Social Business: Making a Tree out of Bonsai

Social Business:

Making a tree out of Bonsai

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Social Business: Making a Tree out of Bonsai

Title page photo from Bethlehem (1988)

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Acknowledgements

I am deeply grateful to Almighty Allah to help me retain my patience and energy to complete the project

on social business in time. Similarly, I owe the deepest gratitude to Dr. Yunus for forging such a powerful

tool to fight against poverty, the cruelest thing on earth. As a Bangladeshi I would like to thank him for

bringing Bangladesh in lime light over and over again. I would also like to acknowledge my elder sister,

Biva, for providing valuable information regarding social business, encouraging me and providing me help

in compiling this project. Similarly, I owe much to one of my very close friends for her support,

unrelenting questioning and unconditional help. Most importantly, I thank you, the faculty of my course,

Niaz Patwary, for assigning this project by dint of which I got to know a lot of things which is the need of

the hour. Surely, his judgment in assigning us a project is laudable. I hope this paper serves as a blueprint

of social business.

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CONTENTS

Executive Summary........................................................................................................................................4

Introduction...................................................................................................................................................5

History of Social Business...............................................................................................................................5

The concept of Social Business......................................................................................................................7

Defining Social Business.................................................................................................................................8

Types of Social Businesses with examples....................................................................................................9

Eleven Features of Social Business Organizations........................................................................................10

Seven Principles of Social Business..............................................................................................................11

Vis-à-vis with the critics...............................................................................................................................11

Corporate Social Responsibility vs. Social Business......................................................................................15

Is social business sustainable?.....................................................................................................................17

Start up company as social business............................................................................................................17

Future of social business..............................................................................................................................18

Conclusion...................................................................................................................................................20

Works Cited.................................................................................................................................................21

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EXECUTIVE SUMMARY

TO SOME, IT SOUNDS IMPOSSIBLE.

BUT NOBEL PEACE PRIZE WINNER MUHAMMAD YUNUS IS DOING EXACTLY THAT. THE

WORLD CELEBRATES YUNUS’ EXTRAORDINARY HUMANITARIAN WORK, WHICH

STARTED WHEN HE SIMPLY LENT $27 TO 42 PEOPLE OUT OF HIS OWN POCKET. AS

THE FOUNDER OF GRAMEEN BANK, YUNUS PIONEERED MICROCREDIT, THE

INNOVATIVE BANKING PROGRAM THAT PROVIDES POOR PEOPLE – MAINLY WOMEN –

WITH SMALL LOANS THEY USE TO LAUNCH BUSINESSES AND LIFT THEIR FAMILIES OUT

OF POVERTY. IN THE PAST THIRTY YEARS, MICROCREDIT HAS SPREAD TO EVERY

CONTINENT AND BENEFITED OVER 100 MILLION FAMILIES. HIS GRAMEEN BANK

CURRENTLY LENDS TO ONE OUT OF EVERY 1,000 PEOPLE ON EARTH AND WITH A 98%

RATE OF RETURN – UNHEARD OF IN THE FINANCIAL WORLD.

BUT MUHAMMAD YUNUS DIDN’T STOP THERE. NOW, YUNUS GOES BEYOND

MICROCREDIT TO PIONEER THE IDEA OF SOCIAL BUSINESS – A COMPLETELY NEW WAY

TO USE THE CREATIVE VIBRANCY OF BUSINESS TO TACKLE SOCIAL PROBLEMS FROM

POVERTY AND POLLUTION TO INADEQUATE HEALTH CARE AND LACK OF EDUCATION.

YUNUS, NOW, IN PARTNERSHIP WITH SOME OF THE WORLD’S MOST VISIONARY

BUSINESSES – IS LAUNCHING PURPOSELY DESIGNED SOCIAL VENTURES. FROM

COLLABORATING WITH DANONE TO PRODUCE AFFORDABLE, NUTRITIOUS YOGURT

FOR MALNOURISHED CHILDREN IN BANGLADESH TO BUILDING EYECARE HOSPITALS

THAT WILL SAVE HUNDREDS OF THOUSANDS OF POOR PEOPLE FROM BLINDNESS.

THIS PROJECT ELUCIDATES THE CONCEPT OF SOCIAL BUSINESS, ITS VARIOUS

CONSTITUENTS, CRITICISMS, REBUTTAL AND THE FUTURE ENTITLED TO THE IDEA.

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INTRODUCTION

aws of Economics, which literally translated into ‘rules of the house(hold)’, are about 100 years in

it’s making. Still now there are many empty spaces where it can expand. One such recent

expansion was initiated by a Bangladeshi citizen Dr. Muhammad Yunus. He is a renowned teacher

of Chittagong University’s Economics department. Muhammad Yunus was awarded the 2006 Nobel Peace

Prize (Foundation, 2006), along with Grameen Bank, for their efforts to create economic and social

development. In the prize announcement The Norwegian Nobel Committee mentioned (Foundation,

2006):

L“Muhammad Yunus has shown himself to be a leader who has managed to translate

visions into practical action for the benefit of millions of people, not only in Bangladesh, but also

in many other countries. Loans to poor people without any financial security had appeared to be

an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost

through Grameen Bank, developed micro-credit into an ever more important instrument in the

struggle against poverty.”

He was the one who invented the concept of microcredit and later on social business. According to him

(Yunus & Weber, Introduction, 2010), the biggest flaw in our existing theory of capitalism lies in its

misrepresentation of human nature (pp. xv). The present capitalism assumes that, without any exception,

human beings engage in business solely to maximize their profit. However, he argued that human beings

are not money making robots. There are people who believe that they owe it to the society to help the

underprivileged people. In the pursuit of serving the society they are willing to donate or invest

substantial amount of money without wanting anything in return. Among lots of other reasons, they

might engage in such voluntary works for happiness or simply out of sympathy or obligation. This specific

dimension of human beings is deficient in any prevailing business law of economics. After identifying the

problem, he proposed a solution. He proposed a business model under which the business entity will

evaluate itself considering performance regarding maximization of social welfare rather than profit as a

yardstick. He coined the term ‘Social Business’ to refer to this kind of business model.

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http://en.wikipedia.org/wiki/Norwegian_Nobel_Committee

http://en.wikipedia.org/wiki/Nobel_Peace_Prize

http://en.wikipedia.org/wiki/Nobel_Peace_Prize


HISTORY OF SOCIAL BUSINESS

Dr Muhammad Yunus, in his book CREATING A WORLD WITHOUT POVERTY, wrote (Yunus, Creating a

World Without Poverty: Social Business and the Future of Capitalism, 2008)-“The idea of social business

did not arise in a vacuum. It grew out of my thirty-one years' experience on the front lines of the battle

against poverty, first in Bangladesh and later in countries around the world.”

After the liberation war he, resigning from the assistant professor post of Middle Tennessee State

University in the United States, he came to Bangladesh in 1972 with the intention of helping the country

by doing his part of the job. He joined Chittagong University as an economics teacher and soon became

the department head. However, things didn’t turn out as he expected it to be. He confessed (Yunus,

Muhammad Yunus, Founder of the Grameen Bank in Bangladesh, 2007)- “This was not the

Bangladesh which I'd hoped to play a role in building. I found it increasingly difficult to teach elegant

theories of economics and the supposedly perfect workings of the free market in the university classroom

while needless death was ravaging Bangladesh. Suddenly, I felt the emptiness of those theories in the face

of crushing hunger and poverty. I wanted to do something immediate to help the people around me get

through another day with a little more hope.”

At that time, he went out to a village nearby named Jobra to learn more of the misery of

the poor. There he met a woman named Sufiya; from whom he got to know that to earn their

livelihood, poor people who were short of money to do some kind of business had to rely on

local moneylender for the cash as banks never deemed them as creditworthy. She, for one,

borrowed money from one of them to buy the bamboo for making tools to sell, with the

agreement that she will sell him all she produced at a price he would decide. In addition, she had

to oblige to pay a very high interest rate as high as 80%. Between the high interest rate on her

loan, she was left with only two pennies a day as her income. No matter how small, on terms like

these, it was virtually impossible for her to work her way out of poverty. The scenario was like

recruiting slave labor. So Muhammad Yunus decided to make a list of the victims of this money

lending business in the village of Jobra. He along with one of his student spent a week visiting

families in the village to compile this list. When it was done, it had the names of forty-two victims

who had borrowed a total amount of 856 taka—at the time less than $27 (U.S.). (Yunus, Creating

a World Without Poverty: Social Business and the Future of Capitalism, 2008)

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Referring to this Yunus said- “What a lesson this was for an economics professor! Here I was, teaching my

students about our country's Five-Year Development Plan with its impressive goal of investing billions of

dollars to help the poor. The gap between the promised billions and the pitiful sum that a few starving

people actually needed seemed incredible.”

Eventually, Dr. Yunus extended loans to these poor people without any collateral. Surprisingly so, he got

back every penny they had taken from him. This concept came out to be known as micro-credit later on.

By definition, Microcredit is the extension of very small loans (microloans) to those in poverty designed to

spur entrepreneurship without any collateral. This idea was not welcomed by any local banks there and

eventually he started a Bank with his own money- “Bank of the Poor” named as Grameen Bank. (Yunus,

Creating a World Without Poverty: Social Business and the Future of Capitalism, 2008) Through the course

of its life, Dr. Yunus gained immense experience regarding the life of the poor and the loop holes of the

present banking system. All these experiences allowed him to initiate and craft a new model of economics

and business.

THE CONCEPT OF SOCIAL BUSINESS

Till now there were two types of businesses- profit maximizing business and not-for-profit organization.

The former practically describes all private companies in the world while the later is the one which relies

on charitable or philanthropic donations. Differing from these two types of businesses in countless ways,

the social business is a hybrid of these two business models. It operates to ensure the maximum serving

of the specific social cause for which it was formed while generating minimum profit to self-sustain.

Grameen Danone, for example, is working to solve the problem of malnutrition by selling affordable

yogurt fortified with micronutrients. Grameen Veolia Water, for another, addresses the problem of

arsenic-contaminated drinking water by selling pure water at a price the poor can afford. Then again,

BASF Grameen will reduce mosquito-borne diseases by producing and marketing treated mosquito nets.

All these businesses were formed with the intention of addressing a specific social problem and each

determined a price of their product which would enable them to earn a minimum profit without

burdening the poor customers whom they are serving. Dr. Mohammed Yunus envisioned that with this

extremely powerful tool he would be able to eradicate poverty in Bangladesh by 2030. “I have set a date

of 2030 when not a single person in Bangladesh will be poor. Then we will build a poverty museum to show

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it to our children,” Yunus (TwoCircles.net, 2007) said at the inaugural of the International Hi-Tech Agri

week in Pune, India on Nov 17, 2007. He states in one of his books (Yunus & Weber, Introduction, 2010),

“That poverty is created not by poor people but by their circumstances tells us something else important-

something about the potential of human beings themselves.

Every human being is born into this world fully equipped not only to take care of himself or

herself, but also to contribute to the well-being of the world as a whole. Some get the chance to explore

their potential, but many others never get the chance to unwrap the wonderful gifts they were born with.

They die with those gifts unexplored, and the world remains deprived of their contribution.”

He adds - “To me, poor people are like bonsai trees. When you plant the best seed from the tallest tree in

a tiny flowerpot, you get a replica of the tallest tree, only inches tall. There is nothing wrong with the seed

you planted; only the soil base that you gave it is inadequate. Poor people are bonsai people. There is

nothing wrong with their seeds, but society never gave them the proper base to grow in. All it takes to get

poor people out of poverty is for us to create an enabling environment for them. Once the poor can

unleash their energy and creativity, poverty will disappear very quickly.”

DEFINING SOCIAL BUSINESS

A social business is a business where an investor aims to help others without taking any financial gain

himself. At the same time, the social business generates enough income to cover its own costs. Any

surplus is invested in expansion of the business or for increased benefits to society. The social business is

a non-loss, non-dividend company dedicated entirely to achieving a social goal.

One definition of social business (Fleischer, 2001) reads-

“Social businesses seek to profit from acts that generate social improvements and serve a

broader human development purpose. A key attribute of social businesses is that an increase in

revenue corresponds to an incremental social enhancement. The social mission will permeate

the culture and structure of the organization and the dual bottom lines – social and economic –

will be in equal standing with the firm pursuing long-term maximization of both.”

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Elucidating the two types of social business crafted by him, Dr. Mohammed Yunus, in his book ‘Building

Social Business’ (Yunus & Weber, Introduction, 2010) wrote-

“There are two types of social business. One is a non-loss, non-dividend company devoted to solving a

social problem and owned by investors who reinvest all profits in expanding and improving the business.

The examples mentioned above fit into this category. We call this a Type I social business.

The second kind is a profit-making company owned by poor people either directly or through a trust that

is dedicated to a pre-defined social cause. We call this a Type II social business. Since profits that flow to

poor people are alleviating poverty, such a business is by definition helping to solve a social problem.

Grameen Bank, which is owned by the poor people who are its depositors and customers, is an example

of this kind of social business.”

A social business, in short, is featured to be as follows:

1. To be designed and operated to pass on all the benefits to the consumers.

2. To be operated without incurring losses.

3. To be operated competing with Profit Maximizing Enterprises (PMEs).

TYPES OF SOCIAL BUSINESSES WITH EXAMPLES (YOUNUS, 2007)

Type I: focuses on businesses dealing with social objectives only.

E.g. The product produced is for the benefit of the poor.

Type II: can take up any profitable business so long as it is owned by the poor and the disadvantaged, who can gain through receiving direct dividends or by some indirect benefits.

E.g. The product could be produced by the poor but exported to an international market while net profits would go towards workers benefits.

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In his book Creating a World without Poverty - Social Business and the Future of Capitalism, Professor Dr.

Muhammad Yunus defines what a social business is and what it is not. It boils down to the following

requirements:

1. Social objectives: it needs to have positive social objectives (help comes from the altruistic social

services that the business provides to the poor): e.g. health, education, poverty, environment or

climate urgency

2. Non-profit distribution: investors cannot take profits out of the enterprise as dividends.

3. A business may also be classed as a social business if is owned by the poor, and therefore the

profits directly work to achieve the social objectives of the business, hence this second definition.

ELEVEN FEATURES OF SOCIAL BUSINESS ORGANIZATIONS

There are eleven features that outline social business (Wikipedia, 2011)-

1. Innovation: the SBO belief that everyone is creditworthy

2. Revolution: the SBO rejects the traditional methodology of the conventional banking

3. Objective: the SBO provides banking services at the doorstep of the poor it serves

4. Means of production: the SBO provides physical and non-human inputs (e.g., microcredit,

machines, tools, training) to poor people

5. Operant conditioning: the SBO empowers borrowers through positive reinforcement

6. Asabiyyah: the SBO promotes the unity, conscience, and social cohesion among group members

through social solidarity

7. Syllogism: the SBO applies logical appeal to increase integration among group members

8. Commodity fetishism: the SBO applies social relationships to increase social capital

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9. Self-employment: the SBO provides organizational support to create income-generating self-

employment

10. Collective consciousness: the SBO uses moral force to create two-dimensional social

entrepreneurs

11. Oneirology: the SBO help to create a world without poverty, illiteracy, diseases, and slum

dwellers

SEVEN PRINCIPLES OF SOCIAL BUSINESS

These (Younus M. , 2009) were developed by Prof. Muhammad Yunus at the World Economic Forum in

Davos.

1. Business objective will be to overcome poverty or one or more problems (such as education,

health, technology access, and environment) that threaten people and society-not to maximize

profit.

2. The company will attain financial economic sustainability.

3. Investors get back only their investment amount. No dividend is given beyond the return of the

original investment.

4. When investment amount is paid back, company profit stays with the company for expansion

and improvement.

5. The company will be environmentally conscious.

6. The workforce gets market wage with better-than-standard working conditions.

7. Do it with joy!!!

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VIS-À-VIS WITH THE CRITICS

Like almost anything in this world, social businesses do have criticisms. There are people who simply do

not believe in the power of social business and there are people who think that funding would never be

possible. In this section we will discuss some of the criticisms of social business.

Criticism 1: Social Business, by definition, is supposed to help the poor. Then why should it make profits

exploiting the poor people’s needs?

A one line answer to such a question is not enough. We must understand the whole concept of social

business to justify the reason behind making a profit. Profit, in general, is not a bad thing. It is the only

reason why most of the companies all over the worlds exist. To make a profit while helping the poor is

desirable for couples of reasons which are outlined below:

A)To repay the investor: Unlike a non-profit organization Social Business has investors and owners.

However, in a Type I social business, the investors and owners don’t earn a profit, a dividend,

or any other form of financial benefit. The investors in a social business can take back their

original investment amount over a period of time they define. It could be a very short

period, such as one or two years, or a very long period, as much as fifty years or more. In

social business, a dollar is a dollar. You only get what you invested- not even adjustments for

inflation. However, at one time or the other, the social business will require repaying the

investor. So before that period comes, it should generate enough surpluses to pay back the

invested capital to the investors.

B) To generate surplus for —

(i) Expansion: Since a social business does not have access to continuous funds, unlike a

charity or foundation or any other type of non-profit organization, it should utilize its

profit to finance its expansion to serve the society better.

(ii) Improvement of quality: Every social business should aim at providing the best

quality of good or service that the company is providing as it is synonymous to making

the world a better place. That is why social business should make profit so that they can

further enhance their quality of both product or service and delivery.

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(iii) Increasing efficiency: Through introducing new technology, social business can

augment its efficiency manifold. Increasing efficiency should be at the core of every

social business as it has limited access to funds and the only way to use this limited fund

is to increase efficiency. Social Business should make every penny count as it was

donated by someone for a noble cause. Why would people invest in a social business if

it does not make good use of their money?

(iv)Innovative marketing: Like any other business, social business should conduct

innovative marketing endeavor. The aim of such initiative should be to reach the deeper

layers of low-income people and disadvantaged communities so as to achieve its bottom

line- maximization of social benefit through serving most number of people possible. To

conduct such a marketing campaign they would have to rely on fund generated through

profit.

(v) R&D: Social business should undertake research and experimentation to improve and

diversify its products and services. Through diversification and improvement they can

serve more people, suffering from many different kinds of social problems, more easily.

Research and experimentation devours a huge chunk of money and social businesses

should rely solely on their profit to manage the funds necessary.

Criticism 2: Who, in the world, will be investing in social business? I cannot see any future for this kind

of business simply because they will fall short of money.

Social business is a new variant of for-profit business formed with a sole purpose of helping the poor and

disadvantaged people of our society. Some people confuse social business to be a non-profit

organization. However, it is not exactly that. Social business does operate to generate profit but they do

that within a limit. They find out a profit margin that would not adversely affect the purchasing capability

of the targeted poor people. The motive to earn profit is to make the company self-sustainable. In other

words, social business has the capability to endlessly generate money so as to meet the financial needs of

the company. However, for other charitable organizations they depend entirely on the generosity of the

donors. This characteristic of social business is what makes it different and so powerful. And as for the

initial capital to start such a business, people who are motivated to help the society or corporations who

deem themselves as a corporate citizen and strive to give back to the community or even government

initiatives can help finance starting the company. In this world there are already millions of charity

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organizations, NGOs and other foundations that are being financed by people of altruistic nature. If all

these companies can survive year after year then so can social business. To further support the claim,

Grameen, for one, has already established a lot of social business subsidiary addressing various needs of

Bangladeshi people. Below is a list of such subsidiaries and a brief description of the subsidiary (Yunus &

Weber, Introduction, 2010)-

1. Grameen Telecom and Grameen Phone: It has made modern telecommunication available to

people throughout Bangladesh, with enormous economic and social benefits. Grameen phone, a

mobile phone company, was launched in 1996 and quickly expanded its network coverage to

cover the whole country. By the middle of 2009, Grameen Phone had become the largest tax-

paying company in Bangladesh, with over 2.5 million subscribers. Grameen Bank would provide a

loan to a Grameen borrower to buy a cell phone and become the telephone lady of the village by

selling telephone service, one call at a time, to those without phones of their own. More than

400,000 telephone ladies were created through this program.

2. Grameen Shakti (Grameen Energy, 1995) has become the fastest growing solar home system

company in the world. It sells 14,000 solar home systems per month to the villagers in

Bangladesh. By the end of 2010 it will have half a million solar home systems in operation in

these villages. It will also have half a million improved cooking stoves and 50,000 bio-gas plants in

operation.

3. Grameen Kalyan (Grameen Wellbeing, 1997) exists to provide good-quality, affordable

healthcare for Grameen bank borrowers and other villagers. It operates fifty-four health clinics

and offers a health insurance program providing basic healthcare to families for the equivalent of

around $2 per year per family. They are now in the process of building up a nationwide

healthcare system through a series of social businesses specializing in providing healthcare.

4. Grameen Fisheries and Livestock Foundation was launched in 1986 to administer nearly 1000 fish

pond in northern and western Bangladesh that had become moribund under poor management

by a government agency. By the end of 2009, they had organized over 3,000 poor people into

groups who produce 2,000 tons of fish per year, work to maintain the ponds, and receive nearly

half of the produce in exchange for a share of the gross income. In 2002, a livestock program was

added, providing training, vaccination, veterinary care, and other support services to help poor

women become dairy farmers and assist others in improving and expanding existing dairy

operations.

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5. Grameen Shikkha (Grameen Education) was created in 1997 to provide education to the children

of Grameen bank’s borrowers, including preschool classes held at Grameen bank centers. In

2003, it was expanded to include a Scholarship Management Program, which created an

endowment fund for generating scholarships for poor students. By 2009, it had accumulated

enough in the endowment fund to provide scholarships to 2,500 poor students. It continues to

expand the endowment to finance more and more scholarships each year.

6. Grameen Uddog (1993) and Grameen Shamogree (1996) are textile companies that Grameen

created to revive and modernize the traditional Bangladeshi handloom industry of manufacturing

beautiful cotton fabrics and garments. Grameen Uddog helped local weavers bring to the

international markets a new, uniform line of fabrics under the brand name of Grameen Check.

Grameen Shamogree focuses on local sales of Grameen Check garments.

All these businesses were created following the guidelines of social business. Social Business just needs

some force to get the ball rolling. One it starts to roll, it keeps up its inertia without the need of any more

pushing. So you can see that the future in this so called ‘Social Business' is very bright beyond the

geographical borders of any country.

CORPORATE SOCIAL RESPONSIBILITY VS. SOCIAL BUSINESS

There are considerable number of differences between CSR and Social Business. In this paper I would

elucidate only 3 major distinctions.

Firstly, corporate social responsibility is a concept whereby organizations take responsibility for their

impact on society and the environment. General Electric (GE), for example, – maker of jet engines, plastics

and lighting and builder of power plants that churn large amounts of carbon dioxide into the atmosphere

– are marking itself out as a leader within the field of eco-business. GE’s Ecomagination business strategy

is a pledge to improve its environmental practices by focusing technologies, production capacity and

infrastructure on developing solutions such as solar energy, hybrid locomotives, fuel cells, lower-emission

aircraft engines, efficient lighting and water purification technology. The industrial giant invests $6 billion

each year in research and development, of which $4 billion is allocated to solving the problems of clean

energy and affordable healthcare. In 2008, GE’s energy-efficient technology reaped $17 billion in revenue,

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up 21% from the year before (Eco-business.com, 2011). As it is evident on this case, the company’s CSR

investment was in R&D so that the company could reduce the harm done by them to the environment not

to the poor people in the society. Through this investment the company, by showcasing themselves as

responsible corporate citizen, has gained a boost in their sales by 21%. So it is imperative that the bottom

line of CSR is to maximize the profit by building up a positive company image among the customers. On

the other hand, social business is entirely dedicated to serving the disadvantaged people of the society

without wanting anything in return. The bottom line of social business is to maximize the number of

disadvantaged people served not to maximize profit or build a robust brand image.

Secondly, the money allocated by company to CSR is barren. The money spent on a CSR project is gone

forever. Every year the company needs to allocate money from their profit to the CSR fund in order to

achieve the social targets set by them. For instance, British American Tobacco (BAT), as a CSR project,

sponsored a cleanup day at Cox’s Bazaar. Once spent, the money invested is gone forever. However, a

social business is like a money recycling machine. Once a company invests to create a social business, the

social business produces surplus which is used not only to finance itself but also pay back the invested

capital to the investors. Suppose, BAT, instead of sponsoring the cleanup day at Cox’s Bazaar, invested the

money to create a social business that aimed to provide healthy water to people. In such a case, BAT

could create a company that would produce and market mineral water bottles to the general public at a

very low price, tk.5 rather than tk.10, so as to improve the health conditions of Bangladeshi people. Such

investment would have been much better because a one-time refundable investment could serve the

people better over a longer period of time. After suppose 2 years, BAT would get back the money invested

in the social business and then they could use that money to build another social business.

Lastly, a CSR commitment is actually made by a profit-maximizing firm whose only aim is to maximize

shareholder’s value. It is noteworthy that, CSR would only be committed by a company if it does not limit

their profit potential. For instance, if a profit maximizing company has to choose whether to serve 1

million rich or middle-class people or 1 million people engulfed in poverty, almost 100% of the time the

decision would be the same. They would always choose the market that would best serve their profit

maximizing purpose. Social Business, on the other hand, does no have to make such a decision. It is mainly

because the management or CEO of a social business does not have to account to any shareholder why he

is not generating enough profit. Rather he would be accountable to them concerning why is the company

not serving enough poor or distressed people. This is what gives social business more flexibility in decision

making than a conventional CSR.

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IS SOCIAL BUSINESS SUSTAINABLE?

Yes, Social Business is sustainable. Though delivering social benefit is the primary bottom-line of a social

business, while delivering the benefit the company should try to produce surplus so as to repay the

investors, finance its expansion and cover its operating expenses. What a social entrepreneur should do

before building a social business is identify a social problem that can be solved through a product or

service. Then he needs to find an investor who is willing to ‘lend’ the money to start a business dedicated

to social cause without charging any interest for the lending. Thus the entrepreneur gets to use the fund

to produce a product or service which he would sell to the targeted poor people at a reasonable price

keeping a logical profit margin. In determining the profit margin, the social entrepreneur, needs to be

cautious because to low a price would mean loss for the company and to high a price would mean that

the targeted poor people would not buy the product and hence the social objective of the company would

remain unfulfilled. A social business almost always makes a profit from selling their product or service and

the profit, as a rule, stays within the company. The investor will be repaid within a pre-specified time

period, in full, just the amount he invested - not a penny more, not a penny less. Neither the company

pays any dividend to investor. These regulations save a lot of money for the company which ensures that

the company becomes self-sustaining.

START UP COMPANY AS SOCIAL BUSINESS

Now comes a burning question- Is social Business a good idea for a start-up company? The answer to this

question lies with the motive of the entrepreneur. If the motive of the entrepreneur is to accumulate

money for personal gain then social business is probably not a good idea. The reasoning is that, social

business, by definition, is not owned by anyone. The investor gets the invested money back after a certain

period of time but not a penny more. In the course of the time during which the investment remains with

the social business, the investor does not even get any dividend nor is he compensated, by any means, for

providing the initial capital required to start the business. So it is pretty clear that, if the motive of the

entrepreneur is to make profit then social business is not the tool for him. Social business should be

primarily conducted by capable altruistic people or organization who wants to make a world a better

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place without wanting anything in return. Contrary to conventional for-profit businesses, social business

earns profit not to maximize shareholders profit but to minimize social problems for which it stands.

If the motive of an entrepreneur, however, is to address a social cause namely-education, health,

technology access, and environment- then he can start a social business. But it must be noted that he

would not be able to take any kind of compensation from the company beyond his employment salary

and other employee benefits. Social Business is not a business for all. The entrepreneur should choose

himself whether to get into social business or not considering his motive and expectations from the

business.

As for big corporations, they should indulge in social businesses more and more because such an

investment can be most closely attributed to them. Big corporations have access to huge amounts of

money. As a result, they can consider investing in a social business where their invested money would be

literally blocked for a couple of years yielding no profit or gain for the company. However, this money

would help the social business grow into a self sustaining company by the time they are scheduled to

return the invested capital to the corporation. When that time comes, the corporation gets their invested

money back which they can use for personal ventures or even start another social business. But why

would the corporation invest in such a project where there is no profit? The answer is- the created social

business should contribute to strengthen the corporation’s brand equity and customer perception and

thereby increase sales revenue of their own company. This ‘social business approach’ is most productive

for a corporation because of its self-sustainability capability. This investment would create a company,

dedicated to serving the citizens, bearing the corporation’s name throughout the entire lifetime of its

operation even after the social business returns the corporations’ investment. This social business, though

not profitable in pecuniary terms, would emanate goodwill and sincerity of the corporation to being a

corporate citizen. This is the best incentive for a corporation to invest in a social business- ‘invest once,

reap forever’.

FUTURE OF SOCIAL BUSINESS

Social business is a relatively new concept in the world of business. But people accepted this concept

positively and the result: a large number of social businesses are already underway and some are in the

offing. A few notable are- Grameen-BASF to produce mosquito repelling nets to prevent malaria and other

harmful diseases, Grameen-Intel to create a health care facility to address issues with infant-mother

complicacy through the help of technology, Grameen-Danone that addresses nutritional problems of poor

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people through nutrient fortified yogurt, Grameen-Veolia that addresses water borne diseases through

selling purified water, Grameen-Otto to create a type II social business of textile products etc. Besides

myriads of other world renowned corporations like Nike and General Electronics are discussing matters

with Grameen Foundation to create a social business that goes with their business. All these projects

indicate that social business has a very great potential in the future and testifies that social business will

flourish beyond any country border.

The concept of social business is still in its infancy stage. There are lots of amendments and additions that

could enhance the way social business are being operated currently. For instance, there is no stock

market yet where the stocks of social business could float. To make the availability of funds a lot easier,

Dr. Yunus envisioned that (Yunus & Weber, Introduction, 2010) in the near future there would be a ‘Social

Stock Market’ where all the stocks of social business could be bought and sold and all these will happen

following the over-the-counter market like NASDAQ. Yet an establishment should be created so that

visitors, students and enthusiasts could go to make queries regarding the social stock market. In this stock

exchange the price of a social business would be determined not by following the current procedures,

which truly reflects a profit maximizing business, rather it would be determined by the volume of social

benefit created by the company. Also there would be two kinds of stock- one for which the company

already repaid the investor and the other for which the company is to be established. In a nutshell, there

would a whole world of business created altogether surrounding the social businesses.

Since the method of operating a social business is different from a conventional business, various

universities should start a course called ‘Social MBA’ that would focus on social business operations.

Individuals who likes the concept of social business and wants to work for a social business would pursue

a Social MBA as it would be preferred in social businesses. As a result new theories of social business

would evolve and the operation would become more effective over time.

Since social business stands for a noble cause, it is likely to occur that governments would eliminate taxes

on such entities

Social business, in the future, would play a primary role to rejuvenate regional economies. For instance,

currently there are projects in Colombia, Albania and Haiti that focuses on reducing poverty by providing

micro loans to the inhabitants through a social business infrastructure. (Yunus & Weber, Introduction,

2010)

Also, in the days to come social business will emerge as a common platform of government agencies,

NGOs, private companies and individual citizens through which they would address their own social goals.

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For instance, government is currently spending a great portion of their budget to provide proper facilities

to farmers to grow crops. Why not create a social business around it? Almost all the time, government

agencies are operated lower than normal efficiency because of lack of motivation and incentive. Instead

of privatizing such sectors, whose bottom line to extract every penny they can out of their customers,

government should create a social business around it being the only investor of company. This way

government can reduce its burden in addition to creating a self-sustaining company that would always

work for the betterment of the society. Such a company should come out effective because unlike

government offices, the hierarchy of a social business is flexible. You can always replace an official if he or

she doesn’t work efficiently.

Social businesses, from now on, can be created in a region being subjugated by catastrophic natural

disaster. This would allow the financial help of generous people and companies to focus on mid-term and

long-term development rather than immediate relief that run out too quickly. Such an instance was

exhibited by SAP’s co-CEO, Leo Apotheker (Yunus & Weber, Introduction, 2010), when he created a social

business trust for Haiti, an island that was devastated by an earthquake in 2010. If this social business

turns out to be successful, it would prove the world that it also holds power to help jump-start an

economic development process.

CONCLUSION

To sum up, the social business would entirely change the world as we see it today. By this concept the

laws of economics has gained more completeness. It was the first time that the human dimension of

sympathy and empathy was included in the equation. It was also the first time whereby board members

had applauded for not getting any dividend out of the company. If the currently undergoing projects turn

out to be successful then it seems likely that social business may become a major tool for policy-makers

and others who are looking for ways to accelerate the pace of economic development in countries around

the world.

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WORKS CITED

Eco-business.com. (2011, January 4th). Retrieved March 26, 2011, from Asia Pacific's sustainable business community: http://www.eco-business.com/opinion/sustainable-business-success-through-corporate-soc/

Fleischer, D. H. (2001). PROFIT WITH A CONSCIENCE: CAN BUSINESS BE “GOOD”? London: London School of Commerce.

Foundation, N. P. (2006, October 13). The Nobel Peace Prize for 2006. Retrieved March 23, 2011, from Nobelprize: http://nobelprize.org/nobel_prizes/peace/laureates/2006/press.html

TwoCircles.net. (2007, November 18). Retrieved March 27, 2011, from part of the urdustan.com network: http://forum.twocircles.net/2007nov17/nobel_laureate_yunus_plans_poverty_museum_bangladesh.html

Wikipedia. (2011, February 27). Retrieved March 25, 2011, from Wikipedia: http://en.wikipedia.org/wiki/Social_business

Younus, D. (2007, December 25). Social Business. Retrieved March 22, 2010, from Yunus Centre: http://www.muhammadyunus.org/Social-Business/social-business/

Younus, M. (2009, January). The 7 principles of Social Business. Retrieved March 21, 2011, from The grameen creative lab: http://www.grameencreativelab.com/sites/default/files/7principles.png

Yunus, M. (2008). Creating a World Without Poverty: Social Business and the Future of Capitalism. New York: PublicAffairs.

Yunus, M. (2007, June 4). Muhammad Yunus, Founder of the Grameen Bank in Bangladesh. (S. Edge, Interviewer)

Yunus, M., & Weber, K. (2010). Building Social Business: the new kind of capitalism that serves humanity's most pressing needs. Newyork: PublicAffairs.

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Documents

Social Business: Making a Tree out of Bonsai