The Next Evolution in CSR
Conscious capitalism is a relatively new concept but a natural part of the evolution of what it means to have corporate social responsibility (CSR). Corporations need to embrace conscious capitalism if they want to be relevant as an engine for economic growth. The main difference between conscious capitalism and CSR is that the former is a more comprehensive and holistic approach to the relationship between business and society.
Concepts such as sustainability and the triple bottom line are the forerunners of conscious capitalism. Here is a brief review of what they mean.
Sustainability describes the ability to maintain various systems and processes – environmentally, socially, and economically – over time. Sustainability originated in natural resource economics but has since gained broader focus over time into sustainable development and social equality.
Environmental sustainability addresses ecological systems and keeping in balance natural resources within them so that our use of these scarce resources is replenished for the benefit of future generations.
Economic sustainability addresses the need for financial resources to maintain independent communities around the globe and provide economic activities available to everyone to secure sources of livelihood.
Social Sustainability deals with universal human rights and basic necessities attainable for all peoples to keep their families and communities healthy and secure.
It has been reported that 86% of the Standard & Poor’s 500 Index companies published sustainability/responsibility reports in 2018.
Triple Bottom Line (TBL)
Three aspects of sustainability, often referred to as the three “P’s” – people, planet, and profit -- has received increased attention from non-governmental organizations, management, consultants, and investors seeking to invest in socially-responsible companies.
TBL describes the scope of reporting in three broad areas affecting society: economic including financial reporting, ecological including the environment, and social including social responsibility. Investors use them and their own measurements for valuing companies.
Accountability for environmental, social, and economic impacts of a company is increasingly part of every manager's job. TBL is an important part of disclosure and enhances transparency of financial reporting. TBL is consistent with the broad stakeholder perspective of CSR that includes shareholders, creditors, employees, the community, the environment, government, and society in general. TBL's mission is to disseminate knowledge to engender and catalyze TBL practices.
Conscious capitalism as a business philosophy comes from John Mackey, co-founder and CEO of Whole Foods Market, and professor Raj Sisodia, who together wrote a book on the concept and founded Conscious Capitalism, Inc.
Conscious capitalism goes beyond the bottom line and holds that money isn’t the only goal for the company. It is about making ethical decisions that positively impacts the entire ecosystem surrounding the company. The ecosystem basically reflects the stakeholders of a company including investors, customers, employees, vendors, and the environment. Conscious capitalism is becoming committed to the triple bottom line: the three “P’s” – people, planet, and profit.
A values-based company can choose to build a values-based environment where a company can become focused less on the transactions and more on delivering value both internally. From a consumer perspective, conscious capitalism addresses the whole ecosystem, which then enables the business to thrive.
The framework of conscious capitalism starts by clarifying a company’s purpose and core values, according to Charlotte Chipperfield writing in the Conversation. Having clear values provides the pathway to satisfying stakeholder needs. Understanding that when consumers purchase a product or service it not only improves their lives, but those who work for the company and the environment builds a sense of community around the brand and strengthens close relationships with integrity.
While conscious capitalism still pursues a profit, it does so in light of stakeholder needs. Conscious capitalism goes beyond standalone programs and it promotes an ongoing, integrated approach to social responsibility, self-awareness, and purposeful decision-making.
Northeastern University describes the framework of conscious capitalism using four guiding principles.
- Higher purpose: While profits are essential for a sustainable business, conscious capitalism focuses on purpose beyond profit.
- Stakeholder orientation: Conscious companies operate with their entire business ecosystems in mind, meaning they concentrate on optimizing equal values for all of their stakeholders.
- Conscious leadership: With a “we” rather than a “me” mentality, conscious leaders embrace the company’s purpose, create value for all stakeholders, and inspire actions that contribute to a conscious culture.
- Conscious culture: Conscious capitalism contributes to a culture of trust, care, and cooperation among the company’s employees and all other stakeholders.
The benefits of conscious capitalism, according to Northeastern, include:
- Increased harmony between employers and employees
- Greater employee and customer satisfaction
- Enhanced stakeholder loyalty
- Heightened community engagement
- Improvements in surrounding communities and environment.
The logical question to ask is whether any companies are following the conscious capitalism framework. As would be expected, Whole Foods does. Their website is quite explicit on what it means:
Whole Foods Higher Purpose
Whole Foods Market’s purpose is to nourish people and the planet. We realize that selling high quality food is not enough, that we also have a responsibility to the people, communities, and environment where we source and sell our products. We make our decisions based on this stakeholder model. Making sure we consider and balance the needs of all the stakeholders in our business.
Conscious Leadership & Culture
Our leaders are committed to fulfilling the higher purpose, core values, and leadership principles of our company.
Corporations must continue to evolve in a climate of distrust where their every decision is dissected by an increasing skeptical society in the U.S. Critics of the shareholder model point to the defining element of CSR for many years – profit – and maintain that’s no longer enough for a corporation to satisfy its very existence. In today’s climate profit without purpose doesn’t cut it.
Posted by Steven Mintz, aka Ethics Sage, on September 1, 2020. You can sign up for our newsletter and learn more about Dr. Mintz’s activities at: https://www.stevenmintzethics.com/. Follow him on Facebook and on Twitter .