In 2007, John Mars, one of the family owners of confectionary company Mars, Inc., asked his CEO a question that shareholders rarely pose to their leaders:
“What is the right level of profit for the company?”
If your answer is: As much as possible. Think again.
This query traveled to the company’s internal think tank, where they began developing a concept that would later be known as the Economics of Mutuality (EoM).
The Economics of Mutuality (EoM) provides a strategic framework for businesses to integrate purpose into practice by leveraging non-financial forms of capital—social, human, and natural—which are often overlooked by traditional business models. By harnessing these capitals, it aims to eliminate the perceived trade-off between doing good and achieving profitability.
In the latest episode of The Conscious Capitalists podcast, Raj Sisodia and Timothy Henry speak to Jay Jakub, one of the pioneers of EoM at Mars, Inc., who now is the Executive Chief of Staff at the Economics of Mutuality Alliance (among several important designations in the movement).
In the episode, he breaks down what EoM is and how businesses can (and have) benefited from it.
Here’s what we learned about EoM and how it works:
1 – Its metrics go beyond the financial
One of the most popular sayings in business is ‘you only make what you measure.’
If you only measure financial metrics from financial capital, that’s all you’re going to use, manage, and mobilize.
Instead, EoM expands the definition of performance in a company to include other metrics from other forms of capital like:
- Social Capital, which is about trust, social cohesiveness, and the capacity to work collectively
- Human Capital, which involves identifying and nurturing the true drivers of well-being within a corporate culture to enhance performance and satisfaction
- Natural Capital, which often focuses on metrics like carbon footprint, useful for external benchmarking, but it doesn’t necessarily lead to more resource-efficient outcomes
2 – It emphasizes purpose and stakeholder inclusion
As Jay puts it, “creating profit is part of a business activity, but it’s certainly not its purpose.”
In the Economics of Mutuality, the purpose of businesses is to create profitable solutions to the problems of people, place, and planet. It connects a business’ purpose with solving pain points that exist in society.
One example Jay gave was of Novo Nordisk, a global healthcare company : The company’s initial purpose was simply to ‘sell more insulin’ and make more money from treating the symptoms of a serious disease.
However, after a leadership epiphany, they shifted their purpose from selling more insulin to solving diabetes. This change transformed how they operated and how they were perceived, with stakeholders now eager to work with a company genuinely committed to solving the problem and not just profiting from selling its cure.
This new approach not only boosted the company’s profitability but also inspired Novo Nordisk to explore innovative initiatives in diabetes treatment and resolution.
3 – It’s all about mutual value creation
The Economics of Mutuality is geared towards creating mutual value by addressing external challenges. The company seeks to solve a major pain point of their stakeholders who in turn make greater efforts in supporting the company financially.
This approach emphasizes using positive impact to enhance both top and bottom lines, rather than simply making more money to do good.
In the podcast episode, Jay goes deeper into some other successful EoM case studies, its continued positive impact on Mars, Inc., his advice for leaders who might want to learn more about it, how we can create synergy between Conscious Capitalism and EoM, and so much more.
Listen to the full episode here -> https://bit.ly/theconsciouscapitalists-jayjakub
If you’re already a Conscious Leader, EoM provides a solid framework where you can track the kind of impact you’re having across various different types of metrics. This approach allows you to measure and enhance your contributions in ways that align with mutual value creation, ensuring your leadership is not only purpose-driven but also fosters sustainable and inclusive growth.