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Moral Capitalism: A Model for Creative Innovation
January 17th, 2013
Traditional forms of corporate philanthropy and social responsibility allow corporations to “do good” with the cash left over at the end of the year. When your company makes a profit, you write a check for a percentage of those profits and get a tax break. You feel good about your contribution, and you can use the donation to get some PR buzz. In the years you do really well, you write a big check. The years you don't do so well, you write a smaller check, or no check at all.
Writing a check certainly makes a difference, but isn’t there more that a corporation can do with all of its structure, systems, people, innovative thinking and R&D to maximize its contribution? Well, yes, there is. Make the shift from corporate philanthropy to moral capitalism.
If corporate philanthropy uses the fumes of the business for doing good, moral capitalism uses the engine of the business for affecting positive social change. As opposed to balancing profits, people and planets, a moral capitalism model is a creative way to think about how people and planet can fuel profit.
A recent IBM poll of 1,500 CEOs identified creativity as the No. 1 “leadership competency” of the future. Indeed, in this economy, we need to be creative. We need to explore ways of thinking and executing that drive profits in new and innovative ways. Thankfully, one of the most effective ways to boost creativity is to think within a set of boundaries. When your left brain (the logical side) bumps up against barriers over and over again, your right brain (the creative side) jumps into action and comes up with all sorts of new ways of looking at the problem (For more information on this, check out the book Imagine: How Creativity Works, by Jonah Lehrer).
So what if, as we looked into ways of driving profits, we created boundaries that supported social progress? What if we challenged ourselves to innovate within the boundaries of increasing profit margins and generating positive social impact?
Think that sounds like a pipe dream? Here's an example.
When Jeff Swartz, former CEO & President of Timberland, spoke at the 2012 Social Innovation Summit, he discussed Timberland’s creative profit-driving innovations. After seeing a pile of discarded tires on the side of the road, he wondered, "What if you made a hiking boot out of recycled materials (for the soles)?" This was an interesting, brand-centric idea for a company that sells products to nature-lovers. But, Swartz noted, as compelling as the social impact would be, Timberland would never have implemented the idea had it not led to greater profits. Lo and behold, they found it was actually less expensive to grind up old tires than to use traditional raw materials.
When Timberland announced the innovation to consumers, their competitors laughed - stating that Swartz was crazy. “Oh, he’s a tree hugger,” they scoffed. Swartz retorted, “No, I’m a capitalist. I’m a moral capitalist.”
Swartz laughed all the way to the bank. Timberland's profits soared. It didn’t end there. Swartz then found a way to take plastic bottles and turn them into laces for the boots. Again, it turned out to be less expensive to go this route, and provided another opportunity for social innovation that benefited the company — achieved not through positive PR or marketing spin, but through actual dollars saved.
When public companies argue that their shareholders aren't interested in anything other than returns, it doesn't mean corporations need to stymie their social contribution. By adopting a moral capitalism model, you can have both profits and impact. It's time to boost your creativity with boundaries that benefit the company and humanity. Try bringing this approach to your next strategic planning session and see what unfolds!