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What is the Relationship Between ‘Conscious Capitalism’, ‘Stakeholder Capitalism’, and ESG?

Operationalizing CSR

I have previously blogged about “Conscious Capitalism” and pointed out that it is a relatively new concept but a natural part of the evolution of what it means to be committed to 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 a holistic approach to the relationship between business and society.

In this blog, I will address the concept of environmental, social, and governance reporting (ESG). and stakeholder capitalism, two concepts that overlap conscious capitalism.”

What is ESG?

At its core, ESG is a means by which companies can be evaluated with respect to a broad range of socially desirable ends. ESG describes a set of factors used to measure the non-financial impacts of particular investments and companies. At the same time, ESG also provides a range of business and investment opportunities.

The Harvard Law School Forum on Corporate Governance suggests that the three categories of ESG are increasingly integrated into investment analysis, processes and decision-making.

  • The “E” captures energy efficiencies, carbon footprints, greenhouse gas emissions, deforestation, biodiversity, climate change and pollution mitigation, waste management and water usage.
  • The “S” covers labor standards, wages and benefits, workplace and board diversity, racial justice, pay equity, human rights, talent management, community relations, privacy and data protection, health and safety, supply-chain management and other human capital and social justice issues.
  • The “G” covers the governing of the “E” and the “S” categories—corporate board composition and structure, strategic sustainability oversight and compliance, executive compensation, political contributions and lobbying, and bribery and corruption.

ESG metrics have evolved in recent years to measure risk as well as opportunity. In his “Dear CEO” letter in 2018, BlackRock Chair and CEO Larry Fink wrote that:

“[s]ociety is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

He goes on to say that:

Companies must ask themselves: “What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?”

One company committed to ESG is Whole Foods Market. The company’s purpose is stated in its CSR standards as:

“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..”

In addressing conscious leadership and culture, Whole Foods says that: “Our leaders are committed to fulfilling the higher purpose, core values, and leadership principles of our company.”

Conscious Capitalism Conscious Capitalism

In a recent survey on the support for conscious capitalism, "Survey Shows Conscious Capitalism Makes an Impact," by consciouscapitalism.org, the Partner Companies, who are engaged and aligned with the company's purpose, believe their organization stands for something good: concern for stakeholder interests, ethical leadership, and a strong company culture. The following are the results of the survey.

Four Principles of Conscious Capitalism


My company stands for something good.

80% Strongly Agree

I feel connected to my company’s purpose.

64% Strongly Agree

If I worked for a non-profit, I could do more good for the world.

11% Strongly Agree


I have the opportunity to use my skills, strengths, and experiences at work.

60% Strongly Agree

In my job, I get things done.

71% Strongly Agree

I see my company as an actual source of good in the world.

58% Strongly Agree


I want to do more, but my leaders don’t trust me.

3% Strongly Agree

I don’t feel safe expressing my opinions in work meetings.

6% Strongly Agree

My leaders trust me to get my job done.

63% Strongly Agree

I believe that my boss really cares about me.

59% Strongly Agree


I am encouraged to use my unique skillset to get things done.

71% Strongly Agree

I don’t enjoy going to work.

3% Strongly Agree

There are people at work who care about me.

69% Strongly Agree

I feel comfortable sharing my ideas on projects I am working on.

60% Strongly Agree

Some of my best friends are my work colleagues.

32% Strongly Agree

I have fun at work.

42% Strongly Agree

I don’t have any friends at work.

1% Strongly Agree

I have opportunities at work to learn and grow.

64% Strongly Agree

I sometimes exceed my own expectations in my role.

38% Strongly Agree

I regularly feel a great sense of accomplishment in my role.

41% Strongly Agree

Stakeholder Capitalism

The Harvard Law School Forum on Corporate Governance, discusses the concept of “Stakeholder Capitalism,” which we could say is a proxy for ESG. According to its posting on the subject, Harvard believes that:

“Stakeholder capitalism and ESG are fundamentally frameworks to enhance the sustainable long-term value of a corporation. Both are tools for boards and management to guide business strategy, risk management and capital allocation in a manner that best serves the financial well-being of a business, and in turn, the interests of shareholders. Time and again, stakeholder and ESG considerations have driven positive societal outcomes (climate and DEI being among the examples). But stakeholder capitalism and ESG, as we and many investors understand them, do not lead with a political or moral agenda. The north star of stakeholder capitalism and ESG is driving sustainable long-term value creation”.

Stakeholder capitalism recognizes that corporations do not exist in a vacuum, but rather each relies on a multitude of stakeholder contributions and interests from employees, customers, suppliers, communities and, more broadly, society and the environment at large in order to operate effectively and create value. 

Stakeholder capitalism is ostensibly about incentivizing business leaders to take these wider considerations into account and thus make more “sustainable” decisions. This, it is argued, is also better in the long run for businesses’ bottom lines.

Some point out that ESG standards are not competing, but rather complementary to the profit-and-loss metric and thus serving consumers. They say it’s a big part of the ESG sales pitch: that corporations who adopt and adhere to ESG standards will enjoy higher long-term profits, because breaking free of their fixation on short-term shareholder returns will enable them to embrace more “sustainable” business practices.

The impact of ESG is such that the US Labor Department issued guidance last year, which acknowledges that ESG factors may have a direct relationship to the economic and financial value of an investment. When they do, these factors are more than just tiebreakers, but rather are proper components of the fiduciary's analysis of the economic and financial merits of competing investment choices. Further, the Sustainability Accounting Standards Board (SASB) is overcoming the limitations of the current financial and ESG disclosure system and has evidenced industry specific non-financial elements having material impact according to SEC’s definition while developing its rigorous disclosure framework which involves industry working groups.

Summing it All Up

Conscious capitalism, stakeholder capitalism, and ESG have similar attributes. In a sense, they operationalize CSR standards. The trend in financial reporting is to disclose more information about these concepts either online and/or in a separate report and/or in public disclosures and/or in annual reports. Today, companies need to take these matters seriously because of public interest in non-financial reporting metrics, and because millennials and Gen Z are looking for companies that pay attention to these factors and not solely driven by profit maximization and share price increases.

Posted by Steven Mintz, aka Ethics Sage, on December 21, 2023. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on LinkedIn at: https://www.linkedin.com/in/steven-mintz-aka-ethics-sage-98268126/recent-activity/all/.