A... B... Conscious Business 101
People often ask me, “What is a conscious business?” This question often comes from a place of curiosity and confusion, combined with a recognition that there’s a movement afoot. People are trying to figure out what it’s all about. They see signs that the definition of business success is changing. They also see that societal expectations of business are shifting, accelerated by the pandemic, and exacerbated by the “Great Resignation”.
The perplexity and curiosity stem from hearing terms like conscious business, conscious capitalism, benefit corporations, B corps, triple bottom line, stakeholder capitalism, benefit economy, economics of mutuality, doughnut economics, corporate social responsibility and not knowing what they mean — no one has the time to figure it all out!
So how do I answer? I often start by saying that the movement is confusing, with an alphabet soup of terms that don’t make it easy to grasp. I often apologize that it’s so hard to understand and then I share the following.
Bottom-line is that conscious businesses have a holistic definition of success where profits are generated to fuel the achievement of the business’ Higher Purpose. They are intent on providing value to all of their stakeholders, not just their shareholders. "Conscious business" is an umbrella term that is inclusive of all the ways that organizations can continuously work towards being a purpose-driven organization.
Benefit Corporation
If harmony is the way of the natural world, Benefit Corporations strive to operate through a similar approach.
A Benefit Corporation is a legal designation intended to align the organization toward stakeholder value and protect the company through leadership transitions and capital funding by embedding stakeholder value into the company’s legal structure, or its structural DNA. A Benefit Corporation is a traditional corporation, like an S-Corp, but with obligations committing it to higher standards of purpose, accountability, and transparency. Benefit Corporations commit to creating a public benefit and sustainable stakeholder value by considering a company’s impact on society and the environment when making decisions.
Picture yourself as a business leader in a Benefit Corporation where you are legally required to create a public benefit and sustainable stakeholder value. As opposed to the traditional approach of profit maximization, how would considering all stakeholders impact your decision making as a leader? Significantly! This is why Benefit Corporations are such a game changer. For transparency and accountability, in most states Benefit Corporations have to be assessed by a third party and report their public benefit progress annually.
Certified B Corp
Certified B Corps have been rigorously assessed by an entity called B Lab, with the “B” standing in for “Benefit”. Any for profit corporation operating for at least a year can apply to be a Certified B Corp. Most companies curious about starting their Certified journey begin by participating in B Lab’s free Business Impact Assessment to determine where they fall in the points necessary to achieve certification in five stakeholder areas: governance, workers, community, customers, and environment. To apply for certification a company must have at least 80 points with the maximum points possible being 200. Certified companies are required to recertify every three years and the assessment evolves over time, pushing certified companies to evolve with it. (The standards for becoming a Certified B Corp are currently being overhauled with the updated standards expected in 2025.) Here’s where the alphabet soup really comes in. In most states, Certified B Corps are required to become Benefit Corporations after a period of time. To create a new ecosystem that defines company success differently, B Lab is deliberately requiring the embedding of stakeholder value principles into certified companies’ legal designation.
When a business becomes a Certified B Corp it tells employees, customers, and fellow businesses that they exist to serve their stakeholders, the collective, and the wellbeing of the planet. It also makes it easier for customers to make confident, values-based spending decisions.
Conscious Capitalism
Conscious Capitalism is a belief that business is the most powerful force in the world to solve our collective societal issues and elevate humanity. Conscious Capitalism offers four tenets for leaders to follow: Higher Purpose, Conscious Leadership, Conscious Culture, and Stakeholder Orientation. Like other stakeholder oriented models, Conscious Capitalism espouses the importance of adding value to all stakeholders while creating an inspiring, energizing Higher Purpose that solves a worthy problem in the world. The Conscious Capitalism Credo is a great representation of the philosophy of Conscious Capitalism and inspires many leaders to engage in the movement.
Conscious Capitalism tends to be embraced first by the CEO or founder and practiced overtime throughout the organization.
Corporate Social Responsibility (CSR) or Environmental, Social and Governance (ESG)
Corporate Social Responsibility (CSR) is an initiative where a company attempts to portray the relationship the company has with society, in categories such as social (i.e. employees of the company), environmental, community, and governance. Goals for each category are set and the idea is that companies publicly report on the achievement of those goals, often annually. It helps to look at an example, so check out Warby Parker’s report. CSR is often motivated by a philosophy of “giving back” and is often a good place for companies to start when thinking about their stakeholder impact. However, for many companies CSR is where they start and stop. For that reason, CSR efforts have received well-deserved scrutiny. In a previous blog, I shared the flaws of CSR and how we must demand more.
To keep things confusing, CSR has a variety of titles. You may see it called Corporate Responsibility Report (without the Social); Sustainability Report; Environmental, Social and Governance (ESG) Report; or Impact Report.
Doughnut Economics
Doughnut Economics is a new way of thinking about economics that focuses on regenerative principles as opposed to traditional, depletive economic principles of the past. You can think of the Doughnut as a compass for human prosperity where all the needs of all people are met within the means of the planet. Developed by Kate Raworth, a Senior Associate at Oxford University’s Environmental Change Institute, the most important principle of Doughnut Economics is a movement from endless, obsessive GDP growth towards a goal of all of humanity thriving.
Doughnut Economics prioritizes systems thinking by recognizing that our economies, the natural world, and our societies are intrinsically linked as complex interdependent systems. Human behavior can be nurtured to be cooperative and caring, rather than competitive and individualistic as traditional economics purports.
The Doughnut has two concentric rings: a social foundation to ensure that no falls short of life’s essentials and an ecological ceiling to ensure that we do not overshoot nature’s protective boundaries for Earth's life-supporting systems. Within these boundaries lies a space (the Doughnut) that is both socially just and ecologically safe. This is the space where humanity thrives. Check out more here. So cool!
Economics of Mutuality
The backend of any organization is the driving force that propels various operations into fruition. In economics of mutuality, businesses can financially flow with a model that takes all aspects of collective wellbeing into design and function.
Economics of mutuality is an empowering approach where management adopts a multifaceted perspective to empower businesses with the ability to invest in an inclusive yet meaningful manner. Some examples include investing in social, human, and natural capital to further support conscious operation.
From a consumer perspective, dollars go to supporting a business that in turn supports its resources. Are you noticing a pattern? We've learned from devastating losses throughout history, and now it is time to consciously capitalize on how to win-win-win.
Employee Ownership
While there are many ways to set up employee ownership of a company, the most common way is an Employee Stock Ownership Plan (ESOP). As stakeholder capitalism grows in practice, ESOPs are becoming a much more common business structure offering employees ownership, additional value, and a stake in the direction of their business. With this approach, a company essentially sets up a trust fund for their employees and contributes various financial options.
Companies can use ESOPs for a variety of purposes. ESOPs are most commonly used in three scenarios; when owners are departing the business and want to leave a legacy of ownership to their employees, to motivate and reward employees, or to take advantage of the tax benefits of being an ESOP, which for 100% ESOP S corporations includes not paying any taxes. Yes, you read that right. Employees also have real financial benefit, with the option to borrow from their ESOP or cash out on their stock upon retirement, creating long-term wealth generation for employees beyond what would ever be possible as a non-owner.
Another model growing in popularity is the worker cooperative. You’re probably familiar with the co-op model from a local grocery store where co-op members get special perks and discounts on goods in exchange for working a set number of hours each month. One of the most appealing aspects of worker cooperatives for those starting a business or thinking about converting to one is that they are largely self-designed, with the help and guidance of a good lawyer of course.
Not only does employee ownership, whether through an ESOP or worker cooperative, create a strong atmosphere of shared ownership amongst colleagues, employee ownership also holds those in positions of leadership and power to a higher degree of accountability. The positive impact this has on company culture is immeasurable.
Stakeholder Capitalism
Stakeholder Capitalism is just another name for Triple Bottom Line or Conscious Capitalism and shares the same principles as those organizations designated as Benefit Corporations or Certified B Corps. Like the terms mentioned above, Stakeholder Capitalism takes more than profit into account as a definition of business success. In this model, people and the planet are at the forefront with added attention on partnerships that fuel collective wellbeing.
Businesses practicing Stakeholder Capitalism exist to add value to all of their stakeholders. Their stakeholders are the typical stakeholders we might think of; customers, investors, and employees, but additionally the stakeholders include community, suppliers, and the earth. Businesses practicing Stakeholder Capitalism have a goal to add value to all of their stakeholders and in its most advanced form, representative stakeholders participate in key business decisions. Stakeholder Capitalism can significantly increase innovation, as it rejects the scarcity mindset that if one stakeholder wins, another must lose, and embraces that there is a way that all stakeholders can win and if we work collaboratively we will find that way.
Triple Bottom Line (TBL)
Triple bottom line is an economic model that holds businesses accountable for the trifecta of social, environmental, and financial performance. It is sometimes also called the 3Ps for People, Planet, and Profit. The key is that people, profit, and the planet are equal in value, profit does not outweigh the other factors. Triple bottom line is a term coined in 1994 by British management consultant and sustainability expert, John Elkington. He was trying to measure performance in corporate America in a way that makes money and improves people's lives and the well-being of the planet. As we now know, all of these can be achieved!
1% for the Planet
1% for the Planet (1%FTP) was started in 2002 by Yvon Chouinard, the founder of Patagonia, and Craig Mathews, the founder of Blue Ribbon Flies. 1% for the Planet is another certifying organization with a goal of “accelerating smart environmental giving.” Businesses are certified, or held accountable, by donating 1% of their annual sales to approved environmental organizations. Individuals can also be certified to donate 1% of their annual salary to approved environmental organizations.
1% for the Planet encourages people to look for their logo when making purchases to ensure they are doing business with companies that have made a commitment to environmental solutions. Globally, 1% for the Planet has more than 5,000 certified businesses and a community of individual members that support thousands of nonprofit environmental organizations over 100 countries. Members have given more than $635 million to environmental nonprofits since 2002.
Whether it’s an organization, a legal structure, or a certification program, all of the highlighted paths to becoming a conscious business contribute significantly to the movement to define business success differently. In many cases, organizations are participating in multiple ways. As one example of many, the business I founded, Conscious Revolution, is a Benefit Corporation, a Certified B Corp, a member of 1% for the Planet, and I’m a certified Conscious Capitalism consultant. Each way we practice conscious business at Conscious Revolution reinforces the other and also offers variety in approach, language, and accountability methods. Fundamental to all the ways is a focus on adding value to all stakeholders, an abundance mindset, and that profit fuels purpose rather than being a desired outcome. We have many options in how to engage in the movement so get started now and reach out if you need help!
