embrace this philosophy, including:
1. Better Financial Performance
“The pragmatic value of conscious capitalism is underscored by the fact that companies that adhere to these principles outperformed the market by a 9 to 1 ratio over a 10 year period.”
A Case for Conscious Capitalism: Conscious Leadership Through the Lens of Brain Science, by Pillay and Sisodia in the Ivey Business Journal
2. Relationships and Synergies for the Long Term
He (co-CEO John Mackey, Whole Foods) also spoke about the virtues of being generous with vendors, noting that cultivating strong relationships with suppliers pays off when times become difficult. “Business is not a zero-sum game,” he said. “It is in fact all about deriving value from synergies.”
Mark Hamstra, Whole Foods Cites Benefits of Conscious Capitalism, supermarketnews.com
“Another result is long-term trusted relationships with suppliers, consistent with The Integrity Chain, which is more profitable for both parties.”
4 Tenets of Conscious Capitalism, ctsmithiii.wordpress.com
3. Stakeholder and Employee Engagement
“A compelling sense of purpose can create a high level of engagement by the stakeholders and generate tremendous organizational energy.”
Mark Hamstra, Whole Foods Cites Benefits of Conscious Capitalism, supermarketnews.com
“The result of this is empowered employees who we know work harder, are more creative, care more and are responsible for driving greater customer experiences.”
CTSmithIII, 4 Tenets of Conscious Capitalism, ctsmithiii.wordpress.com
4. Shared Meaning and Purpose
“I’m absolutely confident that practicing the principles of Conscious Capitalism brings both a deeper sense of meaning and purpose to your employees (and customers), as well as higher financial returns in the long run. It provides an authentic context to the “story of us,” the fact that business is about relationships, about creating value and not extracting value from those relationships.”
Doug Rauch, former President of Trader Joes and CEO of Conscious Capitalism, Inc. quoted in Conscious Capitalists Share Their Smarts, monkeydish.com
5. Increased Innovation and Trust
“The benefits far outweigh this challenge. Employee morale and engagement increase, innovation flourishes and the principles of your brand relationship with consumers, namely trust, is reinforced by living core values that align with your consumers’ own values. We feel a remarkable sense of duty and accomplishment in building a better business model and caring today for seven generations of tomorrow.”
John Replogle, President and CEO of Seventh Generation, quoted in Conscious Capitalists Share Their Smarts, monkeydish.com
Doing “Good” Is Its Own Reward
Conscious capitalism is the view that we, as business leaders, can make money and make the world a better place at the same time. This is not an unrealistic dream – this is a new way of leading that an increasing number of companies are choosing. And those leaders choosing conscious capitalism are finding out that the old saying is true – that doing “good” is its own reward.
Questions for Discussion:
1. Are we leading in ways that make us part of the global conscious capitalism movement?
2. In what ways do we enhance lives and communities in the course of our business?
3. How could we better demonstrate systems thinking and a long-term view?
For more, see Linda’s book 7 Lenses and the 21 Question Assessment: How Current is My Message About Ethics?2014 Axiom Business Book Award Winner About 7 Lenses Info@LeadinginContext.com @leadingincontxt @7Lenses
© 2012 Leading in Context LLC
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Thank you Holly! So glad you like the site. This blog posts weekly stories on Wednesdays, so check out tomorrow’s post too!
Appreciation to my father who stated to me on the topic of this blog, this
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It began in our case by reasoning against the inherent assumtion of capitalism, for community primacy:
“There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
~Milton Friedman~ US economist (1912-2006)
That statement would be unchallenged in mainstream business for almost 3 decades until 1996 when something almost heritic was suggested in a seminal paper about doing business.differently
“The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a charitable, non-profit organization whose proceeds go to local, national, and international charities. Non-profits, however, are typically very restricted in the type of business they can conduct. In the United States, all non-profits must constantly pay heed that they are not violating those restrictions, lest they suffer the wrath of the Internal Revenue Service. For-profits, on the other hand, have a relatively free hand when it comes to doing business. The only restrictions are the normal terms and conditions of free-enterprise. If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders.”