Capitalism is based on the creation of profitable organizations that could only exist by providing high quality and efficient products and services. The for-profit nature of companies forces them to find efficiencies in operations and production. This leads to greater profits, which can then be applied to social initiatives.
The globalization of business has given many organizations unprecedented power. The revenue of some companies is larger than the gross domestic product (GDP) of some countries. With power comes responsibility—social responsibility.
The increased challenges and expectations of operating a business in the global economy have business leaders recognizing the importance of corporate social responsibility. This business term has caught on quickly the past few years—but CSR is more than just a trend, it is becoming the new expectation for businesses.
And as the idea of CSR continues to evolve, we are moving toward the thought of ‘conscious capitalism.’ Established in 2009, the Conscious Capitalism Institute defines conscious capitalism as “a philosophy based on the belief that a more complex form of capitalism is emerging that holds the potential for enhancing corporate performance while simultaneously continuing to advance the quality of life for billions of people.”
The organization states, “Conscious Capitalism differs from CSR by virtue of its origins from within the company as an expression of an overall perspective on how to conceive and build a business, rather than as a response to external notions of what counts as ‘socially responsible’ or external pressure.”
The public is starting to demand that social responsibility be weaved into the core values of a company. We want our entrepreneurs and corporate leaders to believe in what they are creating and to be creating for the greater good rather than just to fatten their own wallets.
The phrase conscious capitalism was first used by the 2006 Nobel Peace Prize recipient, Muhammad Yunus, for his creation of the Grameen Bank in Bangladesh in 1983. Grameen Bank is a microfinance organization and community development bank that provides small loans (microcredit) to the impoverished without requiring collateral.
Focusing on more than profits has taken on much discussion today as stakeholders and business leaders debate whether this method still enables companies to compete with others who solely focused on profits.
Two examples of successful companies practicing conscious capitalism today are The Container Store and Whole Foods. Both companies believe that profits can be earned from balancing the needs of employees, suppliers, customers, community members and investors—all of the company’s stakeholders. The shareholder is not the most important stakeholder. The Container Store and Whole Foods have seen great success in terms of profitability while not compromising their core values.
That is why I firmly believe that today, more than ever, helping our students to be well prepared business leaders of integrity must be held up as an inviolable trust.
Free enterprise is absolutely essential for innovation in products and services. Innovation is the prelude to prosperity. And as a business school, we must take a stand for free enterprise—so strongly that it becomes a part of our DNA.
We must remember that our responsibility goes beyond providing our students and business leaders with rigorous academic courses. Our responsibility is to people and community. And we much teach that this responsibility can be maintained while still be profitable (as seen with TOMS Shoes, The Container Store, Whole Foods, and many others).
