05/02/2014 - 06:05

Striving for positive partnerships

05/02/2014 - 06:05

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Striving for positive partnerships

The founder and co-CEO of the $11 billion company Whole Foods, John Mackey, has collaborated with marketing professor Raj Sisodia to propose the idea that ‘conscious capitalism’ can be a force both for economic and social good.

Their new book, Conscious Capitalism: Liberating the Heroic Spirit of Business, is a considered and thoroughly researched argument that well run, values-centred businesses can contribute to humankind in more tangible ways than any other organisation in society.

Hard data show that, over the long term, conscious businesses outperform traditionally run companies by a wide margin. In fact, they believe ‘conscious capitalism’ demonstrates conclusively that, in business, nice guys may actually finish first instead of last.

Mr Sisodia looked at 28 companies he identified as the most conscious ‘firms of endearment’ (as he terms them) based on characteristics such as their stated purpose, generosity of compensation, quality of customer service, investment in their communities, and impact on the environment.

The 18 publicly traded companies out of the 28 outperformed the S&P 500 index by a factor of 10.5 over the years 1996-2011. Conscious companies treat their stakeholders better. The most conscious companies give more, and they get more in return.

Today, ‘conscious’ and ‘capitalism’ are not two words that go easily in the same sentence. Both words stand for fundamentally different worldviews. Capitalism is associated with individualism, personal ambition, the accumulation of wealth and power, and external accomplishment.

Conscious, or more specifically consciousness, is associated with self-awareness, personal development, the greater good, spirituality and a worldview that discourages competition, hierarchy, and materialism.

Mr Mackey recognises that much of the prosperity and achievements of modern society have come about because of capitalist business – reduced illness, production of food, social infrastructure, etc. But at the same time many businesses have accumulated wealth for the owners and shareholders by complying only with the basic legal, financial, social and environmental regulation.

Companies try to minimise taxes and many of their socially responsible actions are an add-on, which are dropped if profits fall. Managers are increasingly focused on the next quarter’s earnings, not the long-term responsibility to their other stakeholders such as staff, customers, and society.

According to Mr Mackey, conscious capitalist business practice relies on careful attention to four tenets:

1) higher purpose and core values;

2) stakeholder integration;

3) conscious leadership; and

4) conscious culture and management.

At the core of Mr Mackey’s model is the higher purpose and values. While it is necessary to make a profit, having a purpose beyond profit provides value for all stakeholders and is the primary purpose that truly engages everyone. 

 Under ‘stakeholder integration’, the second tenet of conscious capitalism, the environment is considered to be one of the stakeholders. The authors state: “We need to address key environmental issues creatively and in an integrated way. These include critical concerns such as freshwater availability, air purity, seafood sustainability, environmental livestock impacts and welfare, deforestation, and desertification.”

Poverty also has a substantial overall negative environmental impact, and the authors point out that “as countries become more prosperous, environmental conditions improve, and people with higher living standards expect and demand a cleaner environment.”

A number of initiatives adopted by Whole Foods can serve as examples of conscious capitalism.

• All seven senior executives are paid the same amount.

• Staff members who live healthier lifestyles are given larger discounts on Whole Food products. 

• The ratio of the highest to the lowest paid in the organisation is only 19 to one, compared to 350 to one for public listed companies.

• Long-term partnership contracts are made between suppliers and Whole Foods.

• Only products that are good for customers and society are sold.

• Encouraging spiritual and contemplative practices such as meditation.

 • Attraction of investors who are committed to the higher purpose and long-term strategy rather than a short-term profit-focused outlook.

• Between 5 per cent and 10 per cent of profit is allocated for not-for-profit community activities.

Without these tangible examples, conscious capitalism might be considered an idealistic dogma for new age businesses rather than an example of a new type of business success.

Conscious capitalism can be a very inspirational as well as a practical way to run a business. It provides a blueprint for organisations that aim to be successful commercially as well as work in harmony with their staff, customers, the environment and society.  

It is different from the triple bottom line, sustainability, empowerment or other ideas of enlightened business in that it goes wider and deeper than other approaches.

Conscious capitalism provides a great example for leaders and organisations to move to the next stage of business development.

These conscious capitalistic organisations are more than just successful businesses; they strive to be in a positive partnership with all stakeholders and the world they interact with.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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