Progressing to ‘conscious capitalism’
Big business needs reform in its mindset to encompass social commitment and not just shareholder interests
In an age known by the ubiquity of greed and materialism, can social impact ever become a priority for the corporate world? As ‘Not Business as Usual’ explores, yes there is a way out of all such excesses. And that does not necessarily involve shunning capitalism altogether but coming together to form a new social movement known as ‘conscious capitalism’. For some it may seem an oxymoron, since the core purpose of capitalism is to make profit and the cost of social impact always mitigates profits. For the social business innovators however, such a phenomenon is very much plausible since according to them strategizing for social impact is not an expense but an investment that will reap a return in the long-run. Those businesses who do not make such an investment have to pay the cost anyway in the future, such as the Bangladesh factory collapse in 2013. Out of over 300 fabric mills in Bangladesh, only two had a waste water treatment plant, which means that all the dyes and chemicals were going straight into the river out of which millions of locals fetch their drinking water. Many brands later had to provide compensation to the families of victims; the cost of not investing for environmental good in the first place.
During the time of the baby boomers, business became about adding book value to the shareholders, not adding societal value to the stakeholders. According to the late Milton Friedman, who may be called the chief architect of modern-day capitalism, corporations have no social duty; they only have a duty towards those who own their stocks. But all this was to change when only a decade ago in 2005, Jay Coen Gilbert popularized the idea of a B Corporation; benefit corporations created for having a positive societal impact and increasing ‘stakeholder’ value. These stakeholders include the customers, the public, the suppliers and the manufactures; all those involved in the value chain. Now many corporations in the world are B-Corp certified.
The documentary explores several businesses in the US who utilize the profits they make for social good. The Potluck Café is one such business that makes about million bucks a year and at the same time gives full life skills training to its employees. It takes care of the mental health of its staff and makes sure that it brings stability to the lives of people who had suffered so much instability before, especially emotionally in terms of relationships. Nurse Next Door is another business in the US healthcare industry that have built their company on strong values and ethics and they live up to their promise. One of their clients accounted for 80% of their revenue but it wasn’t very nice to its customers; it used to yell at people and treat them poorly. So Nurse Next Door fired the client. They traded financial loss for customer goodwill. Now that’s what’s called a long-term investment that will pay dividends in the future. The owner of Eco Apparel Boardroom says that consumers are increasingly concerned about a lot more than the price tag, such as whether the products are manufactured in toxin-free conditions. People today buy stuff not only because of its affordability but also if the brand is socially compliant; it’s not just about selling the cheapest product or selling more.
The social enteprise sector, which connects non-profit ethos and for-profit motives, is still a very nascent sector in North America. Imagine what effect it will have on the world if it is adopted worldwide. Now, as said in the documentary, people are inherently good. And when they see organizations doing good things, they want to be a part of it. So take your pick. The business paradigm is changing; it’s for you to decide whether you are going to be a follower or a pioneer.
Thanks, it's very helpful post.
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