Conscious Capitalism: Definition, 4 Principles, and Company Examples

What Is Conscious Capitalism?

The term "conscious capitalism" refers to a socially responsible economic and political philosophy. The premise behind conscious capitalism is that businesses should operate ethically while they pursue profits.

This means that they should consider serving all stakeholders, including their employees, humanity, and the environment. They shouldn't limit the impact of their achievements to just their management teams and shareholders.

The idea of conscious capital was created by Whole Foods co-founder John Mackey and author and marketing professor Raj Sisodia.

Understanding Conscious Capitalism

The concept of conscious capitalism was coined and popularized by Whole Foods co-founder and co-CEO John Mackey and marketing professor at Babson College, author, and speaker Raj Sisodia in their book Conscious Capitalism: Liberating the Heroic Spirit of Business.

The two are also co-founders of Conscious Capitalism, a nonprofit organization that has chapters in more than two dozen U.S. cities and 10 other countries.

Conscious Capitalism Credo

The conscious capitalism credo acknowledges that while free-market capitalism is the most powerful system for social cooperation and human progress, people can aspire to achieve more. It does not minimize profit-seeking but encourages the assimilation of all common interests into the company's business plan.

This credo includes competition, entrepreneurship, freedom to trade, the rule of law, and voluntary exchange. It also builds on this foundation of traditional capitalism by adding elements such as trust, compassion, collaboration, and value creation to the formula.

Although profits don't take a backseat in conscious capitalism, the philosophy emphasizes profits that result from integrating the interests of all major stakeholders in a company.

4 Guiding Principles of Conscious Capitalism

• Higher Purpose: A business that adheres to the principles of conscious capitalism focuses on a purpose beyond pure profits. In doing so, it inspires and engages its key stakeholders.
• Stakeholder Orientation: Businesses have multiple stakeholders—customers, employees, suppliers, and investors, among others. Some companies focus on their shareholders to the exclusion of everything else. A conscious business, on the other hand, concentrates on the whole business ecosystem to create and optimize value for all of its stakeholders.
• Conscious Leadership: Conscious leaders emphasize a "we" rather than a "me" mentality to drive the business. By doing so, they work to cultivate a culture of conscious capitalism throughout an enterprise.
• Conscious Culture: Corporate culture is the sum of the values and principles that constitute the social and moral fabric of a business. A conscious culture is one where the policies of conscious capitalism permeate the enterprise, fostering a spirit of trust and cooperation among all stakeholders.

Companies That Embrace Conscious Capitalism

Conscious capitalism has become an increasingly popular concept in the business world. A growing number of businesses have adopted its principles. Examples of such companies are:

• Amazon (AMZN)
• Whole Foods Market
• Starbucks (SBUX)
• Alphabet (GOOG)
• Trader Joe's
• The Container Store
• Southwest Airlines (LUV)
• Costco (COST)

Benefits

Firms that adopt this philosophy reap significant rewards, and not just from more satisfied and productive employees.

Many consumers and investors consider the impact that businesses have on the environment. These stakeholders seek businesses that align moral principles with corporate values.

A survey of 1,000 U.S. consumers found that 37% of them seek out environmentally-friendly products and are willing to pay up to 5% more for them.

In addition, Sisodia's research of conscious capitalism companies found that over a 15-year period of time, these businesses achieved investment returns of 1646% versus investment returns of 157% for S&P 500 companies that did not subscribe to the philosophy.

Criticism of Conscious Capitalism

Despite the generally favorable sentiment toward the idea of conscious capitalism, the business philosophy has its critics.

Naysayers believe that adherents of conscious capitalism cannot fix problems within the corporate structure. They also state that adopting this ideal may not necessarily bode well for investors who, for the most part, are after good returns.

Other critics say that the onus for ethical performance shouldn't be borne by the business sphere—notably the private sector. They feel that enabling change should be the responsibility of those shaping public policy and the collective efforts of various leaders.

The Bottom Line

The conscious capitalism movement is an acknowledgment by some entrepreneurs that their companies can help promote social good in their communities.

Although most corporations continue to place profits and shareholders first, some businesses are also taking responsibility for the well-being of their employees, local communities, and the environment.