Conscious Capitalism. John Mackey
and love and care.
Conscious businesses use an approach to management that is consistent with their culture and is based on decentralization, empowerment, and collaboration. This amplifies the organization’s ability to innovate continually and create multiple kinds of value for all stakeholders.
By embracing the principles of Conscious Capitalism, businesses can bring themselves into close harmony with the interests of society as a whole and align themselves with the evolutionary changes that we humans have been experiencing. Conscious Capitalism provides an ethical foundation that is essential but has been largely lacking in business. We believe that businesses should lead the way in raising consciousness in the world. The larger the company, the greater its footprint and therefore its responsibility to the world. Our friend Kip Tindell, cofounder and CEO of The Container Store, refers to this as the “power of the wake.”12 Just as a ship leaves behind it a large body of turbulent water, so too do individuals and companies leave a wake behind them. However, most of us are so focused on our destination that we never look around to appreciate the full impact we have on the world.
The Financial Performance of Conscious Businesses
Like all businesses, conscious businesses are subject to the discipline of the market, and they need to deliver strong financial results. Appendix A addresses the important issue of the financial performance of conscious businesses in detail, but here is a preview. In addition to creating social, cultural, intellectual, physical, ecological, emotional, and spiritual value for all stakeholders, conscious businesses also excel at delivering exceptional financial performance over the long term. For example, a representative sample of conscious firms outperformed the overall stock market by a ratio of 10.5:1 over a fifteen-year period, delivering more than 1,600 percent total returns when the market was up just over 150 percent for the same period.
As Bill George, former CEO of Medtronic and one of the foremost conscious leaders of our times, puts it, “Some people may interpret the phrase Conscious Capitalism to be soft. But it is not soft at all. It is tough; it is challenging. You’ve got to do both. You have to perform, and you perform for a purpose. It’s like a sports team. You really care about working together as a team, but at the end of the game, you still want to win.”13 Conscious businesses win, but they do so in a way that is far richer and more multifaceted than the traditional definition of winning, in which others must lose for someone to win.
Doing What Is Right Because It Is Right
Conscious businesses have a simple but powerful belief: the right actions undertaken for the right reasons generally lead to good outcomes over time. If we allow ourselves to become too attached to what the Buddha called a “cherished outcome,” we become more likely to engage in actions that seem to work in the short term, but may have harmful long-term consequences. Conscious businesses do what is right because they believe it is right.14 They treat all their stakeholders well because that is the right, humane, and sensible thing to do—and because it is also smart business practice to do so. They operate with a sense of higher purpose because that is what gets their people excited about coming to work. The leaders of conscious businesses care about service to others because that is ultimately what leads to fulfillment and value creation.
We never actually fully control outcomes in our lives, but in business, we have created a deep-seated illusion that we do. What we can do is learn to control our actions and reactions. Traditional businesses give their managers hard targets for metrics like market share, profit margins, and earnings per share. Such metrics confuse cause and effect. To achieve those numbers—which are just abstractions—managers often knowingly undertake actions that are harmful to stakeholders, including, ultimately, shareholders. For example, managers might squeeze their team members or their suppliers. These actions may deliver the desired numbers in the next quarter, but they also plant the seeds for much bigger problems in the future. This is what happened to Toyota a few years ago, when the company started to set numerical goals for sales growth and market share. Managers throughout the organization soon shifted their focus to meeting the numbers and away from creating safe and reliable cars. The result: a spate of quality and safety problems that greatly tarnished the hard-won reputation of the company.
The lesson is to focus on the things we can control, which are our actions and our reactions, and trust that the right actions will lead to positive outcomes, not always immediately but in the long term. The positive outcomes may not be exactly what we had in mind. Depending on the quality of our actions and external factors, they could be different but far better.
Conscious Capitalism Is Not Corporate Social Responsibility
A good business doesn’t need to do anything special to be socially responsible. When it creates value for its major stakeholders, it is acting in a socially responsible way. Collectively, ordinary business exchanges are the greatest creator of value in the entire world. This value creation is the most important aspect of business social responsibility.
The whole idea of corporate social responsibility (CSR) is based on the fallacy that the underlying structure of business is either tainted or at best ethically neutral. This is simply not the case. As we showed in chapter 1, free-enterprise capitalism has helped improve our world in numerous ways.
While businesses do not need to redeem themselves by doing good works in the world, there is nothing wrong with businesses focusing some of their attention on social and environmental challenges. Conscious businesses believe that creating value for all their stakeholders is intrinsic to the success of their business, and they consider both communities and the environment to be important stakeholders. Creating value for these stakeholders is thus an organic part of the business philosophy and operating model of a conscious business.
By contrast, firms that are primarily profit-driven tend to graft social and environmental programs onto a traditional business profit-maximization model, usually to enhance the firm’s reputation or as defensive measures to ward off criticism. Many such efforts are really about public relations and have rightly been dismissed as “green-washing.” What is needed is a holistic view that includes responsible behavior toward all stakeholders as a core element of the business philosophy and strategy. Rather than being bolted on with a CSR mind-set, an orientation toward citizenship and society needs to be built in to the core of the business.15 Table 2-1 summarizes the key differences between Conscious Capitalism and CSR.
TABLE 2-1
How Conscious Capitalism differs from Corporate Social Responsibility
| Corporate Social Responsibility | Conscious Capitalism |
| Shareholders must sacrifice for society | Integrates the interests of all stakeholders |
| Independent of corporate purpose or culture | Incorporates higher purpose and a caring culture |
| Adds an ethical burden to business goals | Reconciles caring and profitability through higher synergies |
| Reflects a mechanistic view of business | Views business as a complex, adaptive system |
| Often grafted onto traditional business model, usually as a separate department or part of public relations | Social responsibility is at the core of the business through the higher purpose and viewing the community and environment as key stakeholders |
| Sees limited overlap between business and society, and between business and the planet | Recognizes that business is a subset of society and that society is a subset of the planet |
| Easy to meet as a charitable gesture; often seen as “green-washing” | Requires genuine transformation through commitment to the four tenets |
| Assumes all good deeds are desirable | Requires that good deeds also advance the company’s core purpose and create value for the whole system |
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Implications for business |