The rise and rise of conscious capitalism

By Lysanne Currie | 31 Oct 2019 | Wealth

We find out what’s behind the revolutionary restructure in the world's most successful businesses

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* Silicon Valley

On 16 January 2018 the world’s top CEOs woke up to a startling missive from one of their own. Laurence D Fink, founder of BlackRock, the most influential investment firm on Earth, wrote: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

His letter, hailed as a pivotal moment in ‘conscious capitalism’, was all the more surprising having come from a CEO who, just four years previously, had claimed that activism harmed job creation. But Fink had since wised up: businesses that failed to engage with the community, he warned, would “ultimately lose the licence to operate from key stakeholders”.

The term ‘conscious capitalism’ itself was first popularised by John Mackey, CEO of high-end grocery chain Whole Foods. Mackey spent the 1960s studying Eastern philosophies and living in Texan communes. His 2013 book Conscious Capitalism: Liberating the Heroic Spirit of Business argues for “a way of thinking about business that is more conscious of its higher purpose” and asks leaders to think about how they can create more value for their stakeholders.

Significantly, Mackey also argues that huge amounts of value can be delivered to every stakeholder without sacrificing profits. In this, he shares the viewpoint of economist Professor Colin Mayer, whose recent book Prosperity: Better Business makes the Greater Good, says corporations can create both wealth and social wellbeing.

“Business should be a force for social change as well as for social good,” he told BBC Radio 4 last year. “But increasingly over the last few years it has been the cause of inequality, environmental degradation, and growing mistrust in business.”

Fast-forward to 19 August 2019: The Business Roundtable, a lobbying group of leading American CEOs, announced they were no longer putting shareholders before everyone else. Instead, they were pledging a responsibility to their customers, workers and communities, helping to “set a new standard for corporate leadership”; a response to a changing world in which businesses are expected to do more than just maximise profits.

It all reflects a wider and accelerating trend. High- net worth individuals – such as Amazon’s Jeff Bezos, who donated $2bn to the homeless in 2018, or Jeff Skoll, whose eponymous foundation is the world’s largest for social entrepreneurship – don’t simply want to manage problems anymore; they want to fix them. >>

Related: The changing face of wealth: From Leonardo to Greta, we examine the real influencers behind the new UHNW, and the behaviour trends that will affect us all

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* The Spheres

Allied to this, donors are actively seeking out companies that fulfil a social purpose. “Consumers will analyse charities and come up with what they think are the most effective ways of giving,” says Anna Josse, CEO and founder of gift fund company Prism. 

As younger, technologically adept generations come to age, they also play a big factor: “Millennials are more inquisitive, and are used to a level of transparency and having things at their fingertips,” says Lucy Edwards, partner at law firm Penningtons Manches LLP. “They’re in a position to hold companies to account in a way wehaven’tinpreviousyears,becausetheinformation simply hasn’t been there.”

With the rise of a new socially-minded generation, a spirit of ‘effective altruism’ is in the air. If post-war investors in an economically fragile world followed the rapacious likes of free-market economist Milton Friedman, the needs and preferences of socially conscious millennials have turned outwards, towards building a better and brighter solar-panelled tomorrow. 

Various tax incentives have also made life easier for UK-based philanthropists, such as funds within charitable organisations, allowing donors to receive tax relief, along with tax breaks available for those bequeathing art to British charities (provided the art is in ‘the national interest’). 

Edwards has also identified a trend in “parents helping children dip their toe in financial responsibility, by involving them in charitable endeavours... they want their children to be socially aware; the conversation emphasis has changed from ‘I want to make sure my children are financially mature’, to ‘I want my children to be aware of the privileges their wealth brings them’, and tailor the impact of their socialfootprintaccordingly. 

“The old method of philanthropy was that you could be a robber baron, pillage resources, do harm to the planet and treat your staff badly – but as you got closer to God, you could make up for it by buying everyone a library,” says Peter Cafferkey, founder and CEO of Boncerto, a network which acts as a bridge between charities and wealthy donors. “[But] people are now seeing through that. You need to look at your whole legacy.”

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