Conscious Capitalism (Part 2) – Conscious Capitalism “In Action”
By Alan Minker
The four principles of conscious capitalism must all be concurrently present to truly create a long-term healthy business environment. Conscious capitalism and B-corps (see below) are a natural evolution from the single-minded shareholder paradigm of the 20th century (i.e. the corporate focus is returning value to shareholders), to a paradigm of serving ALL stakeholders (employees, consumers, suppliers, shareholders) as well as the environment and society.
Some businesses have gotten some of these focuses right, but other parts badly wrong. These businesses were building on a foundation of sand:
- Businesses that give generously to worthy charities but are brutally demanding in dealing with their suppliers and employees. Suppliers at times decide it’s not worth dealing with the business and seek other customers. Some employees become disillusioned by unfair treatment and leave, despite loving the mission and purpose.
- Turnover of good employees and suppliers has been proven to be costly to businesses.
- Businesses that make big positive impacts, but are not profitable enough to sustain itself and therefore those positive impacts.
- In a financially unhealthy organization, the need to survive will quickly overtake the higher purpose as the critical mission.
- When I joined Body Shop in 1996, their mission statement said simply, “To foster social and environmental change”. Extraordinary and inspiring, but they were hemorrhaging cash in North America and rapidly losing market share worldwide. That noble mission was compromised by the need to sustain the business.
- Businesses that are quite profitable and provide an excellent return to shareholders but don’t have a purpose or mission that truly excites the other stakeholders (employees, suppliers, customers).
- Profitable businesses with a good mission but a “siloed” culture, where distrust and negativity pervaded the environment.
The effort put forth to develop the Conscious Capitalism principles in businesses is truly an investment. It takes time, effort, and exceptional people to make it happen. There is a real cost that most companies have little patience to invest.
In our “instant gratification” society, we seek immediate results. The reality is that most organizations that are called “overnight successes” took 20 years or more to build. Conscious Capitalism organizations that have been successful for the long-term have had:
- A higher purpose and meaning that motivates the organization to greatness. When times get tough (and they always do over the long-term), it’s that purpose that inspires the organization’s team members to persevere and overcome. As Nazi death camp survivor, Dr. Victor Frankel wrote in his book “Man’s Search For Meaning”, “Those who have a ‘why’ to live, can bear with almost any ‘how’”.
- An understanding that there is a business ecosystem that must be balanced and fair among all stakeholders including employees, shareholders, suppliers, lenders, and customers. Steven Covey described the concept of a paradigm shift of treating your employees as volunteers, because only then would they volunteer their best thinking and effort. Take great care of your people and they will take great care of your customers. If you find the right people and create the right environment, you don’t have to spend much time motivating them.
- Conscious Leadership – Organizations succeed long-term are often led by “Servant Leaders” who understand that their role is to create value for ALL the organization’s stakeholders, and to create a culture of trust and respect. In his book, “Good to Great”, Jim Collins talks about “Level 5 leaders” who embody a mix of personal humility and professional will. They give credit to their team, deflect adoration (unlike many high-ego executives), and take responsibility for failures. The Conscious Leader is the opposite of many of today’s top executives who display narcissism, selfishness, and high-ego bravado.
- Great cultures where trust and respect are carefully cultivated. An organization can have all the above traits, but without a great culture, long-term success will be elusive. It takes repetition, training, people-development, leadership and constant communication. Reinforcing the core values until it is engrained in the day-to-day actions of the team is critical to success. As management guru Peter Drucker famously said, “culture eats strategy for breakfast”.
Getting all 4 of these areas right is probably more aspirational than realistic. In the all-out effort to achieve them simultaneously, perhaps lies the better path to success.
There are a good number of for-profit B-corporations (the B is for “Benefit”) and Certified Benefit Corporations. While these two types have some differences, both mainly focus on social and environmental performance, accountability, and transparency. These organizations and the requirements for certification cover much of the conscious capitalism concepts above and are attempting to redefine success in business.
Several better-known organizations that have followed the Conscious Capitalism and/or B-corp. model that come to mind include:
- Seventh Generation
- Whole Foods (note: now with its announced purchase by Amazon, it will be interesting to see what compromises, if any, may need to be made with respect to Whole Foods core values)
- Body Shop International (especially before their purchase by L’Oréal)
- Ben & Jerry’s Ice Cream
- Motley Fool
- Plum Organics, King Arthur Flour, Solberg Manufacturing, Laureate Education and AltSchool
The above list is just some of thousands of businesses comprised of people who believe that a more conscious approach to capitalism can lead to a world in which business is both practiced and perceived as a force for good. Notable major brands like Starbucks, Southwest Airlines, Interstate Batteries, REI, The Container Store, Tata, Virgin and Costco have made public commitments to be more “conscious” stewards of capitalism. Equally encouraging is the much larger and rapidly growing number of small and mid-sized businesses that comprise much of our global economy who are following suit.
I truly believe that as the principles of conscious capitalism resonate with more and more consumers, employees, shareholders and other stakeholders, more companies will achieve success with this aspirational model. As that continues to happen and the ROI of the conscious capitalism effort is realized, the model will grow and achieve wider acceptance. That will no doubt be a good thing for human-kind and planet earth.
Authored by Alan Minker