Why conscious capitalism? Why now?

As a business leader focused on the middle market, I often have healthy discussions with fellow leaders about what is best for our organizations. One frequent topic of discussion is the idea of stakeholder, or conscious, capitalism. As a purpose-driven organization, committed to helping people thrive every day, this is something that we have embraced and with which we are deeply engaging.?

Skeptics ask: If we embrace this perspective, are we limiting our ambitions or capacity to grow?

I respect the question. However, I’ve come to understand that taking a more purposeful, “conscious” approach to business can make an organization more competitive, not less. Businesses that are guided by a purpose beyond profit, and that seek to create value for all their stakeholders, are typically rewarded with greater customer and employee loyalty, which can ultimately lead to greater profitability.

That’s been our experience at BDO, where purpose and values have long been at the heart of our business. In recent years, as challenges like climate change, social inequity and economic inequality have become ever more urgent issues, it’s clear to us that businesses need to step up and meet the moment. We also believe that an organization’s leaders have an especially important role to play. To become the type of business that drives progress and creates opportunity for all, change starts with leaders.

That’s why we’ve been even more intentional about integrating the principles of conscious capitalism into the everyday operations of our business. To help us do that, and to share the benefits of this thinking more broadly, we entered into a relationship with Raj Sisodia , one of the founders of the Conscious Capitalism movement, establishing the Conscious Business Leadership Academy (CBLA) to offer formal training to leaders interested in this approach.

Recently, I participated in the CEO CBLA program and the entire BDO executive leadership team had an opportunity to go through the C-Suite CBLA training program. There, I had a chance to spend more time with Raj and discuss the principles of this approach and why it is more relevant and important than ever. What follows is an edited version of our conversation.

WB: Raj, how would you define Conscious Capitalism?

RS: Its premise is that capitalism is inherently good, because it creates extraordinary value and can elevate humanity. Leaders who support conscious capitalism are mindful of the impact they have on all their stakeholders – and the world – and are committed to doing better to fulfill the potential of free enterprise capitalism. ?

WB: What are the core principles?

RS: There are four. The first is a higher or transcendent purpose. Elevating humanity through business requires that you know why your company exists. The second is to take a stakeholder orientation – recognize that a business needs to create value with and for all of its stakeholders. Third is conscious leadership. Organizations need to be led by people who are driven by service to the organization’s purpose and the people it impacts. Fourth is conscious culture. All companies have a culture, but the goal here is to intentionally develop a culture that promotes trust, caring and purpose.

WB: Why did you start the Conscious Capitalism movement? What inspired you?

RS: It grew out of a research project I started in 2005 in which I wanted to identify companies that spent less than the norm on marketing and promotion, and yet had outstanding customer loyalty and trust. This led me to discover a group of companies that were doing things differently. They were not particularly marketing oriented, but their customers, employees and suppliers were extremely loyal to them, and their investors were genuinely supportive of what they were doing. What these companies had in common was a stakeholder mindset, a shared purpose and a clearly defined set of core values. These companies also had leaders who were committed to this purpose, and a culture that made these ideas a priority. That project was published in 2007 as a book, Firms of Endearment: How World Class Companies Profit from Passion and Purpose. Through this initial work, we discovered the core principles of what we now call Conscious Capitalism. The companies we highlighted in this book dramatically outperformed the S&P 500 financially even as they created multiple kinds of non-financial wealth for all their stakeholders.

WB: How does conscious capitalism fit with an organization’s growth strategy?

RS: It can elevate performance in many ways, including something core to an organization like growth. A company that understands strategically where it’s going, and why, can harness its resources in a productive, efficient way.

WB: How does it make us better leaders?

RS: It makes you more aware of the interdependence of business. That helps you see the business landscape more fully, and therefore you have a deeper, clearer understanding of opportunities and risks.

I believe the conscious business perspective also makes you more empathetic, and that quality always makes you a better leader. You recognize that, as Herb Kelleher of Southwest Airlines said, “The business of business is people – yesterday, today, and forever.”

WB: I’ve heard you call for fundamental change in the way we do business. Why now? What’s the urgency?

RS: I’ve been a business professor for a long time, and I’ve always had concerns about the traditional ways of business. Now, I’m convinced that some of those ways are self-destructive and must change. We need to elevate capitalism now. Otherwise, I don’t believe it can survive the challenges we are facing together, as a global community.

WB: I agree the goal of conscious capitalism is a worthy one. But with all the issues in the business world now – the challenges and the cross-currents – what makes you feel we can bring about this kind of change? What gives you hope?

RS: The fact that you and I are here, having this discussion, gives me hope. And we’re not alone. A lot of business leaders recognize that the status quo isn’t good enough. It’s not sustainable. We also know our stakeholders – our employees, our customers, our investors – are demanding that we play a more constructive role in society. I see it happening – and accelerating – and that gives me hope.

Once these kinds of ideas become familiar, they can be readily adopted, and once adopted I’m confident they will lead to success. I see a bigger transformation happening more quickly than we might have expected.

WB: Thank you, Raj. It’s always inspiring to talk with you.

?

Readers: I’ll have more to say about Conscious Capitalism, including an upcoming conversation with Neha Sangwan, M.D. , who leads the Conscious Business Leadership Academy, as well as several of my BDO colleagues who have their own perspective on how these ideas affect and benefit our business. We are thrilled about taking the CBLA to even more leaders, both internally and within our network of exceptional companies and like-minded professionals.