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Jul 15, 2015

Conscious Capitalism: Another Way for Capitalism to Do Good

There is an emerging movement called Conscious Capitalism.  It is inspired by Simon Sinek’s TED talk “Start with Why” which noted that every business knows what it does, how it does it, and why it does it.  Sinek’s insight is that customers (and employees) are motivated mostly by “why it does it.”  This view of business was further described and systematized by the eponymous 2013 book authored by Raj Sisodia and Whole Foods co-founder John Mackey.

Conscious Capitalism rejects the notion popularized by Milton Friedman in 1970: “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits….”  Instead Conscious Capitalism proposes a credo that “…conscious businesses are galvanized by higher purposes that serve, align, and integrate the interests of all their major stakeholders….” Indeed, there is some evidence that this integration of the interests of customers, employees, suppliers, and owners actually can lead to lower costs and higher profitability.

Conscious Capitalism is guided by four tenets: conscious culture and management, conscious leadership, stakeholder integration, and higher purpose.
•    A conscious culture helps a business adhere to its higher purpose, and it needs a management that is “based on empowerment, decentralization, and collaboration.”  A command-and-control management would not be successful.
•    Conscious leaders “are primarily motivated by service to the purpose of the business and its stakeholders, and not by the pursuit of power or personal enrichment.”
•    Integration of stakeholders means that trade-offs among stakeholders are avoided and replaced by strategies that make all stakeholders better off.
•    The higher purpose espoused by conscious businesses is analogous to Sinek’s “why”:  Why do we exist? Why do we need to exist? Why is the world better because we are here?

These tenets apply equally to social enterprises.  Indeed, all social enterprises are conscious businesses.  The local hashtag many of us use for social enterprise posts is Passion, Purpose, Profit.  That can be the hashtag for Conscious Capitalism as well.

But not all conscious businesses are social enterprises.  The distinction is that social enterprises have an additional tenet:  to measure success as a direct, measurable impact on a specific social problem.  Whole Foods is guided by the tenets of conscious capitalism, and it may hire some ex-felons as part of its higher purpose.  However, a social enterprise like CleanTurn, whose social impact is to provide meaningful jobs to ex-felons would hire mostly ex-felons and incur the unique additional costs necessary to make that happen.

Whole Foods is not likely to, and should not be expected to, become a social enterprise.  But instilling its credo of Conscious Capitalism more broadly among Central Ohio businesses would be a tremendous benefit to our community.

I would welcome a Central Ohio chapter of Conscious Capitalism and will gladly be a charter member.  Why?  Because its members may ultimately be the best mentors and supporters of our community’s emerging social enterprises.

Yours in Linking Mission to Money,

Allen Proctor, President & CEO, Center for Social Enterprise Development