Lessons From A Decade Of “Conscious Capitalism”

What can 220 CEOs learn at a “Conscious Capitalism” conference? Perhaps valuable insights into the purpose and value of their businesses. Perhaps also, ways to communicate those attributes and, in the process, better defend themselves and their firms from anti-business attacks. CEOs must learn that focusing only on the self-interest benefits they provide too often fails to gain them legitimacy and doesn’t win over the hearts of their customers and employees. CEOs need to become more aware, more conscious, of the moral and economic virtues that capitalism advances spontaneously.

With these ideas in mind, John Mackey, CEO of Whole Foods Market, recently gathered a couple hundred of his fellow corporate leaders near his home base of Austin, Texas, for the 10th annual Conscious Capitalism CEO Summit. Conscious Capitalism is the name of the movement, the nonprofit group that organizes it, and the book, co-written by Mackey and Professor Raj Sisodia, which inspired it all.

The book’s subtitle is “Liberating the Heroic Spirit of Business,” and Mackey and Sisodia emphasize two ways of achieving that: recognizing the moral purpose of business leaders and making them, and the general public, more conscious of the contributions of capitalism to human flourishing. These two key terms reinforce one another: one can’t have much of a sense of purpose without being conscious of it.

A recent report from Globescan, a research firm that specializes in corporate reputation, defined purpose as the process by which a company “marries business value with societal value.” And, at the Conscious Capitalism conference, many were “striving to be financially successful by making a positive difference in society through… [their] products, services and operations.”

There is something a bit ironic, of course, about all this. Any company, regardless of its managers’ intentions, is already making a “positive difference in society” simply by virtue of selling something that people want to buy. Mackey and Sisodia understand that point well, noting:

“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 is a socially responsible way. Collectively, ordinary business exchanges are the greatest creator of value in the entire world.”

Conscious Capitalists should recognize that markets aren’t tainted by some moral deficiency. Businesses have no need to redeem themselves by signing on to a “social responsibility” program. Helping business leaders appreciate the morality at the heart of business is perhaps the most important contribution of this movement.

But gaining that awareness is only the first step toward a much bigger prize: developing the communication strategy that will reach both policy makers and the general public, making them aware of the inherent morality and social value of business. If a firm could achieve that goal with its economic partners – its customers, employees, suppliers, and investors – and enlist them as ambassadors, unwarranted cultural and political attacks would become much less threatening.

Mackey believes that individual companies way well choose to invest in addressing social and environmental challenges, especially if they align with their business and their customers. The “higher purpose” of Whole Foods, for example, involves advancing a specific vision of environmental stewardship and healthy eating. The company’s investors, business partners, and customers recognize that purpose and value it. Understanding that purpose makes it easier for the company to defend its policies – and to enlist its stakeholders in that effort.

Unfortunately, many business leaders don’t have a clear sense of their company’s higher purpose. Often this is because the firm has defined itself in terms of what they make rather than what they make possible. The steel and cement sectors, for example, are starting to recognize that they not only produce valuable commodities but also make safer, more affordable, more efficient, and more livable buildings and cities possible.

The Conscious Capitalism movement can help business leaders understand and communicate the human connection to their operations and the downstream (and upstream) advantages of their products. Such communications can also help restore the pride and self-esteem of individual business leaders who too often are demoralized by the steady media emphasis on real or alleged corporate wrongdoing.

There are risks, however, with the semantics of the movement. The term “conscious capitalism” suggests to some that the economy itself needs some form of conscious, centralized control to smooth its rough edges. But centralized planning is a very different premise from what Mackey is suggesting for his fellow CEOs. Individual firms need to consciously embrace a higher purpose, he says, and managers need to integrate that into the culture and operations of the firm. But the same is not true of the economy as a whole.

Another concern is that Conscious Capitalism has, to date, focused largely on internal changes in the firm’s actions. That could crowd out efforts to promote a liberalized political and legal operating environment. Capitalism’s achievements depend upon the rule of law, enforceable agreements, and secure property rights. Those prerequisites made the Industrial Revolution and its massive economic achievements possible. But a technologically and institutionally dynamic economy requires that this requisite framework also evolves.

Conscious capitalists should promote that co-evolution: allowing property rights to be established in emerging resources, arguing for the legitimacy of risk-sharing contracts, and reducing barriers to entrepreneurial start-ups. Business leaders should seek to expand the voluntary sphere of economic action by questioning the rationale for government regulation, subsidies, and mandates. Perfecting your company’s higher purpose will be a wasted effort if government agencies regulate you out of business.

The success of the Conscious Capitalism movement so far demonstrates a thirst among business leaders for a group that can validate their profession and their passions. Thus, it represents an important step toward the business world understanding its own value and contribution to society. I hope it will also evolve to mount a more active defense of its freedom to operate and innovate.

Originally posted at Forbes.