Good Business: IPA president Tom Knox on ‘conscious capitalism’ and the role of advertising
The IPA’s new president and DLKW chairman Tom Knox looks at the trend towards ‘conscious capitalism’ and the role businesses play in society.
It feels like we have reached a tipping point in the debate about how we think about market capitalism.
Since the 1962 publication of Capitalism and Freedom by Milton Freidman until the financial crisis of 2008, the consensus seemed to be that maximising shareholder value was the sole concern of business.
Always one for a pithy quote, Freidman wrote: “The social responsibility of business is to increase its profits.”
As Charles Handy argues in his most recent book The Second Curve, it’s now become clear that Freidman was wrong.
Handy puts the case that “the proper responsibility of a business community surely, is to create wealth for society as a whole, to produce the goods and services that their customers need and want, to provide employment and a way of life for those who work in them, all at fair prices, and to do no harm to the environment around them”.
Everywhere you look today, economists, business people and commentators are talking about what Wholefoods chief exec John Mackey calls ‘conscious capitalism’.
I have recently become president of the IPA. In my inaugural speech I made the point that advertising plays a pivotal role in making the promises that brands have to keep.
In arguing that advertising and media agencies should be encouraging their clients to act responsibly I was in no way saying that responsibility doesn’t of course also rest with our clients themselves.
Companies and brands need to embrace conscious capitalism – not because it’s trendy or ‘nice’ but because it works. When a company as big and as influential as Unilever embraces this way of thinking you know it’s a movement of global significance and not just a fad.
When a company as big and as influential as Unilever embraces this way of thinking you know it’s a movement of global significance and not just a fad.
Unilever’s chief exec Paul Polman has laid out a clear strategy for the company: “Our vision is to double the size of our business, reduce our environmental footprint, and increase our positive social impact.”
Clearly, technology has played its part in this shift in thinking.
Not only does the web empower consumers by enabling them to know more about the brands they buy and the companies behind those brands, but social media also makes it possible for people to respond immediately to marketing campaigns and hold marketers to account.
So business is changing, and I would argue that it’s changing for good, and marketing is at the very forefront of that change.
The winners will be those companies, like Unilever, who recognise the true role they play in society.
There’s a reason why Unilever is one of the most attractive companies on the planet for graduates, enabling it to choose from the brightest and best. This is because it is a marketing-driven company that recognises its wider role.
As Polman says: “Compliance and profitability which drive most boards and executive teams are necessary – but by no means sufficient. Only when an organisation states clearly what purpose it plays in serving the community in which it operates, and makes profit aligned with that purpose, can it contribute to societies in the long term.”