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Better Capitalism in Action - illycaffè

The ethic of mutuality – pursuing self-interest and the interest of others – is a core tenet of what we term Partnership Economics™ and advocate is the pathway to better capitalism. We are thrilled when we find real-time examples of mutuality, Partnership Economics™, being put into practice toward better capitalism. If you’re new to this blog and an introduction to the ethic of mutuality might prove helpful, we invite you to explore this earlier post. For a deeper dive, we invite you to check out our book Better Capitalism.

The title of an article in the September–October 2022 edition of Harvard Business Review is particularly intriguing. It includes the word 'virtuous.' Curious word, virtuous. Don’t you think? Do you see if often in business publications? What exactly does it mean and, more particularly, how does it connect to the commercially successful empire that is illycaffè ?

You can explore definitions yourself but, at least for now if you’d rather keep reading, here’s the top definition from The Free Dictionary by Farlex: “vir·tu·ous (adj.) 1. characterized by or possessing virtue or moral excellence; righteous; upright.” That’ll work for present purposes. What does virtuous, virtue, moral excellence, righteous or upright have to do with illycaffè’s current (2022) successes including, “annual revenues of €500 million with earnings of more than €60 million before interest, taxes, and depreciation and a compound annual growth rate of 10%. … [paying] our growers an average of 30% more than market price for coffee beans and [being] consistently recognized as one of the world’s most socially responsible companies [?]” * Everything!

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illycaffè did not become a household name in many parts of the world, nor are 8 million cups of illy coffee served daily in more than 140 countries by happenstance. Hardly. That dominance and impact can be traced back to 1933 and the founder Francesco Illy’s vision of “creating an institution respected for both its products and its contributions to society.” Wonderful vision you say? Us too. An ethic of mutuality can take difference forms you observe? Us too. But how does such vision take flight and stay sustainable, you ask? Us too.

For Francesco, the key to flight and sustainability lay in the virtues he learned from the writings of Augustine of Hippo (354 – 430). Also called St. Augustine and among the most influential Christian thinkers of all time, “Augustine, emphasized that perfection is twofold: what you achieve and how you do so.” Like the wings of a bird that provide lift and flight “[e]xcellence and ethics were his core values in life,” which Francesco successfully wove into the what and how DNA of illycaffè.

Almost 90 years on Andrea Illy, the former CEO and now Chair of illycaffè, carries his grandfather’s physical and spiritual DNA as he spreads “the gospel of this virtuous agriculture model,” a model that benefits illy products, suppliers, sales & marketing, even its industry as a whole. A virtuous cycle “is not purely altruism,” writes Andrea in the HBR article, “[w]e have plenty of business incentives to do the right thing for all stakeholders – and the environment.” Indeed, we'd wager a case study of illycaffè will show a virtuous business model handsomely rewards the organization's owners.

As we discuss in Better Capitalism, virtuous models succeed! From our chapter on Of the People, by the People, for the People, pages 120-123:

Prosperous corporations, the crowning achievement of capitalism, can and should recognize their profitability as resulting from God’s provision. As such, they can and should seek to sustain that profitability. They sustain that profitability by seeking mutual benefit with all their stakeholders—employees, customers, suppliers, distributors, communities, Creation, future generations, and shareholders. Well-provided-for stakeholders become the foundation of an enduring, prosperous corporation in the form of productive employees, fertile markets, bountiful resources—and happy shareholders. This is the virtuous cycle of partnership.

We are thrilled for the worldwide growth and endurance of illycaffè over several generations. We are particularly thrilled its current generation of leaders, relying on the sturdy ethos of their ancestor, are engineering and implementing sustainable solutions to 21st Century challenges. Now, within your context and your realm of influence, how might you and your company begin to contextualize a virtuous model or cycle and make the transformative move to better capitalism? We’d love to hear of and share your success making that move to a more ethical and profitable form of capitalism.

* Except for Better Capitalism text noted, the quotes in this post are from the HBR article, The Chair of Illycaffè on Creating Virtuous Agricultural Ecosystems. You can read the LinkedIn version here.

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