In this article I provide a quick recap of what Conscious Capitalism entails. I discuss the various benefits the framework offers and highlight the excellent results companies who have adopted the framework have had.
The difference between conscious companies and other socially aware companies is that Conscious Capitalism goes beyond corporate social responsibility (CSR). Conscious businesses operate with a higher purpose in mind, and it’s this purpose that keeps employees motivated and engaged while keeping customers and investors happy.
Higher purpose is one of the four tenets of the Conscious Capitalism philosophy. Stakeholder orientation, conscious leadership, and conscious culture are the other three tenets. When these four tenets are applied together the foundation for a conscious business is laid.
“When all the tenets are present in the same company, the collective and cumulative impact on financial performance can be dramatic.”
Conscious Capitalism: Liberating the Heroic Spirit of Business, John Mackey, Raj Sisodia.
Research has shown that companies who adopt this framework consistently outperform both S&P 500 and “Good to Great” companies. Some well-known examples of conscious businesses include Southwest Airlines, Costco, The Container Store, Starbucks, Trader Joe’s, Patagonia and Nordstrom.
Why do conscious businesses consistently outperform their peers?
Conscious business have;
- A positive impact on the environment and good civil society relationships
- A strong reputation that attracts customers, employees, and investors
- Greater employee engagement, innovation, passion, and commitment
- Improved employee retention and loyalty
- Lower spend on recruiting
- Delighted and loyal customers who are advocates for the company
- Loyal and innovative suppliers
- Improved stock market performance
- Increased revenue
Numerous studies support the Business Case for Conscious Capitalism
Customer satisfaction is directly linked to stock market performance
The Dijulius Group, a leading authority on customer satisfaction, refers to research conducted by the University of Michigan which shows that; “Over a twelve-year period (April 2000 to April 2012) the top customer satisfaction companies’ stock value went up 390%, where the S&P 500 average stock went down 7%”
Customers want to work with businesses that treat their employees well
According to Quantum Workplace, facilitators of America’s most widely used employee engagement survey i.e. Best Places to Work, “One of our studies revealed that companies with higher employee engagement experienced a rate of revenue growth over a three-year period of 39.7% versus only 23.7% at companies with lower engagement.” That’s a 16% difference!
The ESG Advantage
A 2018 S&P Global Rating paper on the ESG (Environmental, Social and Governance) Advantage explores the link between environmental governance and financial performance. The report states that “Assets invested according to ESG-related strategies reached $30 trillion in 2018, according to estimates by The Global Sustainable Investment Alliance. This followed a 25% increase to $23trillion between 2014 and 2016.”
Conscious Capitalism supports Innovation
A 2016 paper by Caroline Flammer and Aleksandra Kacperczyk finds that “stakeholder orientation sparks innovation by encouraging experimentation and enhancing employees’ innovative productivity.”
The world needs more conscious companies
Conscious Capitalism makes sense for all stakeholders and the research can back up its efficacy. Not only do companies who adopt conscious business philosophies get to do more good; but by adopting the framework they also outperform their competitors in all respects. More and more companies are adopting the conscious capitalism framework which is great for business, the environment and customers.