Social business
Encyclopedia
Social business, as the term is commonly used, was first defined by Nobel Peace Prize
laureate Prof. Muhammad Yunus
and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business—The new kind of capitalism that serves humanity's most pressing needs. A number of organisations with which he is involved actively promote and incubate social businesses. These include the Yunus Centre
in Bangladesh, the Grameen Creative Lab in Germany and the Yunus Social Business Centre University of Florence.
In Yunus' definition, a social business is a non-loss, non-dividend company designed to address a social objective within the highly regulated marketplace of today. It is distinct from a non-profit because the business should seek to generate a modest profit but this will be used to expand the company’s reach, improve the product or service or in other ways to subsidise the social mission.
In fact a wider definition of social business is possible, including any business which has a social rather than financial objective.
. This term describes broadly 'commercial activity by socially minded
organizations'. Charities may engage in social enterprise in order to generate funds, as per the 'op-shop' model; a social enterprise model may also be used to provide supported employment to those with barriers to work. Social business is therefore a subset of social enterprise, with the specific characteristic that, whereas a social enterprise can be funded by philanthropy or government grant, a true social business should be self-sufficient.
Grameen Danone
, which is Yunus' prototype social business, was launched in 2005. It's social mission is to address malnutrition in Bangladesh, by providing products, such as yoghurt, containing many of the nutrients missing in an impoverished child's diet and providing these products at a price affordable to everyone. Grameen Danone received seed capital and in-kind support from dairy products company, Danone and the brand credibility leant by Yunus' well-known micro-finance company, Grameen Bank.
.
Yunus postulates a new world of business in which profit-maximizing enterprises and social-benefit-maximizing enterprises coexist. In addition, a social business would operate much like a profit-maximizing business in that the company as a whole grows financially and gains profits. The only difference is that the company's shareholders and investors would be re-accumulating their initial investment as opposed to receiving dividends. He calls the latter social business. In the book, Grameen Social Business Model: A Manifesto for Proletariat Revolution, Rashidul Bari shows how social business- has gone from being theory to become an inspiring practice adopted by leading universities (e.g., Glasgow), entrepreneurs (e.g., Franck Riboud) and corporations (e.g., Danone) across the globe. Through Grameen Bank, Rashidul Bari claim that Yunus demonstrated how social business can harness the entrepreneurial spirit to empower poor women and alleviate their poverty. One of the conclusions of Yunus' concepts is that the poor are like a “bonsai tree,” and they can do big things if they get access to the social business that holds the potential to redeem the failed promise of free-market enterprise.
Key ingredients to the success of the approach are education, institutions to make social businesses visible in the market place (a social stock market), rating agencies, appropriate impact assessment tools, indices to understand which social business is doing more and/or better than other social businesses so that social investors are correctly guided. The industry will need its Social Wall Street Journal and Social Financial Times.
Therefore, a social business is driven to bring about change while pursuing sustainability. Although from a strictly profit-maximizing perspective it seems inappropriate to pursue a goal other than profit, social business’s aim is to achieve certain social and environmental goals. In this perspective, a social business can also be understood as a business-pursuing NGO which is (eventually) financially self-sufficient.
Social business is a cause-driven business. In a social business, the investors or owners can gradually recoup the money invested, but cannot take any dividend beyond that point. The purpose of the investment is purely to achieve one or more social objectives through the operation of the company, since no personal monetary gain is desired by the investors. The company must cover all costs and make revenue, but at the same time achieve the social objective.
The impact of the business on people or environment, rather than the amount of profit made in a given period measures the success of social business. Sustainability of the company indicates that it is running as a business.
and Hans Reitz, the co-founder of Grameen Creative Lab:
Nobel Peace Prize
The Nobel Peace Prize is one of the five Nobel Prizes bequeathed by the Swedish industrialist and inventor Alfred Nobel.-Background:According to Nobel's will, the Peace Prize shall be awarded to the person who...
laureate Prof. Muhammad Yunus
Muhammad Yunus
Muhammad Yunus is a Bangladeshi economist and founder of the Grameen Bank, an institution that provides microcredit to help its clients establish creditworthiness and financial self-sufficiency. In 2006 Yunus and Grameen received the Nobel Peace Prize...
and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business—The new kind of capitalism that serves humanity's most pressing needs. A number of organisations with which he is involved actively promote and incubate social businesses. These include the Yunus Centre
Yunus Centre
The Yunus Centre, situated in Dhaka, Bangladesh is the world’s first and foremost think tank for issues related to social business and one of the leading institutions that are working in the field of poverty alleviation and sustainability...
in Bangladesh, the Grameen Creative Lab in Germany and the Yunus Social Business Centre University of Florence.
In Yunus' definition, a social business is a non-loss, non-dividend company designed to address a social objective within the highly regulated marketplace of today. It is distinct from a non-profit because the business should seek to generate a modest profit but this will be used to expand the company’s reach, improve the product or service or in other ways to subsidise the social mission.
In fact a wider definition of social business is possible, including any business which has a social rather than financial objective.
Disambiguation: Social business and Social enterprise
A more commonly used and better understood concept is the related model of social enterpriseSocial enterprise
A social enterprise is an organization that applies business strategies to achieving philanthropic goals. Social enterprises can be structured as a for-profit or non-profit....
. This term describes broadly 'commercial activity by socially minded
organizations'. Charities may engage in social enterprise in order to generate funds, as per the 'op-shop' model; a social enterprise model may also be used to provide supported employment to those with barriers to work. Social business is therefore a subset of social enterprise, with the specific characteristic that, whereas a social enterprise can be funded by philanthropy or government grant, a true social business should be self-sufficient.
Prototype
In Yunus’ book Creating a World without Poverty—Social Business and the Future of Capitalism, two different types of social businesses are proposed:- A Type I social business focuses on providing a product and/or service with a specific social, ethical or environmental goal. A prominent example is Grameen DanoneGrameen DanoneGrameen Danone Foods, popularly known as "Grameen Danone" is a social business enterprise which, launched in 2006, has been designed to provide children with many of the key nutrients that are typically missing from their diet in rural Bangladesh. It is run on 'No loss, No dividend' basis...
. - A Type II social business is a profit-oriented business that is owned by the poor or other underprivileged parts of the society, who can gain through receiving direct dividends or by indirect benefits. Grameen BankGrameen BankThe Grameen Bank is a microfinance organization and community development bank started in Bangladesh that makes small loans to the impoverished without requiring collateral...
, being owned by the poor, is the prime example of this type, although it would also classify as a Type I social business.
Grameen Danone
Grameen Danone
Grameen Danone Foods, popularly known as "Grameen Danone" is a social business enterprise which, launched in 2006, has been designed to provide children with many of the key nutrients that are typically missing from their diet in rural Bangladesh. It is run on 'No loss, No dividend' basis...
, which is Yunus' prototype social business, was launched in 2005. It's social mission is to address malnutrition in Bangladesh, by providing products, such as yoghurt, containing many of the nutrients missing in an impoverished child's diet and providing these products at a price affordable to everyone. Grameen Danone received seed capital and in-kind support from dairy products company, Danone and the brand credibility leant by Yunus' well-known micro-finance company, Grameen Bank.
Idea
Professor Professor Muhammad Yunus, the key proponent of the social business model, argues that capitalism is too narrowly defined. The concept of the individual as being solely focused on profit maximizing ignores other aspects of life. Failures of this system to address vital needs, that are commonly regarded as market failures are actually conceptualization failures, i.e. failures to capture the essence of a human being in economic theory by limiting humankind to the homo oeconomicusHomo Oeconomicus
Homo Oeconomicus is an interdisciplinary peer reviewed academic journal publishing studies in classical and neoclassical economics, public choice and social choice theory, law and economics, and philosophy of economics....
.
Yunus postulates a new world of business in which profit-maximizing enterprises and social-benefit-maximizing enterprises coexist. In addition, a social business would operate much like a profit-maximizing business in that the company as a whole grows financially and gains profits. The only difference is that the company's shareholders and investors would be re-accumulating their initial investment as opposed to receiving dividends. He calls the latter social business. In the book, Grameen Social Business Model: A Manifesto for Proletariat Revolution, Rashidul Bari shows how social business- has gone from being theory to become an inspiring practice adopted by leading universities (e.g., Glasgow), entrepreneurs (e.g., Franck Riboud) and corporations (e.g., Danone) across the globe. Through Grameen Bank, Rashidul Bari claim that Yunus demonstrated how social business can harness the entrepreneurial spirit to empower poor women and alleviate their poverty. One of the conclusions of Yunus' concepts is that the poor are like a “bonsai tree,” and they can do big things if they get access to the social business that holds the potential to redeem the failed promise of free-market enterprise.
Key ingredients to the success of the approach are education, institutions to make social businesses visible in the market place (a social stock market), rating agencies, appropriate impact assessment tools, indices to understand which social business is doing more and/or better than other social businesses so that social investors are correctly guided. The industry will need its Social Wall Street Journal and Social Financial Times.
Therefore, a social business is driven to bring about change while pursuing sustainability. Although from a strictly profit-maximizing perspective it seems inappropriate to pursue a goal other than profit, social business’s aim is to achieve certain social and environmental goals. In this perspective, a social business can also be understood as a business-pursuing NGO which is (eventually) financially self-sufficient.
Social business is a cause-driven business. In a social business, the investors or owners can gradually recoup the money invested, but cannot take any dividend beyond that point. The purpose of the investment is purely to achieve one or more social objectives through the operation of the company, since no personal monetary gain is desired by the investors. The company must cover all costs and make revenue, but at the same time achieve the social objective.
The impact of the business on people or environment, rather than the amount of profit made in a given period measures the success of social business. Sustainability of the company indicates that it is running as a business.
Seven Principles of Social Business
These were developed by Prof. Muhammad YunusMuhammad Yunus
Muhammad Yunus is a Bangladeshi economist and founder of the Grameen Bank, an institution that provides microcredit to help its clients establish creditworthiness and financial self-sufficiency. In 2006 Yunus and Grameen received the Nobel Peace Prize...
and Hans Reitz, the co-founder of Grameen Creative Lab:
- Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization
- Financial and economic sustainability
- Investors get back their investment amount only; no dividend is given beyond investment money
- When investment amount is paid back, company profit stays with the company for expansion and improvement
- Environmentally conscious
- Workforce gets market wage with better working conditions
- Do it with joy
See also
- Yunus CentreYunus CentreThe Yunus Centre, situated in Dhaka, Bangladesh is the world’s first and foremost think tank for issues related to social business and one of the leading institutions that are working in the field of poverty alleviation and sustainability...
- Yunus Social Business Centre University of Florence
- Impact InvestingImpact investingImpact investing refers to investments made based on the practice of assessing not only the financial return on investment, but also the social and environmental impacts of the investment that happen in the course of the operations of the business and the consumption of the product or service which...
- Social entrepreneur
- Social entrepreneurshipSocial entrepreneurshipSocial entrepreneurship is the work of social entrepreneurs. A social entrepreneur recognizes a social problem and uses entrepreneurial principles to organize, create and manage a venture to achieve social change . While a business entrepreneur typically measures performance in profit and return, a...
- Social enterpriseSocial enterpriseA social enterprise is an organization that applies business strategies to achieving philanthropic goals. Social enterprises can be structured as a for-profit or non-profit....
- Double bottom lineDouble bottom lineDouble bottom line is a business term used in socially responsible enterprise and investment.While all businesses have a conventional bottom line to measure their fiscal performance—financial profit or loss—enterprises which seek a second bottom line look to measure their performance in...
- Triple bottom lineTriple bottom lineThe triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
- List of social enterprises
- SustainopreneurshipSustainopreneurshipSustainopreneurship is a concept that has emerged from earlier conceptual development social entrepreneurship and ecopreneurship, via sustainability entrepreneurship...
- Social Business Earth - A Social Business Centre http://www.socialbusinessearth.org/
External links
- Yunus Nobel Peace Prize lecture
- Muhammad Yunus: Building Social Business Ventures Video at youtube.com
- Social Business - A Step Toward Creating a New Economic and Social Order, Second Annual Professor Hiren Mukerjee Parliamentary Memorial Lecture
- Social Business World - A Social Network for Social Business
- Yunus Social Business Centre University of Florence