These days, many businesses are now focused on socially responsible operations. That is when the idea of conscious capitalism was developed. In this piece, we’ll be taking a closer look at what conscious capitalists actually are.
Venture capitalism demands that businesses should not just exist to make profits but also to provide value. If you could choose to work for a company that only exists to make money for shareholders or one that cares more about stakeholders, which one would you choose?
Also, if you see the opportunity to start a business that makes enormous profits compared to the market average, would you sacrifice everything for it?
Conscious capitalism has the answers for it! So, let’s get to understand what it means and its principles.
What is Conscious Capitalism?
Conscious capitalism is an ethically grounded enterprise. The brains behind this idea define it as building a healthy functioning economy through voluntary exchange, competition, entrepreneurship, freedom to trade, and rule of law.
Conscious capitalism does not dismiss making a profit. It only advocates for other values such as trust, compassion, value creation, and collaboration. Loosely interpreted, profit-making should not be the only reason a business exists.
The idea of conscious capitalism was popularized by co-CEO of Whole Foods Market, John Mackey, and professor Raj Sisodia. Today, the Whole Foods Market is one of the organizations that thrive on the tenets of conscious capitalism.
In fact, it has been listed among the top 100 best companies to work for by Fortune magazine. It also appears in the Wall Street Journal ranking as one of the world’s best corporate organizations with a high reputation.
The conscious capitalism philosophy recognizes some stakeholders that cannot carry banners or speak for themselves. Also, it advocates for more than just sponsoring a charitable activity or overseeing a community tree plantation exercise.
Instead, conscious capitalism focuses on a continuous and inclusive approach to self-awareness, social responsibility, and purposeful decision-making.
Businesses and companies that practice conscious capitalism are referred to as conscious capitalists. So, what are the pillars of this idea?
Tenets of Conscious Capitalism
There are 4 basic principles of capitalism. To know how to be a conscious capitalist, let these pillars be your guiding principles. Your business or company should be built on social responsibility and ethical practices.
The 4 principles of conscious capitalism, also referred to as “tenets”, are as follows:
- Striving towards a higher purpose
- Stakeholder orientation
- Conscious leadership
- Conscious culture
By following these principles, you create a healthy business system that is also profitable. If you get everything right, the much-sort-after profit will automatically follow.
Let us quickly explain what every conscious capitalism pillar means and the values they bring to businesses.
Higher Purpose
This pillar is all about putting humanity before money. Many businesses are founded on profit-making – I mean, duh, right? But if you want a sustainable business, the practices should have stakeholder orientation. To put it simply, think of others around you before lining your pockets.
Companies that focus on creating healthy stakeholders over making a profit become successful over the long term. Conscious businesses define their purposes, which are beyond making money.
To become a conscious capitalist, define why your business exists if not to enrich shareholders. These are often incorporated in business plans and mission statements.
Remember, money is not everything, and some things are more valuable than money, for example; the friends we make, the air we breathe, the food we eat, the futures we foster. These are human values.
This pillar, however, should not be mistaken for purely philanthropic endeavors – we’re still talking about capitalism.
For example, donating one dollar to a charitable organization for every dollar earned in profit is not a conscious capitalism movement. Think of it differently as improving the values of the employees, customers, shareholders, and other stakeholders. It is all about making people want and try to be a better version of themselves.
Think about what you’re like on your best day; now think about what you can get done and how jazzed you’ll feel if you make every day the best day you can.
Stakeholder Orientation
Your stakeholders include employees, customers, vendors and suppliers, the business community, labor unions, and the local community (think schools, hospitals, community centers, parks and gardens, shelters, food banks, etc.). Conscious businesses focus on these groups and not on pleasing shareholders. If you want to build a global brand, start by taking care of them, they will also care for you big time.
Plus you’ll generate a reputation that will echo for years. Even better, your example may encourage other businesses to adopt similar practices. The benefits can then potentially snowball and make huge differences to these groups, and society as a whole.
We all do better when we all do better – and this is a relatively simple concept to implement.
Many companies get it wrong by focusing more on only a portion of stakeholders. Depending on who these groups are, it could impact your image, or standing among other stakeholders.
While some may choose to invest in the well-being of employees, others only value shareholders. Until the Great Resignation and the ever-increasing murmur of the word “union” at least, this was the practice of the vast majority of retail stores and big-chain eateries in the US. This attitude seems to be changing, however, and more employee and community-focused initiatives are starting to filter in.
Every stakeholder deserves attention – if they’re going to stake some time, effort, or money into your business, it is absolutely worth striking up a dialogue.
The success of every company depends on the contribution of these people. Making a profit alone will not keep each group happy.
Conscious businesses do not discriminate against their stakeholders. Instead, they focus on each of them equally. Healthy and happy stakeholders lead to success.
Conscious Leadership
The role of conscious leaders in conscious capitalist organizations is not just to improve profit margin. They inspire the people they lead to upholding the higher purpose of the company.
In conscious capitalism, every stakeholder in the organization is considered a leader. You have a role to play, and you should be the best example for others by upholding values.
If everyone is regarded as a leader in the company, they will have a sense of ownership. They will not hesitate to work extra time or go beyond their work descriptions to achieve a common goal.
Conscious leadership encourages empowerment, innovation, and improvement. This tenet of conscious capitalism encourages all business leaders to act responsibly and follow these principles:
- Focus on long term goals
- Think outside the box and scrutinize the overall impact of the company
- Always raise the bar and ensure operational excellence
- Embrace learning as a continuous process
- Always think of a win-win proposition in every situation.
This is why companies that practice conscious capitalism benefit in the long run. If you create a conscious company, you are investing in the future.
Conscious Culture
A healthy functioning economy depends on culture. Every company has a culture. But only a few of them purposefully cultivate conscious culture. Conscious leaders understand the need and benefits of keeping strong and engaged stakeholders by creating a conducive business environment for everyone.
This principle of conscious capitalism can be summarized in an acronym of TACTILE, where:
- T = trust
- A = authenticity
- C = caring
- T = transparency
- I = integrity
- L = learning
- E = empowerment
A business that practices conscious capitalism follows this principle which becomes very tangible to stakeholders and observers.
The entire business ecosystem is based on the company culture. A conscious culture permeates policies of conscious capitalism and fosters a spirit of trust, transparency, and integrity among all stakeholders.
See Related: Shareholder vs Stakeholder: What’s the Difference?
How Business Benefits from being Conscious Capitalist
A conscious business is built on the human foundation and corporate social responsibility. Such companies may seem non-beneficial, but they are not focused on making profits. But they also enjoy some benefits over those that are aligned to money-making.
The following are some of the benefits for a business that practices conscious capitalism:
- Increased understanding and harmony between employees and employers
- Higher levels of employee and customers satisfaction
- Enhanced loyalty of various stakeholders
- Improved community empowerment
- Better environmental conservation
- Business sustainability
See Related: Best Portable Solar Panels for Home
Criticism of Conscious Capitalism
The idea of conscious capitalism is well-received, but that does not mean there are no critics. Other philosophers have viewed it differently. The most commonly argued point is that conscious capitalism can fix issues with a corporate structure.
Some people oppose it, stating that adopting such ideals in an organization may not go well with investors who only need returns. If a company cannot promise certain investors large gains in the immediate term, they may not invest at all.
There is also the risk of letting your business collapse by not focusing on the “capitalism” aspect of the job.
Examples of Conscious Capitalists
Many companies around the world practice conscious capitalism. The following are some of the most well-known conscious capitalist companies:
- Whole Foods Market – The grocery store founded on ESG principles, acquired by Amazon, and adored by hipsters.
- Southwest Airlines – A regional US airline that is one of few in the industry shifting towards conscious capitalism.
- Costco – The popular members-only wholesaler has always been about delivering huge savings on just about anything to the customer and taking care of their staff.
- Starbucks – The world’s favorite coffee shop has long invested in its staff’s future, offering to pay for employees’ higher education.
- Patagonia – Patagonia is one of the most famous clothing companies to adopt conscious capitalism. It seems to be working, as they are arguably the most beloved outdoor wear producer on the planet.
- Google – Their motto is “Do no evil”. Despite being one of the most enormous, overreaching companies on the planet. Google is a pretty great place to work and spends millions every year investing in communities around the world.
- Ben and Jerry’s – Everyone’s favorite ice cream company has always been at the forefront of investing in communities and championing social issues.
FAQs
Is conscious capitalism profitable?
Yes – potentially EVEN more profitable than non-conscious capitalism.
This philosophy is not against making profits but only focuses more on other values that better the world at large. Businesses have made money in the long term by practicing conscious capitalism. It aids in building a brand as a socially responsible company.
Corporations such as Whole Foods Market, Starbucks, Southwest Airlines, Trader Joe’s, and The Container Store have historically leveraged their reputation to win ethically-minded customers and see business skyrocket.
How is conscious capitalism different from impact investing?
Impact investing and conscious capitalism have many things in common, but they are not the same. Impact investing is an investment strategy that looks for socially and environmentally responsible businesses, including conscious capitalist companies.
On the other hand, conscious capitalism is a set of business practices that make a company more social and environmentally responsible.
Is conscious capitalism sustainable?
Yes – very much so.
Conscious capitalism shares many themes with corporate social responsibility. That is why many socially responsible companies practice conscious capitalism.
This idea considers the interests of all stakeholders, including the environment. Many business practices suggested by conscious capitalism are also shared by sustainability principles. Just as Google – you might have heard of them.