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Conscious Capitalism

The Urgency of Sustainable Leadership—and the Promise of Social Entrepreneurship

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On this Earth Day, we honor our planet and recognize the importance of climate action and environmental stewardship. We acknowledge our interdependence—and the gravity of the stakes if we fail to meet the moment.

What is the role of business in this epic challenge? Of leaders and entrepreneurs? Of all of us?

 

The Role of Business

Business leaders of course must address cash, profits, and growth as they manage their venture’s financial health amidst market pressures. Thankfully, there are not just costs associated with environmental stewardship but real opportunities.

“For far-sighted companies, the environment may turn out to be the biggest opportunity for enterprise and invention the industrial world has ever seen.”
–The Economist

Businesses operating sustainably have the potential for:

  • Increased sales
  • Cost reduction
  • Risk mitigation
  • Reputation enhancement
  • Operational efficiency
  • Customer loyalty
  • Pricing premiums
  • Innovation benefits
  • Competitive advantage
  • Talent attraction, motivation, and retention

Of course, these gains are not automatic. Leaders must figure out viable business models and strategies, leveraging innovation and efficient operations while engaging with partners in the community and their supply chains.

None of this can happen without leading people well. Organizations must have an intentional culture that allows people to sustain excellent and ethical work over time.

“I think every business needs a leader that does not forget the massive impact business can have on the world. All business leaders should be thinking, ‘How can I be a force for good?’ What I see is demand from our people to be a business that is good, makes a profit, but also does something for the planet and humanity. I think this is a trend we will see more of.”
–Richard Branson, British entrepreneur, philanthropist, and founder, Virgin Group

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The Promise of Social Entrepreneurship

One of the driving forces of changemaking on this front is social entrepreneurship. It’s one of the great mega-trends of our time, but it can be a bit complicated and confusing. What is it?

Wikipedia notes that social entrepreneurship “uses entrepreneurial principles to organize, create, and manage a venture to achieve a social change.” I define it simply as “creating an innovative enterprise that generates social value.”

It’s best illustrated through examples. Today there are many exciting examples of social entrepreneurship and innovation in action:

  • Karma is a food app in Sweden that connects surplus food from restaurants, cafes, and grocery stores to consumers for a lower price. Users eat food for less money, and businesses receive an additional revenue stream–all while reducing food waste.
  • The Palazzo Italia is a building in Milan with a smart, biodynamic concrete skin that absorbs and breaks down pollutants—making it a smog-eating building. Photocatalytic cement captures pollution when it comes into contact with light, which is then transformed into inert salts. The building, designed by Nemesi Studio, is net-zero energy.
  • Valani is a fashion brand that bridges the gap between sustainability and feminine style by offering sustainable, vegan apparel for women. Its plant-based fabrics are dyed with low-impact, non-toxic dyes and can be composted. One dress, for example, is made from 100% banana viscose, made from discarded banana tree stems, a vegan alternative to silk.
“Let’s be honest, sustainability and fashion haven’t always been friends.”
–Vanni Leung, founder of Valani

Social entrepreneurs often begin with a problem they notice. They learn more about the context and start experimenting with different ways to solve it. For example:

  • Problem: Coral reefs support up to 1 billion people, sustain 25% of marine life, and generate $30 billion annually through tourism and fisheries, but they are dying rapidly. Over 30% of our world’s reefs have died over the past several decades. The oceans are projected to lose 75% of reefs by 2050.
  • Solution: coral farming has been proven to be a viable tool to revitalize reef health. Coral Vita in the Bahamas created a commercial, land-based coral farm that grows and transplants corals to restore dying coral reefs, helping to preserve the ocean’s biodiversity.

 

  • Problem: Potholes are annoying to people and damaging to cars, while roadmaking has a large carbon footprint.
  • Solution: MacRebur in Scotland uses molten, recycled plastic as a replacement for the bitumen commonly found in asphalt roads. Their product is now used in Australia, Dubai, Estonia, Slovakia, South Africa, and the U.S.
“We’re basically using rubbish to create better roads.”
-Toby McCartney, co-founder of MacRebur in Scotland, “The Plastic Roads Company”
  • Problem: lack of access to clean water. The WHO and UNICEF note that 844 million people faced this problem in 2015.
  • Solution: Solvatten founder and CEO Petra Wadström created a revolutionary water-filtration technology—a portable water treatment device that also serves as a solar water heater. The sun’s energy inactivates pathogens through UV radiation, while also heating the water to provide additional disinfection. UV light destroys the formation of DNA linkages in microorganisms, making them harmless. Today, about 350,000 people across 20 countries use Solvatten.

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The Role of Technology and Innovation

Today, we’re seeing great advances in areas such as biomimicry, circular economy business models, carbon sequestration, regenerative and restorative practices, and more.

Of course, social entrepreneurship, sustainable leadership, and innovation aren’t nearly enough on their own to address the climate crisis. We also need bold and decisive collective action from governments, NGOs, philanthropies, scientists, and individuals changing their behavior and sending market signals to industry.

On this Earth Day, we must take stock and act boldly, decisively, and urgently. So much is at stake. Will we meet the moment?

“If the success or failure of this planet, and of human beings, depended on how I am and what I do, how would I be? What would I do?”
-Buckminster Fuller

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Gregg Vanourek is a writer, teacher, TEDx speaker, and coach on leadership and personal development. He is co-author of three books, including LIFE Entrepreneurs: Ordinary People Creating Extraordinary Lives (a manifesto for integrating our life and work with purpose, passion, and contribution) and Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (a winner of the International Book Awards). Check out his Best Articles or get his monthly newsletter. If you found value in this article, please forward it to a friend. Every little bit helps!

Sustainable Leadership on the 50th Earth Day

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Today marks the 50th anniversary of Earth Day, a day on which we honor our planet and recognize the importance of environmental stewardship and our mind-boggling interconnectedness. Since 1970, the world population doubled, from 3.7 billion people to 7.6 billion today. We have made great progress on some fronts, but not nearly enough.

In our triple crown leadership model, there are three mains aims: excellent, ethical, and enduring. We define the latter one, enduring, as “standing the test of time and operating sustainably.” Sustainability can be defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (United Nations) or, quite simply, as “the capacity to endure.”

 

Two Dimensions of Sustainability


We view sustainability as having two dimensions—external and internal—the latter of which is often overlooked:

  • External: ensuring appropriate and sustainable levels of resource consumption, while minimizing harm
  • Internal: sustaining people and maintaining the financial health of the organization

Business leaders of course must address cash, profits, and growth as they manage their organization’s financial health. Here, it turns out, there are not just costs associated with environmental stewardship but real opportunities. Businesses operating sustainably have the potential for:

  • Increased sales
  • Cost reduction
  • Risk mitigation
  • Reputation enhancement
  • Operational efficiency
  • Customer loyalty
  • Pricing premiums
  • Innovation benefits
  • Competitive advantage
  • Talent attraction, motivation, and retention

“We see that sustainability drives growth, cuts costs, reduces risk, and helps us serve a multitude of stakeholders.” –Paul Polman, CEO, Unilever


Of course, these gains are not automatic. Leaders must figure out viable business models and strategies, leveraging innovation and efficient operations while engaging with partners in the community and their supply chains.

None of this can happen without leading people well. Organizations must have a conscious culture that allows people to sustain excellent and ethical work over time.

Here too, we have much work to do. Take, for example, the problem of burnout:

  • 44% of employees report feeling burned out sometimes (Gallup, 2018)
  • 23% of employees report feeling burned out at work very often or always; 28% of millennials (Gallup, 2018)
  • Nearly all of the 72 senior leaders randomly surveyed reported at least some signs of burnout (Harvard Medical School, 2014)
  • 60% of health care workers felt burned out; 21% always or often (Harris Interactive, 2013)

“Creating the culture of burnout is opposite to creating a culture of sustainable creativity.” –Arianna Huffington, Cofounder, Huffington Post, and CEO, Thrive Global

 

The Conditions for Conscious Capitalism


Wise leadership can help create the conditions for “conscious capitalism,” including:

  • Long-term thinking
  • Better benefits and long-term employment for workers
  • Embracing diversity and inclusion in the workplace
  • Consumers valued as key stakeholders and not taken advantage of by deceptive practices
  • Responsible environmental stewardship
  • Reducing inequality (e.g., by addressing executive pay)
  • Uniting communities around common causes and solving problems

See John Mackey and Raj Sisodia, Conscious Capitalism (Harvard Business Review Press, 2013)

There have been big developments on this front in the business world. For example, in Larry Fink’s 2018 Annual Letter to CEOs, he wrote about how companies must have a social purpose and pursue a strategy for achieving long-term growth:


“Without a sense of purpose, no company, either public or private, can achieve its full potential.” -Larry Fink, CEO, BlackRock


This was big news coming from the CEO of BlackRock, one of the world’s largest asset managers, with trillions of dollars in assets under management.

In 2019, the Business Roundtable published a statement on the purpose of a corporation. Columnist Barry Ritholtz wrote the following in Bloomberg about that dramatic statement: “For 47 years, the Business Roundtable has lobbied on behalf of corporate America. Much of that time, it maintained a fiction—that the sole purpose of a corporation was to maximize profits on behalf of shareholders. This philosophy has been under assault for several years now, and this week the Business Roundtable announced it wants to put it to rest. In a widely circulated memo, the 200-member organization reversed itself, writing that ‘shareholder primacy’ is no longer the sole purpose of a corporation. Instead, corporations must include a commitment to ‘all stakeholders,’ which includes customers, employees, suppliers and local communities.” By now, we should all be including the environment in our list of essential stakeholders, given our dependence on its resources and conditions.

According to management theorist R. Edward Freeman (creator of stakeholder theory), “Managing for stakeholders is not about trade-off thinking. It is about using innovation and entrepreneurship to make all key stakeholders better off and get all of their interests going in the same direction.” John Mackey and Raj Sisodia note that the way to enable such stakeholder synergy (avoiding trade-off thinking) “is to focus on value creation rather than on value division,” taking us back to the innovation imperative.

When it comes to the external aspects of sustainability, we are today seeing great advances in areas such as biomimicry, circular economy business models, carbon sequestration, regenerative and restorative practices, and more, in part capturing the attention of the world through the U.N.’s Sustainable Development Goals (SDGs).

These matters are not only the province of CEOs, entrepreneurs, philanthropists, and policymakers. They are our own.

“If the success or failure of this planet, and of human beings, depended on how I am and what I do, how would I be? What would I do?” –Buckminster Fuller


On this 50th anniversary of Earth Day, we must take careful stock and act appropriately—and urgently. So much is at stake.

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Gregg Vanourek is a writer, teacher, speaker, and coach on personal and leadership development. He is co-author of three books, including LIFE Entrepreneurs: Ordinary People Creating Extraordinary Lives (a manifesto for integrating our life and work with purpose and passion) and Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (called “the best book on leadership since Good to Great“). Take Gregg’s Traps Test (Common Traps of Living), check out his Best Articles, get his newsletter, or watch his TEDx talk. If you found value in this article, please forward it to a friend. Every little bit helps!

What This Pandemic Teaches Us About Business and Society

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“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, we must think anew and act anew.” –Abraham Lincoln

As an insidious virus spreads around the world, we are wise to stop and ask: what can it teach us?

Much, I think. One question I am drawn to lately is this: what does the pandemic teach us about the role of business in society?

“This moment is the curriculum.” –Jon Kabat-Zinn

 

Shareholder Primacy?

First, some context. For half a century, an epic battle has been raging in board rooms and business schools about the purpose of business. Economist Milton Friedman took the first shot:

“There is one and only one social responsibility of business—to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” -Milton Friedman

His work laid the groundwork for “shareholder primacy theory,” the idea that shareholders should come first when business executives make decisions, that the primary purpose of business is to increase shareholder (owner) wealth, and that the ultimate measure of a company’s success is the extent to which it rewards shareholders. Jack Welch, former CEO of General Electric (in the 1980s and 1990s), is also credited with fueling this idea in practice.

This idea was so successful that, now, many people take it for granted, as business school gospel, as a law of nature. Of course the role of business executives is to maximize profits and reward shareholders. Right?

 

A New Take: Stakeholder Theory

Not so fast. Edward Freeman, a business school professor, had a different idea:

“Business is not about making as much money as possible. It is about creating value for stakeholders.” -Edward Freeman

Freeman’s “stakeholder theory” focused not just on shareholders but also employees, customers, suppliers, communities, and the environment, since these are all necessary for the business to survive and thrive. This was not an exercise in wishful thinking or naive altruism. There is a systemic view and innovation imperative that fuels the engine of value creation:

“Managing for stakeholders is not about trade-off thinking. It is about using innovation and entrepreneurship to make all key stakeholders better off and get all of their interests going in the same direction.” -Edward Freeman

The battle was afoot, continuing even to this day.

 

Systems Under Strain

What does this have to do with a tiny virus (SARS-CoV-2) that causes a global pandemic due to the rapid spread of a novel coronavirus disease (COVID-19)? Much, I think.

Today we see that our health care systems are strained, in some places to the breaking point. These systems are complex, relying on private, nonprofit, and public hospitals and chains and their personnel, equipment, technologies and related links like supply chains, research, labs, insurance providers, laws, regulations, information flows, and data models.

These complex health systems rely heavily on business products and services (e.g., ventilators, masks, vaccines, etc.), which arise from an amalgamation of complex business systems: raw materials, suppliers, manufacturers, distributors, customers, etc., each with their own business models, incentives, and limitations.

These business systems are heavily influenced by complex government systems at different levels—federal, state, and local—which are not used to close collaboration amidst the cascading timing crunches imposed by crises.

These government systems include the three branches of government (executive, legislative, judicial) purposely designed to provide checks and balances to each other (i.e., slowing things down) and an array of challenges and sometimes bizarre influences (e.g., laws, regulations, court orders, campaigns, elections, lobbying, committees, messaging, press briefings, inspectors general, etc.).

During this health + economic crisis, those of us who are parents are also seeing how reliant we are upon a functioning education system, with its own complexities (federal, state, and local laws, regulations, and funding streams). When schools are closed, the impacts on families, workplaces, communities, etc. are vast.

All these systems are affected by a complex financial system. And transportation system. Travel industry. And food industry. Media industry. All of which are complex systems under strain.

All these complex systems exist not only within nations but also across borders, with each country having its own systems and context.

And all of this sits on our planet, itself a vastly complicated system of oceans, winds, climate, biology, chemistry, physics, and more.

Meanwhile, our own personal virus risk profile comes down to an interplay between our own internal systems, including our respiratory and immune systems but also our overall physical and mental health and our own decisions and context related to our work, families, home, movement, and social milieu.

In short, we see compounding strains on systems of systems of systems. In all the death, suffering, and disruption, we are faced with a powerful reminder of just how interdependent we all are, and how relevant systems are to our life, work, and leadership.

 

The Role of Business… And Conscious Capitalism

In an age of global pandemics that threaten our lives and livelihood, business has a vital role to play. Many business executives are facing their greatest professional trial. A retreat to previous thinking about narrow shareholder focus and short-term profits will be a recipe for disaster—for the business and its stakeholders (us). We need more—and must demand more.

This brings us to a newer idea: “conscious capitalism.” John Mackey and Raj Sisodia wrote a book about it and conceptualize it to include higher purpose, a focus on stakeholders (not just shareholders), conscious leadership, and conscious culture.

“Conscious businesses believe that creating value for all their stakeholders is intrinsic to the success of their business, and they consider both communities and the environment to be important stakeholders. Creating value for these stakeholders is thus an organic part of the business philosophy and operating model of a conscious business.” -John Mackey and Raj Sisodia, Conscious Capitalism

The conscious capitalism movement is dynamic and growing, but up against an entrenched ideology and powerful array of forces, interests, and funds. It is not wrong to view it as an epic battle between two versions of capitalism, but we should place this war of ideas in historical context: capitalism has been around for centuries.

Many view Adam Smith’s classic book, The Wealth of Nations (published in 1776), as a landmark of capitalism, but we forget that his prior book, The Theory of Moral Sentiments, provided important underpinning to it.

Capitalism, business, entrepreneurship, and leadership are all social phenomena with ethical dimensions, and have always been so. What’s more, we have always had “flavors” of capitalism. Some are crass, mercenary, brutal, and short-sighted. Others not. Look to the current practice in northern Europe and the Nordic countries as intriguing examples, and that sync well with the way that many family businesses have operated for centuries (e.g., valuing workers, stewarding resources, taking the long view).

No, Milton Friedman does not have a monopoly on the industry of business ideas.

And no, the choice is not between capitalism and socialism.

No, the answer is not to discard the dynamic engine of progress created by a capitalist system of enterprise. It has lifted so many worldwide out of abject poverty and taken so many into days of prosperity.

And no, businesses cannot just hunker down and maximize profits in a pandemic. They are part of the social fabric, with a vital role to play in getting us through the crisis.

No, the purpose of business is not to make a profit.

Profit is the oxygen which allows the business to survive so that it can create value and pursue a higher purpose, for its people and its customers, and ideally also for its community and our world.

“The purpose of business is not to make a profit. The purpose of business is to find profitable solutions to the problems of people and the planet.” -Robert Fish, co-founder, Biggby Coffee

This is not about turning business into charity. It is instead a challenge to recognize the role of business in society and to look for ways for business to “do well by doing good”—a bold creative challenge. The idea, then, is not profit versus purpose. It is both.

“Just as happiness is best experienced by not aiming for it directly, profits are best achieved by not making them the primary goal of the business.” -John Mackey and Raj Sisodia, Conscious Capitalism

These are the hidden lessons of the virus. They are calling us to think and act anew. And the call is urgent.

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Gregg Vanourek is a writer, teacher, speaker, and coach on personal and leadership development. He is co-author of three books, including LIFE Entrepreneurs: Ordinary People Creating Extraordinary Lives (a manifesto for integrating our life and work with purpose and passion) and Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (called “the best book on leadership since Good to Great“). Take Gregg’s Traps Test (Common Traps of Living), check out his Best Articles, get his newsletter, or watch his TEDx talk. If you found value in this article, please forward it to a friend. Every little bit helps!