Conscious Capitalism — Going beyond Profitability and Shareholder Value
Recently while listening to Kara Swisher’s and Scott Galloway’s duet podcast “Pivot” I came across the term “Conscious Capitalism” which was something I had never heard before.
Investopedia defines “Conscious Capitalism” as a philosophy that businesses should serve all principal stakeholders involved in the business, including the environment. It does not minimize profit-seeking but encourages the assimilation of all common interests into the company’s business plan. In simple terms it basically means that organizations should not solely focus on revenue, profitability and shareholder value but should consider all the stakeholders within the ecosystem as important members and should focus on their growth and well being as well. The word “Conscious” has a similar meaning : being aware of and responding to one’s surrounding.
But the real question is, can the words “Conscious” and “Capitalism” be used together? Does this even makes sense? Will having a “Conscious” attitude towards capitalism and business not hurt revenues/profits ?
To find an answer to the above question I did some research and found that in reality, it very much makes sense and there are many organizations and who are practicing “Conscious Capitalism” since their inception days.
Let’s take Starbucks as an example. In a 2013 interview with CNBC, Starbucks (then) CEO Howard Schultz spoke the following lines which speak volumes about his vision for the company. “Profitability is a shallow goal if it doesn’t have a real purpose and the purpose has to be share the profits with others.” he said. We all know, Starbucks has always been known for their customer centricity and employee friendliness.
In 1987, Schultz became the CEO of Starbucks. In 1988, Starbucks started extending medical coverage to its full-time and also part-time employees at a time when most companies were not doing so. In 2014, Starbucks started Starbucks college achievement plan for their employees/baristas whom they consider “partners”. Almost 6,000 partners participated in the program and Starbucks's helped over 25,000 partner’s take Arizona State University’s Online Courses.
Taking environmental responsibility into consideration Starbucks has been the only coffee shop (correct me If I am wrong here) to give “bring your own cup” discounts to customers to encourage frequent customers to bring in reusable cups to reduce waste. Recently, they also announced their “conscious” goal of eliminating plastic straws globally by 2020 to help reduced plastic waste.
While doing all this for the environment and employees Starbucks’s stock value has grown more than 12,000+ percent since it first went public 27 years ago. This clearly indicates that “Conscious Capitalism” is not just a fancy phrase but a reality.
Moving further, lets take Expedia Group as an example. It was named the Best Employer for Work-Life Balance in the UK by Glassdoor rankings in 2017. Being working at Expedia for more than a year now I can vouch for the same. Expedia offers a comprehensive range of benefits to its employees across all locations, ranging from travel reimbursements to educational assistance program and also generous time off policies to pursue them both without any guilt.
Another travel company, Airbnb started an Open Homes initiative in 2012 during the Hurricane Sandy in New York, where they created a platform in just 24 hours allowing its hosts to offer emergency accommodation for the affected people in need. Since then, Airbnb has partnered with several relief organizations and non profits to provide temporary housing to refugees, people and families affected by natural calamities or people requiring critical medical treatment. Recently, Airbnb invested $1.2 Million into their Medical Stays program (providing accommodation to travelers travelling for critical treatments). Under the Open Homes program, all the rooms are offered free of charge and Airbnb does not collect any fee on the bookings.
Now, for Starbucks and Expedia if you take all these benefits and multiply them with thousands of employees globally (200,000+ for Starbucks and 20,000+ for Expedia) this definitely becomes a significant cost to the company which could easily be avoided/reduced and converted into enhanced profits and shareholder value.
For Airbnb, they were already doing well in their core business. What was the need to shift some focus from their leisure travel business and create a platform to help people in need? They could have invested the million dollars somewhere else.
I think majority of these decisions and actions are fueled by 4 core values which a 2015 Entrepreneur.com’s article clearly mentions as
“The 4 Principles of Conscious Capitalism”.
These four distinct traits are :
- Conscious Leadership : It all starts with the leadership. If the leadership of the company is open and conscious odds are the same culture and practices flow through the organization.
- Stakeholder Orientation : Conscious leaders take into account all the stakeholders in the ecosystem and not just the shareholders while making important decisions. The really important factors for long term business success are employees, customers, vendors and the community. Take care of them and they will do the same in return.
- Conscious Culture : A value based culture where everyone at every level is thinking in the same direction, consciously drives and scales these set of values across small and large organisations.
- Higher Purpose : Finally, all these companies are in business to do more than just make money. They have a long term goal or a purpose which motivates them every day and drives them to success over the long term.
I believe the last point is the most important. Having a higher purpose while doing business is really what sets you apart.
For Expedia, it is “To bring the world within reach”.
For Starbucks, it is “To inspire and nurture the human spirit — one person, one cup and one neighborhood at a time”.
And for Airbnb, as they mention in their mission statement : to make people around the world feel like they could “belong anywhere”.
All the mentioned benefits and initiatives taken by these companies are a true reflect of their mission/purpose statements, right ?
Now coming back to the question, “How can Capitalism and Consciousness thrive together in a cut-throat business ecosystem?”
A 2013 Harvard Business Review study reported that brands that placed a focus on conscious capitalism enjoyed returns 10 times higher than the S&P 500. This tell us that definitely the “Conscious Capitalism” can might hurt the company’s balance sheet in the short term but definitely creates significant value for companies over the long term. More often, it acts as a differentiator that helps organizations stand out. And as we all know, the world is moving towards social good.
A 2015 survey from Nielsen found that 66 percent of consumers would pay more if a business supported a social or environmental cause, representing a 16 percent jump from 2013. It helps organizations to attract talent who already have a high sense of purpose and value such practices. Employees are more engaged, productive and stay longer. The customers and communities are generally more satisfied and loyal. And as a result, all of this makes the shareholders happy and satisfied as well.
In conclusion, the good news is that a lot of companies are already following these practices in their day-to-day business and culture either knowingly or unknowingly. However, the ones that aren’t, I believe its a good time to pivot.
Conscious Capitalism, a book by John Macjey and Raj Sisodia might be a good start (link below).
PS : John Macjey and Raj Sisodia are are also the co-founders of the nonprofit organization Conscious Capitalism, Inc.
About the Author : Kinshuk Dudeja has a day job at Expedia Group and occasionally writes about technology, business and almost everything in-between. All views and opinions expressed are his own.
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