The rise of conscious capitalism
The rise of corporate social responsibility (CSR) has seen many positive changes. Now, conscious capitalism looks set to make an even greater impact.
To many people around the world, capitalism – particularly post-2008 – still means either the top-hatted tycoon of the early 20th century, or the Gordon Gekkos of the 1980s. Capitalism, in this conception, means looking out for shareholders above customers, and yourself above everyone else.
This is a reputation that, in many respects, stands in direct contrast to the achievements of capitalism over the last few decades. The Millennium Development Goals, set by the UN in 1996 to tackle extreme poverty across the world, have been successful thanks in a large part to rising global wealth generated by international trade and investment.
With the challenges facing the world – aging populations, stagnant economic growth, the rising cost of health care, and the rise of automation threatening jobs – how can we make sure that the capitalism of tomorrow is more about spreading wellbeing and opportunity than hoarding wealth?
The answer is conscious capitalism.
How is conscious capitalism different from CSR?
Conscious capitalism is a nice sentiment, but what form can we expect it to take? We might start by looking at its immediate predecessor, CSR.
CSR basically says that companies have a moral obligation toward their environment and society, and that businesses should be conducted so that all stakeholders – be they customers, employees, suppliers, local neighbors or even ecological systems – enjoy the benefits of that business.
Rather than just conducting business in an ethical way, conscious capitalism goes out of its way to create new value for these communities.
Where CSR is about being dutiful, conscious capitalism is about putting higher values at the core of business operations.
Where CSR could mean planting trees to offset carbon emissions, conscious capitalism could be choosing a business where planting lots of trees is how you make your money.
Jacto: helping future potential grow
Let’s take a more in-depth example. Jacto is a Brazilian company that makes and maintains fertilizing equipment, founded by Shunji Nishimura in 1948. Since its foundation, the company has followed certain principles. It only employs the unemployed, meaning it never poaches talent but focuses on nurturing its own. It has funded two agricultural colleges, which its competitors are allowed to participate in running, and whose students have no obligation to join the company when they graduate. It has actively supplied rivals with raw materials during a commodity crisis, because it was the right thing to do.
Companies such as Jacto have, on the surface, little financial incentive to behave as they do. But statistics show a sound business logic behind conscious corporate altruism. For instance, by treating employees as key stakeholders rather than exploitable labor, they enjoy much lower turnover rates. By focusing on the long-term health of their local economies and the communities in which they operate, they can help nurture greater resilience and long-term growth.
This also has a genuine financial impact. Of the 28 companies rated most socially conscious by the Conscious Capitalism think tank, 18 outperformed the S&P 500 by a factor of 10.5.
Millennials lead the way
One of the causes for this growing shift toward conscious capitalism is simply generational. As the baby boomers and Generation X retire, it is the millennials and Generation Z that are coming into prominence in business and leadership around the world. Millennial and Generation Z attitudes have been characterized as committed to equality and social justice and with an active preference for transparency and social action. Their activity on social media has been suggested by some to be one of the driving factors behind the rise of conscious capitalism.
These traits have themselves been hugely shaped by the global proliferation of social media and a closer, more globalized world, as well as more general distrust of traditional capitalist institutions, such as high finance, following the 2008 crisis. These rising generations are more likely to want to work for a firm with strong social credentials, and more likely to want to make a positive difference in the world, and so firms that demonstrate this will, ultimately, attract the top talent of their generation – yet another sound financial reason to do good.