After the GFC (Global Financial Crisis) it is now acknowledge the profit motive in running a business is no longer the main purpose for its being. I support this view and will find ways of cooperating with the Conscious Capitalism Institute to promote its advocacy.
From the Sydney Morning Herald
Pursuit of genuine social awareness can pay at the bottom line
April 21, 2012
When revolution swept Europe in 1848, Karl Marx dashed off a letter to Friedrich Engels proclaiming the rise of the worker, thinking capitalism was on its knees. He did it again a few years later. And then again.
So how do you know if you have really seen something, or if you just think you’ve seen it?
According to Sisodia, ”conscious capitalism” is a fledgling social movement driven by a philosophy that eschews the old profit-for-profit’s-sake mentality of traditional big business in search of a ”higher purpose”.
And companies that adopt the philosophy for the right reasons end up profiting from it anyway.
Sisodia, a marketing professor who will visit Australia in coming weeks to address a conference on the subject, says he became aware of the movement about 2004 when researching companies that spent little on marketing but which still inspired loyalty and trust from customers.
”We found [that loyalty] really wasn’t about the marketing, it had something to do with the way in which these businesses were conceived of,” he said.
”The norm is actually the opposite, certainly in the United States. Companies there spend a lot of money on advertising and promotion and other aspects of marketing, but you don’t see a correlation with customer loyalty and trust. In fact, in some cases you see a negative relationship.”
By taking into account the ”well-being” of everyone involved with the company – employees, customers, suppliers, and the public – Sisodia says employers found they could unleash positive productive forces that traditional command and control structures could not.
”The well-being of all is actually tied together, so you can’t really operate in a way that says it’s all about our shareholders, and therefore we can squeeze our employees and suppliers and we can externalise our costs on to society, because ultimately that will come back to hurt you,” he said.
”To older companies it’s about making money but at the expense of a bunch of other things. But these [conscious] companies make money and they also make a difference. It’s a much richer narrative around what business can be and should be.”
The companies he has in mind? Google, Costco, Whole Foods, and Toyota, among others in the US, which all feature self-organising, self-managing, self-motivating cultures. ”[And] they’re saving money in other areas that actually don’t add value, like marketing costs, high employee turnover, HR costs, lots of levels of of management.
”Then they’re getting the positive feedback from customers and employees, there’s great media coverage. When you’re running a business that is fundamentally good, that is fundamentally doing the right things for everybody all the time, consistently, then all the forces out there start to work in your favour, and pay off over time.”
The movement was not spawned by the global financial crisis, but the crisis provided an opportunity to test the theory. And businesses which followed the principles of conscious capitalism fared much better than traditional, command and control companies, he said.
Sisodia says conscious capitalism is related to the social entrepreneurship movement because it aims to make a positive difference in the lives of others. But it’s more. ”We’re applying it to the traditional for-profit business world,” he said.
”We’re saying that even though you’re a for-profit business, that you can operate in way that ultimately creates value for everyone, including society. This is not just restricted to social ventures.”
He is critical of the fad in big business of corporate social responsibility.
”It’s often an add-on for a business that is fundamentally continuing along the same path that it is on. But then they add on a department which is trying to alleviate some of the very problems that the core business is creating,” he says.
”So a food company might put some money into obesity education, or type 2 diabetes, and meanwhile they’re selling stuff that is leading to those problems.”
The problem isn’t capitalism, Sisodia says.
”Capitalism is about free markets, free people, and voluntary exchange. Crony capitalism is about using the power of government on behalf of certain commercial interests for their own advancement, rather than the public good.”
How will you pass the public’s scepticism that this is just a clever marketing technique? ”Well in that case it probably won’t work for you.”
Sisodia admits the phrase ”conscious capitalism” has been trademarked ”to have some integrity around the phrase”.
And some of the companies he uses as examples are members of the Conscious Capitalism Institute, an organisation with the goal of promoting the philosophy.