Conscious Capitalism: A Definition

Conscious capitalism is defined as an emerging economic system that “builds on the foundations of capitalism—voluntary exchange, entrepreneurship, competition, freedom to trade and the rule of law. These are essential to a healthy functioning economy, as are other elements of conscious capitalism including trust, compassion, collaboration, and value creation.

Conscious capitalism is ethically grounded free enterprise.

John Mackey, founder and co-CEO of Whole Foods Market, is the leading business proponent of conscious capitalism. Whole Foods Market, founded in 1980 in Austin, Texas and now consisting of 331 stores in the United States and the U.K., has embodied the ideals of conscious capitalism. The company has been listed as one of Fortune magazine’s "100 Best Companies to work for” and was in the The Wall Street Journal ranking of the world’s best corporate reputations.

Conscious capitalism has four pillars guiding a business for conducting socially responsible and ethical practices: purpose, stakeholder, culture, and leadership.

Higher purpose: This is the idea that every business has a purpose that goes beyond making money. “While making money is essential for the vitality and sustainability of a business, it is not the only or even the most important reason a business exists.” By focusing on its higher purpose, “a business may inspire, engage and energize its stakeholders.” Accordingly, a compelling sense of purpose creates a higher degree of engagement for all stakeholders and helps the generation and release of organizational energy.

Stakeholder orientation: This is the idea that life and the human foundations of business are independent, and a business needs to create value with and for its various stakeholders. Like the life forms in an ecosystem, healthy stakeholders lead to a healthy business system. Conscious businesses focus on their “whole business ecosystem, creating and optimizing value for all of their stakeholders.” This idea is represented by the acronym SPICE: society, partners, investors, customers, and employees. In turn, strong and engaged stakeholders lead to a healthy, sustainable, resilient business, creating a win-win-win proposition.

Conscious leadership: This is the idea that conscious leaders understand and embrace the higher purpose of business and focus on creating value for and harmonizing the interests of the business stakeholders. Driven primarily by service to the firm’s purpose, rather than by power or money, conscious leaders “inspire, foster transformation, and bring out the best in those around them.” They recognize the integral role of culture and purposefully cultivate conscious culture.

Conscious culture: This is the ethos – the values, principles, practices – underlying 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.” This idea is captured in the acronym TACTILE: trust, authenticity, caring, transparency, integrity, learning, and empowerment. The word “tactile” also suggests that the cultures of these companies are very tangible to their stakeholders as well as to outside observers.

TACTILE: trust, authenticity, caring, transparency, integrity, learning, and empowerment.

These four principles of conscious capitalism are mutually reinforcing. Companies that subscribe to the tenets of conscious capitalism may, in the long term, outperform other companies along multiple dimensions, including financial, while having greater beneficial impact on the world at large. For example, Patagonia has doubled the size of its operations and tripled its profitability.

This has occurred in spite of the company launching a marketing campaign that tells customers not to buy its clothes. Mackey argues that “while there is nothing wrong with making money, indeed it is absolutely necessary for the enterprise to flourish: it is not by itself a very inspiring purpose for the enterprise.” According to the conscious capitalism movement, business exchanges aggregated collectively are the greatest creator of value in the world and this value creation is the source of business virtue.

“Practicing conscious capitalism enriches your life and the lives of people you do business with. And it’s without a doubt, the most fun, enduring and profitable way to build a sustainable business.”
Kip Tindell, chairman & CEO, The Container Store, trustee, Conscious Capitalism, Inc.

Next Page: The Conscious Capitalist Credo