Maxine Bédat's retail startup, Zady, is only a year old. But its practice of donating a portion of each purchase to launching microbusinesses in the developing world is part of an entrepreneurial urge Inc. has covered for decades. Retail veterans Bert Jacobs and Kip Tindell may have been among the first to use the term conscious capitalism with Inc. readers, but the concept wasn't new. For many founders, that was the only kind of capitalism they knew. As Jacobs and Tindell explain, integrating sales and growth with doing good is just, well, good business.
In a conversation with Leigh Buchanan.
How is conscious capitalism different from philanthropy or corporate social responsibility or other similar ideas?
Bert Jacobs: To me, the biggest distinction is integration. I'm not big on the term giving back, because it indicates a world in which I'm sitting on a pile of money and I say, "OK, I've made it, so now I will donate to an opera house." Conscious capitalists ask right from conception, "How do we do this in a way that enables all boats to rise?"
Maxine Bédat: We use the term conscious consumerism because we saw, before launching Zady, that we, as consumers, ultimately had the most power. And it is we as consumers who ultimately create the demand that any business, if it is smart, will follow.
What do you say to people who think conscious capitalism is an oxymoron?
Kip Tindell: An important part of conscious capitalism is that it is OK to make a profit. Costco pays its employees higher salaries than its competitors do. You can't do that unless you are profitable. You can't change the world if the company isn't making money.
Jacobs: I think it's really important for those of us in business to stand up and say, "I'm a capitalist." Some Americans have a negative opinion of capitalism. I can understand that, because there have been many examples of greed and short-sighted behavior, but it was capitalism that created sanitation systems. Pharmaceutical companies cured diseases. Capitalism has always been the central driver for solving social issues. Everybody forgets that.
Kip, in your new book, Uncontainable, you talk about how the Container Store treated employees, vendors, and customers according to the principles of conscious capitalism decades before that term came into vogue. How come you've only recently incorporated it into your public brand?
Tindell: At the first official conscious capitalism retreat in 2007, I gave a speech. One of the founders of Blue Man Group was there, and at the end he jumped up and said, "Kip, why are you keeping this a secret?" And I said, "What do you mean?" And he said, "I'm probably your best customer in New York. And I didn't know about this." And I said, "Well, modesty is why." But I thought, Is there a way that we can talk about what we stand for? So I came home, and we created a blog, WhatWeStandFor.com, and started incorporating that into all forms of marketing and advertising. And we began to lose our fear of looking boastful. Now, it's the most powerful marketing we do.
Bert and Maxine, how big a role do your principles play in your brands?
Jacobs: We had an adviser who said, "Your brand is light and celebratory. This stuff is heavy." We also held back for the same reason as Kip: basic humility. Then, we had this internal come-to-Jesus moment where we were like, "Let's get it out there." We had been giving 10 percent of profits to the Life Is Good Kids Foundation for some time, and we hadn't let anybody know that. We said, "Let's put it right on the hang tag." We surveyed our customers, and everyone was fired up about it. It started sending more traffic to the website.
Bédat: A few months ago, we were doing all this research about the fast-fashion supply chain. And we always told a very positive story about how companies were doing it right, and that's what we were supporting. We had a moment when--I don't know if modesty is the right word--but we were somewhat shy to go up and say what we really believed in. We had this opportunity to have a full-page ad in The Wall Street Journal. And we were like, what should our messaging be? Should we focus on one of our makers and how it's a multigenerational family and tell a beautiful story? But there are also these real problems [mistreatment of factory workers, landfills full of cast-off clothes] that people need to know about. We were nervous about sounding preachy. Someone in the group said, "Is it too much call-to-action-y?" And someone else said, "Damn right it's a call to action!" In the end, we laid it out there as boldly as we could. I didn't sleep that night because I was excited but also nervous about how people would react. We didn't get a single negative comment.
Are there opportunities you have passed on because of your principles? Any regrets?
Jacobs: From the standpoint of supply chain, I have been in factories all over the world, and there's a small percentage that we ended up working with. You are constantly making decisions based on where your values align. But you also become magnetic to organizations with common values.
Tindell: We change a lot of the companies we work with. We joke that we have turned Leonard Green & Partners, our private equity financial partners, into a conscious capitalist equity firm, which is the funniest oxymoron around. We molded them into that. And it's been great for their business. I think that's why they got introductions to Whole Foods and Danny Meyer [founder of Union Square Hospitality Group]. It's so fun to actually change people.
What's so rewarding about doing business this way is that the vendors want to see you win. Everyone wants to see you win. So we get to buy Rubbermaid cheaper than Walmart does because Rubbermaid loves us so much more than they love Walmart.
Bédat: We are working with a supplier right now that has worked with Ralph Lauren. Big guys. We told them what we were setting out to do, and they were so willing to work with us. The conversation wasn't about leverage. It wasn't about number of units. It was about shared values and what we wanted to do together. That created such a phenomenal sense of partnership that our size was less relevant. It's challenging to find those partners, but when you do, it is incredibly exciting. Another potential partner reached out to us after they saw our ad in The Wall Street Journal. We were so excited, because it's a company that we have looked up to so much. They are in a much more advanced stage than we are, but they looked to us because we shared those same values. When you start from those conversations, you can move mountains together.
What are the best, mutually beneficial ways to partner with nonprofits?
Jacobs: We worked with probably close to 50 501(c)3's over the years. It was a lot of wasted resources in many ways. We would have these wonderful people who were all heart and pouring their whole lives into something. And they would burn out in five years. They didn't have the resources, they didn't have the team, and they couldn't pay themselves or their team enough. So to me, it really goes back to that word integration when I look at where we've come to now. Over the past two years, I've had Steve Gross, who heads up the nonprofit within Life Is Good, travel around to the different departments, join in on the meetings, learn what these people are developing, and think about how we can utilize that to help kids.
Bédat: The program director of the Bootstrap Project [a nonprofit founded by Bédat to create markets for impoverished artisans] is an M.B.A. I think that is the exciting next phase of nonprofits and this integration that is happening. The most successful businesses have a mission behind them, and the most successful nonprofits function like companies.
As companies grow more transparent, will most feel compelled to adopt conscious capitalist practices?
Tindell: Research shows that big companies identified as best practitioners outperform the S&P index by more than 10 to 1. The hardest question is, How do you change a very established company? But I think McDonald's and Walmart will both come out in favor of raising the minimum wage. Politically, they almost have to.
Jacobs: The bar is rising. Standards are rising. And that's great for everybody.