Death of a Conscious Capitalist

Capitalism, like any other economic system, has its fair share of detractors. Whether it is socialists in Europe or the Vatican in Rome, the basic underlying structure of the argument is usually the same: Focusing solely on the profit motive leaves a wide range for exploitation at the expense of the world around us.

The beginnings of modern conscious capitalism
These days, the term "conscious capitalism" is thrown around with ubiquity. But back in the early 1990s, the movement had only a small following. In 1994, Ray Anderson, founder and CEO of Interface (Nasdaq: IFSIA  ) , a carpet manufacturer, was asked to give his company a vision for its approach to the environment.

Anderson was no hippie waiting to revolutionize the system. By his own admission, he had no idea what to say: "Frankly, I didn't have a vision except 'comply, comply, and comply'" with government standards.

Then, two books made their way into his hands: Daniel Quinn's Ishmael and Paul Hawken's The Ecology of Commerce. By the time he was done reading them, he had his vision. "I'm here to tell you that Hawken and Quinn together, will not only change your life, but make you understand why it should change."

Embarking in 1997 on an ambitious plan to do well by doing good, Anderson showed how even a company in an industry like carpeting -- which traditionally relies heavily on petrochemicals -- can reduce their footprint. Take a look at the cumulative change that has taken place since then.

Type of Waste

Amount Cut

Greenhouse gas emissions 35%
Fossil fuel consumption 60%
Waste to landfill 82%
Water use 82%

Source: BusinessGreen.com.

Just as important (if not more so) was the fact that these changes also resulted in improvements to the bottom line: Sales increased 63% as a result of these efforts, and profits doubled.

Last week, after fighting a losing battle with cancer, Anderson died. Though you may not hear his name mentioned much, his contribution to our economic model lives on.

Conscious capitalism today
These days, conscious capitalism is more succinctly defined. At its core is the idea that running a company is about more than just making money -- it's about making the world a better place. Two forces are today combining to make this movement much more attractive to today's business leaders:

  1. Educated consumers are voting with their feet and their dollars, patronizing businesses that adopt models of sustainability and avoiding those that don't.
  2. As resources become more scarce and expensive, every ounce of efficiency is being squeezed out of what we use, and then recycled.

No Fool has written more about conscious capitalism than Alyce Lomax. Borrowing liberally from a 2009 article she penned after Whole Foods (Nasdaq: WFM  ) CEO John Mackey visited Fool headquarters, here are some of the ways that the movement is gaining momentum in today's business world.

Purpose over profits
During his visit, Mackey said "great companies have great purposes." He outlined four such goals that light up great companies:

  • The Good (service to others, expressing love and care)
    Mackey noted Southwest Airlines (NYSE: LUV  ) , both for its touchy-feely ticker symbol and its aspirations to provide great customer service. As a result, Southwest has often been named one of the United States' best employers.
  • The True (discovery and the pursuit of truth)
    Mackey's examples here included Google (Nasdaq: GOOG  ) , Wikipedia, and Genentech, all of which strive to collect and make available vast arrays of knowledge.
  • The Beautiful (excellence and the quest for perfection)
    Not surprisingly, Mackey highlighted Apple (Nasdaq: AAPL  ) , which has built a reputation for beautifully designed technology. In a less straightforward example, he offered Berkshire Hathaway's (NYSE: BRK-B  ) Warren Buffett, whose approach to investing is heavy on perfection.
  • The Heroic (changing and improving the world)
    Mackey's examples included both Microsoft (Nasdaq: MSFT  ) and its founder's Gates Foundation, which is currently working to eradicate malaria.

Room in your portfolio?
All of the companies mentioned above serve as excellent examples of a shift taking place in our approach to capitalism. If you'd like two more examples of companies that are doing well by doing good, I'm willing to offer you a special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." Inside, you'll find out about one company that is helping to eliminate -- by leaps and bounds -- the use of paper for books, and another that treats its employees famously well. The report is yours today, absolutely free!

Fool contributor Brian Stoffel's favorite author by far is Daniel Quinn. You can follow him on Twitter at @TMFStoffel. He owns shares of Whole Foods, Google, Apple, and Berkshire Hathaway.

The Motley Fool owns shares of Microsoft, Apple, Berkshire Hathaway, Whole Foods Market, and Google. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, Whole Foods Market, Google, Southwest Airlines, Apple, and Microsoft, creating a bull call spread position in Microsoft, and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 17, 2011, at 5:05 PM, kurtdabear wrote:

    "Purpose over profits?:" John Mackey is a libertarian and a businessperson, and I hear tell he doesn't exactly give his products away, so I presume one of his main purposes is to make a profit.

    After everything else is said and done, a public company's raison d'etre is to make a profit. They owe that to their shareholders, their creditors and their employees. You can make your profits in an honest and moral fashion by providing excellent products and great service to your customers, but if you're not making money, you're not going to be around very long, and you're going to do a disservice to everyone involved with you, including the customers who have come to depend on you.

  • Report this Comment On August 17, 2011, at 7:02 PM, Gato337 wrote:

    @kurtdabear

    I think you misread the article as anti-capitalist. its not. Brian is not saying that companies should pursue a greater purpose at the expense of profits. He is just noting that it is possible to be profitable (even increase profitability) while pursuing more abstract goals such as contributing to the greater good.

    Mackey said "great companies have great purposes." meaning that successful companies (a.k.a. profitable companies) whose vision goes beyond the bottom line (but still stay profitable) can acheive greater cultural impact and longevity. This article in no way refutes that profits are the primary raison d'etre for businesses in a capitalist economy.

  • Report this Comment On August 17, 2011, at 8:17 PM, TMFCheesehead wrote:

    @kurtdabear-

    I'd have to agree with Gato337. In no way do I think profits need be sacrificed for purpose. But by the same token, purpose need not be wholly sacrificed for profit. In fact, as the examples above show, the pursuit of purpose can lead to astounding profitability.

    For those who wish to learn a little more about Ray Anderson, I encourage you to watch this short video put together on him

    http://dotearth.blogs.nytimes.com/2011/08/12/farewell-to-a-r...

    Brian Stoffel

  • Report this Comment On August 18, 2011, at 9:15 AM, mhonarvar wrote:

    cutting down on waste, electricity use etc....will bring more profit to companies and shareholders....

    saying a company is only "responsible for making profit" and doesn't need to care about anything else.....is very short sighted...

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