Consumer Companies as a New Socially Responsible Model

Key Problems in the Content of Globalization

• Wealth Concentration: The wealthiest 1% of the global population controls approximately 45–50% of the world's wealth (Credit Suisse, Oxfam).
• Impact of COVID-19 on Wealth Inequality: Billionaires' wealth grew more during the pandemic than in the previous decade combined. The top 1% increased their wealth more than the bottom 90% combined. (Oxfam).
• Industries Driving Inequality: Sectors responsible for the growth of the wealthiest individuals often contribute to climate change and public health issues (e.g., pollution, tobacco, alcohol, and excessive consumerism). The societal costs of these impacts are borne collectively, not by the corporations benefiting from them.
• Consumer Behavior Manipulation: Advanced technologies personalize advertisements, influencing consumer decisions to maximize profits.
• Reduced Market Competition: The dominance of large corporations reduces competition, leading to higher prices and potentially lower-quality goods and services.
• Political and Social Influence: Wealth concentration increases the influence of corporations and the ultra-wealthy in policymaking and societal decisions.
• Social Inequality: Corporate profits disproportionately benefit shareholders, while small businesses struggle to share economic benefits with local communities.
• Challenges for Low-Capital Businesses: Small and new businesses face significant barriers to entry due to high capital requirements and market concentration.

Challenges for Socially Responsible Small Businesses

Socially responsible businesses with limited capital face significant challenges in gaining a competitive advantage, particularly against large corporations that dominate global markets.

Corporations	Small Businesses
Benefit from economies of scale, producing cheaply.	Limited production scale leads to higher costs.
Access to venture capital for expansion.	Limited funding restricts growth opportunities.
Invest heavily in advanced technologies.	Lack resources to adopt cutting-edge innovations.
Dominate sectors, restricting new entrants.	Struggle to compete in sectors with entrenched leaders.
Huge marketing budgets for brand loyalty.	Minimal resources for awareness-building.

Existing business models fail to align with the needs of a socially responsible society. They remain focused on profit maximization and capital concentration, neglecting the importance of reducing inequality and promoting inclusivity. There is a global need to create and institutionalize new business models that prioritize social equity alongside profitability. This shift could empower small businesses and address the structural challenges of wealth inequality and market concentration.

The Consumer Companies Business Model (CCBM)

The Consumer Companies Business Model (CCBM) introduces an innovative approach to profit-sharing, emphasizing fairness and transparency. By leveraging modern technologies, such as blockchain, the B2C model ensures that profits are distributed among loyal consumers, employees, and shareholders. This approach transforms consumers from passive participants into active partners, enabling them to share in the profits they help generate. Additionally, the model incorporates best practices to include employees in profit-sharing, enhancing social responsibility.

Why Share Profits with Loyal Consumers?

• Consumers Drive Revenue: By purchasing goods and services, consumers directly ensure the company’s profitability. Current loyalty programs, such as discounts, are temporary and inconsistent, and do not equate to profit-sharing.
• Unique Value Proposition: There are no well-known market examples where profits are equitably shared with consumers who are not the members. For example:
  • Costco: Generates substantial revenue through membership fees, offering lower prices to members. However, profits are primarily reinvested or allocated to shareholders, with limited direct benefits to consumers.
  • Fairphone: Shares profits with suppliers to ensure fair labor conditions. This principle could be adapted for consumers.
  • Cooperatives: Often share profits with members, who are also consumers, demonstrating the feasibility of such a model.

Proposed Example of Profit Distribution Structure

• Shareholders (30%): Traditional profit allocation to reward investment and encourage growth.
• Reinvestment (30%): Funds designated for innovation, expansion, and long-term sustainability.
• Loyal Consumers (30%): Profit shares allocated to the top 30% of individual consumers (not businesses) based on their purchasing volume.
• Loyal Employees (10%): Profit shares based on tenure, rewarding employees who have worked for at least three years.

This model provides a sustainable and inclusive framework that benefits all key stakeholders while promoting fairness, loyalty, and social responsibility. It has the potential to redefine the relationship between businesses and their stakeholders, setting a new standard for equitable profit-sharing.

Comparison of Business Models

Profit Distribution Mechanism

• Consumer Companies: Profits are distributed to consumers based on their purchasing behavior. Consumers do not need to be shareholders or members; their share of profits depends solely on their loyalty and spending. The amount may vary year by year, making it a dynamic model tailored to consumer engagement.
• Cooperatives: Profits are distributed to members based on ownership or investment. Consumers must become members (usually by purchasing shares) to be eligible for profit-sharing. This model is commonly designed for B2B contexts. Profit distribution is tied to membership rather than purchasing activity.
• Corporations: Profits are allocated exclusively to shareholders based on the capital owned.

Role of Consumers

• Consumer Companies: Consumers are passive participants and receive profit shares directly related to their consumption volume. They are rewarded for supporting the business through purchases without ownership obligations.
• Cooperatives: Consumers are members who must acquire shares to participate in profit distribution. They often act as both customers and owners.
• Corporations: Consumers are not involved in profit distribution or ownership unless they also hold shares.

Level of Involvement in Governance

• Consumer Companies: Consumers have no direct role in company management. Their participation is limited to being rewarded for their purchases.
• Cooperatives: Members actively participate in governance, often voting on key decisions and electing board members.
• Corporations: Shareholders actively influence management decisions through voting rights tied to their shareholding.

Loyalty Motivation

• Consumer Companies: Loyalty is incentivized through profit-sharing. The more a consumer purchases, the greater their financial benefit.
• Cooperatives: Loyalty stems from ownership, as members are invested in the cooperative's success. Profit-sharing is typically limited and tied to membership rather than consumer activity.
• Corporations: Loyalty is linked to ownership. Shareholders are usually motivated by the returns on their investment rather than consumer participation.

Capital Raising Mechanism

• Consumer Companies: Capital is raised from shareholders, not consumers.
• Cooperatives: Capital comes from member contributions and share purchases.
• Corporations: Capital is raised through the sale of shares to investors.

Key Takeaways:

• The Consumer Companies model is more inclusive than traditional corporations and cooperatives. Rewards consumers directly for their loyalty without requiring ownership.
• Offers a transparent profit-sharing mechanism tied to consumption.
• Reduces barriers to participation, promoting fairness and social responsibility.

Why the Consumer Companies Business Model is Innovative

• Empowering Consumers: Transforms consumers from passive participants into active partners, sharing in the profits they help create without requiring additional investments or complex formalities.
• Promotes Social Responsibility: By including consumers and employees in profit-sharing, acknowledging their role in creating goods and services.
• Motivating Ethical Consumerism: Encourages consumers to support ethical businesses that value their contributions and establishes a new standard for socially responsible economies.
• Leveraging Modern Technologies: Blockchain and Artificial Intelligence may ensure transparency in profit-sharing, building trust among stakeholders.
• Flexibility and Scalability: Can operate globally and adapt to various industries in B2C models, such as retail or food industry.
• Fairness Over Investment: Rewards loyalty based on spending, not the size of investments, creating an inclusive and equitable profit distribution system. The return may vary year by year.

Impact of Legalizing Consumer Companies as a Distinct Business Type

Benefits for Consumers

• Legal Protection: Ensures consumers’ and employees’ rights to profit-sharing are safeguarded by law, preventing companies from unilaterally altering or discontinuing profit-sharing practices.
• Increased Trust: Official recognition boosts consumer confidence, as the model would be regulated and monitored by authorities.
• Transparency: Legalized Consumer Companies would be required to publish financial reports, showing profit distribution between shareholders, consumers, and employees, ensuring accountability.

Benefits for the Market

• New Competition Dynamics: The emergence of companies sharing profits with consumers introduces a new level of competition, encouraging fairer and more transparent business models. Large corporations focused solely on shareholder returns would need to adapt or risk losing customers.
• Economic Impact: Increases consumer spending, as individuals perceive their purchases as contributing to their financial benefit.
• Social Benefits: Companies sharing profits with consumers and employees reduce economic inequality and promote fairer wealth distribution.
• Global Impact: May encourage the development of socially just business models globally and drive systemic change towards more equitable economic practices.

Conclusion: Consumer Companies as a New Business Model

The Consumer Companies model represents an innovative approach to modern business by integrating profit-sharing with consumers, employees, and shareholders in a transparent and equitable manner. By addressing wealth inequality, fostering social justice, and promoting inclusive economic growth, this model would empower consumers as active participants in the economy, turning their loyalty into tangible financial benefits.

Through legal recognition, the model would establish trust, protect consumer rights, and encourage greater transparency in profit distribution. It may introduce a new level of competition in markets traditionally dominated by corporations focused solely on shareholder profits, enabling smaller businesses to thrive and innovate.

Globally, the Consumer Companies model has the potential to reduce income inequality, drive ethical business practices, and inspire systemic economic change. By aligning profitability with social responsibility, it may create a sustainable framework for a fairer, more inclusive economy, setting a new standard for socially responsible business.