Conscious Capitalism

In this article, Anant JAIN (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) talks about Conscious Capitalism.

Introduction

Conscious Capitalism is mainly focused on creating a more ethical business, whilst pursuing profits. The main premise behind conscious capitalism is to make businesses more socially responsible in their economic and political philosophies. Ideally, these businesses should consider benefitting all its stakeholders including employees, suppliers and customers, and the environment and society at large, not just the shareholders and the top management team.

Conscious capitalism is not only about funding charitable events or about the different programs. It is driven by an ongoing and integrated approach to self-awareness, social responsibility and purposeful decision making.

Comprehending Conscious Capitalism

The concept of Conscious Capitalism has been founded by John Mackey, co-founder and CEO of Whole Foods Market as well as Professor Raj Sisodia (Marketing department, Tecnológico de Monterrey, Mexico), who wrote a book together on this philosophy “Conscious Capitalism: Liberating the Heroic Spirit of Business” and founded a non-profit organization called “Conscious Capitalism” which has chapters in more than two dozen U.S. cities and 10 other countries.

While the conscious capitalism credo acknowledges free market capitalism being the most powerful system to ensure human progress and social cooperation, firms and other organizations can still achieve more. It does not mean that profit seeking will take a backseat in conscious capitalism, but it encourages to incorporate all common interests into the plan. Conscious capitalism includes competition, entrepreneurship, freedom to trade, and voluntary exchange. But the credo is also built on the foundation of traditional capitalism as well as elements including trust, compassion, value creation and collaboration. Although profit seeking is not minimized in conscious capitalism, the concept focuses on integrating the interests of all major stakeholders in a company.

There are four guiding principles behind this philosophy:

Higher Purpose

A company that sticks to the main principles of conscious capitalism focuses on profits as well as the purpose beyond this profit. This purpose inspires and engages with the key stakeholders.

Stakeholder Orientation

Companies have various stakeholders including customers, employees, suppliers, and investors among others. Some companies focus on return to their stakeholders, barring everything else. On the other hand, a conscious business, focuses on the business as a whole to create and optimize its value for all its shareholders.

Conscious Leadership

Conscious leaders focus on the value of “we” rather than “I” to drive their businesses. This in turn cultivates a culture of conscious capitalism in the company.

Conscious Culture

The sum of the values and principles that constitute the social and moral fabric of a business is known as corporate culture. A conscious culture, on the other hand, is where the policy of conscious capitalism enters a business and creates a spirit of trust and cooperation among all its shareholders.

What is the difference between Conscious Capitalism and Corporate Social Responsibility?

The main difference between conscious capitalism and Corporate Social Responsibility (CSR) is that conscious capitalism is rooted in a company’s philosophy, it is a more comprehensive and holistic approach connecting companies to the society. On the other hand, CSR employs the traditional business models to different entities.

Moreover, conscious capitalism works to create new ethics and values for its stakeholders. In their book, “Conscious Capitalism: Liberating the Heroic Spirit of Business”, Mackey and Sisodia explain how conscious companies do not necessarily have to do anything outside of its normal functions to become socially responsible, which in turn creates value for its internal and external stakeholders. But at times such businesses also employ various CSR initiatives.

Benefits of Conscious Capitalism

A growing number of businesses including Whole Foods Market, Starbucks, The Container Store, and Trader Joe’s have adopted the practices and principles of conscious capitalism, making it an increasingly popular concept in the business world. Companies that choose to reject this may notice an adverse effect on their profits and revenues.

Companies that have chosen to adopt this philosophy reap significant rewards. Nowadays, many investors and consumers consider the impact of businesses on the environment. These stakeholders look for businesses that give equal importance to moral principles as well as corporate values. According to Nielsen’s 2014 report titled, “Global Survey on Corporate Social Responsibility”, 55% of consumers worldwide, said they would prefer to spend more on products and services that support worthwhile causes.

Criticism of Conscious Capitalism

There has been an overall favorable sentiment towards the philosophy of conscious capitalism, but there has been some criticism as well. The critics are opposed to the philosophy that conscious capitalism can fix the issues within the corporate world. They also believe that adopting such practices might not sit well with the shareholders of the company who are solely after good returns. Some critics believe that the responsibility of conscious capitalism should not only fall on the private sector. They believe that through the collective efforts of the leaders and public policy the responsibility can be shared, and change can be brought out.

Useful resources

• John Mackey (CEO of Whole Foods Market)
• Raj Sisodia (Co-Founder of Conscious Capitalism)
• Conscious Capitalism Inc.

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About the author

The article was written in October 2021 by Anant JAIN (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).