Conscious Capitalism: The defining movement of the 21st Century
Jerry Greenfield, one half of perhaps the most famous ice-cream duo in the world, recently delivered a keynote speech about his story and the lessons he has learned along the way to a packed auditorium of Fordham students. Jerry offered many insights to the students, including these two gems: Ben & Jerry’s Ice creams have very strong flavors because Ben’s lack of olfactory function means that strong flavors are all he can taste; and during their first winter of business in Vermont, Jerry implemented an ingenious “penny off a cone for every degree below freezing” marketing campaign. In addition to keeping the audience entertained, however, Jerry was at Fordham to preach the virtues of Conscious Capitalism, the growing movement that is in the nascent stages of becoming the defining form of business in the 21st Century.
Ben Cohen and Jerry Greenfield were pioneers of the Conscious Capitalism movement in the mid 1980’s with their commitment to donate 7.5% of pre-tax profits to charity, source ingredients from ethical origins and to ensure that all Ben & Jerry’s stakeholders share in the company’s success. Today, however, there is a plethora of multi-national corporations going above and beyond their fiduciary duty to maximize value for shareholders: Google, Tesla Motors, Starbucks and Whole Foods to name but a few. These businesses don’t just engage in Corporate Social Responsibility for PR purposes, rather their entire purpose is to produce “triple bottom line” profits for all of the company’s stakeholders, including shareholders, employees, customers and the wider community in which the business operates.
Conscious Capitalism is not just an anomaly that has seen men in suits transform overnight into neo-hippies with the aim of bringing peace to the world; rather, it is the rational decision of values-driven CEOs who have recognized that making a positive impact for all stakeholders simultaneously drives brand reputation, customer loyalty, employee moral and productivity, all of which contribute to the traditional bottom line. Trader Joes sees its employees not as costs that can be cut, but rather as assets that can be maximized, and incentivizes them accordingly, increasing both morale and productivity. Google is investing hundreds of millions of dollars to become a Carbon Neutral company because it understands how its “Don’t Be Evil” motto enhances Brand Reputation. Starbucks currently sources 93% of its coffee from ethical sources with a goal of 100% by 2015, recognizing that their customers are voting with their dollars and want their values reflected in the products they buy.
All of these positive externalities of Conscious Capitalism have long been understood, but it is only in the past decade have companies really embraced the stakeholder model of Capitalism. What spurred the change? As far as I can tell, there are three forces driving the Conscious Capitalism movement:
- Increase of information dissemination and choice: the internet has successfully revolutionized whole industries as disparate as paper and music, but the true value of the internet is found in its unparalleled ability to disseminate information and correct information asymmetry. Today every aspect of a company is scrutinized, and the exposure of any type of malpractice or activity that contradicts the company’s values is immediately public, and can often cause a backlash against that company. Conversely, companies operating along a triple bottom line model are likely to receive much more PR and exposure to their good work in today’s information age than ever before.
- The improvement in measuring social impact: a company is unlikely to devote resources to improving its value for stakeholders such as employees and the wider community if it is unable to measure key metrics such as brand reputation or employee morale. Fortunately there have recently been vast improvements in the ability to measure such metrics with the rise of companies such as B Lab and Imperative. B Lab can provide companies with official certification of being a stakeholder-oriented business by completing their B Impact Assessment, while Imperative are a consultancy that can produce a company’s “Value’s and Impact report”. There is even a new type of legal entity called a B Corp that no longer mandates a company to maximize shareholder value, and instead obligates a company to benefit all stakeholders. This improvement in measuring previously intangible metrics has allowed companies to analyze the impact of becoming more socially conscious on their bottom line, which usually aids senior management in authorizing triple bottom line decisions.
- A Millenial generation with tight wallets: For many Millenials the Great Recession occurred during their formative years, and many economists are declaring that negative perceptions of Consumerism combined with rising student loans debt is creating a generation whose spending habits are much less frivolous than its predecessors. I am of the opinion that the Millenials have been affected more by stories about worker exploitation in the Far East and the apocalyptical effects of Climate Change, and as such have been instilled with values they actively care about and want to change. Millenials are an activist generation, but rather than rebelling against the institutions like many of the Baby Boomers did in the 60’s, we are taking it upon ourselves to engage with businesses and governments and enact change from within. Finally, the exponential increase in the connectivity of the Millenial generation as a result of social networks has made young people more conscious than ever about their “personal brand”; this means young people are willing to buy products and services from companies that share their values, which Millenials can then wear as badges across their digital world. Companies are adopting a more socially conscious business model as a response to this shift in values amongst the Millenial generation.
At Fordham, Jerry Greenfield was reflecting on a time when Ben & Jerry’s was experiencing rapid growth and both he and his partner became disillusioned about the direction in which they were heading. Both he and Ben were dejected that they were no longer scooping cones or being part of their local community, and instead were becoming part of the corporate system they so detested. Jerry recalled a conversation he held with a friend in which he raised the possibility of selling Ben & Jerry’s to escape a life in a suit, to which his friend replied, “If you don’t like something about business, change it.” Today, companies across the world are responding to consumer demands to benefit all stakeholders. Conscious Capitalism will become the most important movement of the 21st century as long as we have more men and women like Jerry Greenfield who use the market system we have established as a tool to enact real social good.
Until next time!
NB. I am proud to be involved in The Compass Fellowship, a Social Entrepreneurship program that selects 15 Freshmen and gives them the tools to create their own Socially Conscious Business by the end of their first year. FURI Rental was the product of my time in Compass in 2011-12