Many countries follow the economic model of capitalism, in which private businesses and individuals, rather than the government, control trade and industry. This economic system works through a free market economy, with the marketplace driven by the law of supply and demand.
Over the years, various economic experts have suggested improvements to this standard system. One such improvement is conscious capitalism. The tenets of conscious capitalism can guide business owners toward an enhanced way of doing business that benefits all stakeholders in a socially responsible manner.
An Overview of Conscious Capitalism
The main purpose of building a business is to generate profits, which enable business owners to pay their employees. In turn, this allows the owners and employees to support themselves and their families.
Conscious capitalism does not dismiss the importance of generating profits for businesses. Rather, it enhances this purpose by complementing it. Conscious capitalism is a philosophy of doing business in a way that combines the generation of profits with socially responsible choices.
The tenets of conscious capitalism recognize that a business has many stakeholders — individuals or entities involved in, affected by or holding an interest in the business’s activities. These stakeholders include the company’s employees, shareholders (if applicable), surrounding community and even the environment. The founders of conscious capitalism were Whole Foods co-founder John Mackey and marketing professor Raj Sisodia. They established four main principles or tenets of conscious capitalism. These tenets are as follows:1
- Higher purpose
- Stakeholder orientation
- Conscious leadership
- Conscious culture
Conscious Capitalism Has a Higher Purpose
The founders of conscious capitalism believe that these tenets should be incorporated directly into a company’s business plan. For example, a company should identify its higher purpose in its business plan and its mission statement. Although every company has the purpose of generating profits, not every company has a higher purpose beyond profitability.
Mackey and Sisodia co-founded a nonprofit organization, Conscious Capitalism, to explain their credo and its principles more thoroughly. They pose that a business must seek to “elevate humanity” through its higher purpose. According to the organization, “Elevating humanity through business begins with knowing WHY your company exists. Without this, you have no compass to find and stay focused on your True North… We see profit as a necessary means to achieving your purpose — not as an end in and of itself.”1
You might assume that this higher purpose must always involve a philanthropic endeavor. For instance, the apparel manufacturer Bombas pledges to give a pair of socks to a homeless shelter for every pair of socks it sells.2 While this is certainly an admirable business model, conscious capitalism doesn’t necessarily require built-in philanthropy.
For an alternative, consider the mission statement of First United Bank, which is to nurture the financial well-being of individuals so that they can live life better.3 Hyatt Hotels Corporation strives to do more than provide a bed for travelers to sleep on — it strives to create a culture of caring for guests so that they, in turn, can give their best while they are staying there.4
Conscious Capitalism Requires a Stakeholder Orientation
The tenets of conscious capitalism also include the requirement of stakeholder orientation. This doesn’t mean hosting an orientation session for new stakeholders; rather, it involves orienting one’s company and its mission statement to the best interests of all who are affected by the business, that is, all its stakeholders.
Some businesses are highly effective at caring for the best interests of a particular category of stakeholders. For instance, one company might focus on the quality of life of its employees, while another prioritizes its shareholders. However, this tenet of conscious capitalism reminds business owners that every company has many stakeholders beyond its employees and shareholders. Stakeholders include the company’s customers or clients, suppliers, vendors, creditors and labor unions.
An additional stakeholder in the business is the community where the company is located, as the city or town is affected by many factors influenced by the business. These include job creation or loss, public health, occupational safety and economic development. The surrounding environment is also a stakeholder since it can be affected by the business either negatively or positively. Conscious capitalism may also consider local, state and federal governments to be stakeholders in a company because they collect taxes from the business.
The conscious capitalism credo compares the interdependence of a company and its stakeholders to an ecosystem. Just as the health and well-being of an ecosystem depend on every organism within it, so too does a company depend on its various stakeholders, even as they depend on the company. When a company takes care of its stakeholders, the entire ecosystem (including the business) can flourish.
Conscious Capitalism Thrives With Conscious Leadership
The conscious capitalism credo describes leadership as a process characterized by the never-ending quest for improvement. The leader at the head of the organization must inspire others to uphold the higher purpose of the company while creating value for all stakeholders. Yet, while every business has a primary leader, conscious capitalism also recognizes every team member as a leader.
All these leaders in an organization take ownership of their work and exhibit a willingness to go beyond their job description for the sake of innovation and improvement. In other business philosophies, this may be referred to as an intrapreneurial mindset — entrepreneurial principles exhibited by employees. Furthermore, all leaders in the organization strive to honor the following principles:
- Focus on long-term objectives.
- Think beyond their own team or department to evaluate overall impacts on the company.
- Maintain high standards and uphold operational excellence.
- Think originally and boldly, with an eye to creativity and innovation.
- Never stop learning.
- Acknowledge mistakes.
- Work toward win-win solutions.
Conscious Culture Is Necessary for Conscious Capitalism
The last of the conscious capitalism tenets involves the development of conscious culture. Every leader at all levels in the organization is responsible for nurturing a conscious culture. The Conscious Capitalism credo characterizes a company culture as the “social fabric of a business, which permeates the atmosphere of a business and connects the stakeholders to each other and to the purpose, people and processes that comprise the company.”1
The credo goes on to acknowledge that although every organization does indeed have a culture, not all organizational cultures have been intentionally created. It is the responsibility of the leadership to deliberately cultivate a culture that speaks to the higher purpose of the business and nurtures the well-being of all its stakeholders, most notably its employees. Some of the words one might use to describe a conscious culture include the following:
A company culture that embodies these ideals naturally unifies the company and nourishes its ability to fulfill its higher purpose.
You can explore historic and modern principles of capitalism, business administration, entrepreneurialism and much more by becoming a student at Grand Canyon University’s Colangelo College of Business. We strive to graduate ethical, forward-thinking individuals who confidently serve their communities and companies with integrity and purpose. Click on Request Info at the top of your screen to begin your academic journey at our Christian learning community.
1Conscious Capitalism, Learn About Our Philosophy in March 2021
2Bombas, Giving Back in June 2021
3First United Bank, Our Purpose in June 2021
4Hyatt, About Hyatt in June 2021
The views and opinions expressed in this article are those of the author’s and do not necessarily reflect the official policy or position of Grand Canyon University. Any sources cited were accurate as of the publish date.