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In the 30-plus years since he co-founded Whole Foods Market, CEO John Mackey has not only built a profitable health-food empire that now operates more than 500 stores in the U.S., but has also pioneered a new management philosophy, known as “conscious capitalism.” In a book published this week by Harvard Business School Press, Mackey, together with co-author Raj Sisodia, articulates his vision of the potential for companies to play a “heroic” role in solving the world’s problems. In this excerpt, Mackey and Sisodia explain why Whole Foods perceives no conflict between the interests of stakeholders and investors; why the company has a new focus on ending poverty internationally; and why business is the “natural ally” of the NGO sector.
Conscious Philanthropy and Stakeholder Value
The Whole Planet Foundation is a good example of how conscious philanthropy can work for the benefit of the investors. Probably nothing we have done in our history at Whole Foods Market has raised the morale of the organization more than the work of this foundation; our team members are so excited and proud of what we’re doing to help end poverty. It is a great example of philanthropy that creates value for every one of our major stakeholders.
Once a year, we conduct a “prosperity campaign” that lasts six weeks. We give our customers the opportunity to donate to the Whole Planet Foundation to fund microcredit loans. We promote the campaign in our stores with brochures and posters. Customer support has been amazing. In 2012, the prosperity campaign raised $5.6 million in six weeks. Many customers who learn about what the Whole Planet Foundation is doing become excited about it. Our stores compete to raise the most money within a region and in the whole company.
Our team members also love it. We have created a program where our team members can now go to six countries where we do microcredit lending— Guatemala, India, Kenya, Peru, Ghana, and Brazil—to volunteer for two to four weeks. This has become our own little Peace Corps. We pay for their housing, food, and transportation; they donate their time. Most members are in their early twenties, haven’t traveled widely, and have seldom seen serious poverty up close. But they’re idealistic, and they want to make a difference.
The trip is usually a transformative experience. When they come back, they become ambassadors for the program to the rest of our team member base. The impact has been huge. Team members feel immensely proud of this higher purpose of Whole Foods Market. They feel that we’re walking the talk and really trying to make a difference in the world. The program has had a positive impact on all our team members, not just those selected to go on the trips. It enhances their commitment and energy to know that they are part of a company that is making a positive impact on the world in this way. This program has been so successful that it has caused our purpose to evolve. We now think that one of Whole Foods’s higher purposes is to help end poverty. We did not think that five years ago, but this program has altered our thinking and expanded our horizons.
Our suppliers also win with this program. In certain designated categories, suppliers compete to be a member of what we call a Suppliers’ Alliance, which means they commit to donating an agreed-upon amount of money to the Whole Planet Foundation. In exchange, we offer them special recognition in our stores. Their products are featured prominently and given better shelf placement. We only feature one supplier in a category. It’s a significant win for our suppliers because their sales go up and new customers are introduced to their products. It’s a win for the Whole Planet Foundation because of the additional donations it receives. In addition, the suppliers’ team members are also able to participate in our volunteer programs, so they become more engaged as well.
So how is all this good for investors? It has created tremendous goodwill with our other stakeholders. It has also generated a great deal of positive publicity, leading to greater goodwill toward Whole Foods Market in the larger world community. Although it’s difficult to quantify, the amount of money Whole Foods Market is investing in this program is generating perhaps a 1,000 percent return to our investors, factoring in goodwill, positive publicity, enhanced brand recognition, and higher morale, which result in higher sales, profits, and market capitalization.
Conscious Businesses and Nonprofits
Nonprofits play a vital role in society, addressing areas that business is unable to do profitably and that government can’t do competently. Governments are too bureaucratic, too slow, and overly politicized. Business, too, is unable to serve some of society’s needs effectively, because it can’t create an acceptable financial return on investment.
Nonprofits are by definition mission driven, so they understand the “purpose” part of Conscious Capitalism very well. They have stakeholders just like any other business. But instead of having investors seeking a financial return on capital, they have donors who are looking for a psychic return on their donations, usually defined as progress toward fulfilling the mission of thenonprofit.
Unfortunately, many nonprofit organizations operate with a mentality that creates inefficiencies, stagnation, and ineffectiveness. The vast majority depend on donations from the business sector or private citizens to exist; in other words, they’re not sustainable on their own. Conscious businesses can help address this sustainability challenge.
A False Wall
Many people believe that there’s a substantial ethical difference between the purposes of nonprofits and government and those of businesses. In their minds, a metaphorical wall separates these entities. They see nonprofits and the government as having purposes that are dedicated toward serving the common good; because these entities are not trying to make a profit, they are seen as unselfish and dedicated to public service and thus “good.” Business, on the other hand, is seen as bad, because it is supposedly motivated by selfishness and greed and cares only about money. In reality, this depiction is untrue of most businesses, particularly conscious businesses.
In many ways, conscious nonprofits and conscious businesses are quite similar; they are based on voluntary, noncoercive exchanges; have higher purposes; serve all their stakeholders; and have conscious leadership. Conscious businesses and conscious nonprofits both create value for their stakeholders. The wall separating them needs to be taken down. We need both to create a prosperous and flourishing world.
Business is a natural ally of the nonprofit sector, and the two should work hand in hand. Conscious businesses seek ways to be more effective in serving their community stakeholders. Conscious nonprofits can leverage this desire to help fulfill their own purposes within communities. In a typical partnership, the business provides money, operational expertise, and intellectual capital, while the nonprofit provides purpose, highly motivated workers, and a network of relationships. Such partnerships are a win-win-win for both the nonprofit and the business because they more efficiently produce greater value for the communities both entities seek to serve.
For example, the Whole Planet Foundation has worked with dozens of nonprofits around the world to grant microcredit loans more effectively. Those nonprofits have an infrastructure in place; they have a higher purpose and dedicated people. Whole Foods Market can offer the money they need inorder to be more effective in fulfilling their mission. The Whole Planet Foundation only affiliates with nonprofits that are aligned with us on values and purpose and are very effective at what they do. This careful selection process has led to effective partnerships with a number of international nonprofits that are expanding along with the foundation into different regions around the world. These nonprofit partnerships are very similar to our supplier partnerships. By working collaboratively, total value creation is greatly enhanced for all participating organizations and for the millions of poor people we are collectively serving.
Excerpted by permission of Harvard Business Review Press. Excerpted from Conscious Capitalism: Liberating the Heroic Spirit of Business. Copyright 2013 Harvard Business Publishing Corporation. All rights reserved.
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