WHAT IS SOCIAL BUSINESS?

Social business is a kind of economic enterprise that functions in a market economy and, like other businesses, aims to make a profit from its work.   Unlike other kinds of business however, making profit is not its main interest and it does not exist to make its owners rich. Social business is an enterprise set up to serve a social need, such as the relief of poverty or provision of healthcare.  Some examples of social-business activities may be micro-credit, glaucoma clinics for the poor or producing low-cost, highly-nutritious food items.  The following are the 7 principles of social business originally set out by Hans Reitz of Grameen International, a Bangladeshi organisation which runs a large number of social businesses around the world.

  The first principle of social business is that its goal must be to overcome poverty or deal with some kind of social problem, not to make profit.  Of course, as a business, it needs to make profit to avoid going bankrupt.  Indeed, the second principle is that the company will be financially and economically sustainable.  The important difference from a traditional company however, is that, whereas a traditional company exists to make a profit, a social business makes a profit to exist.  This may not seem like a big difference but, actually, it involves very different, even opposite, ways of operating.

  Another aspect of social business is its ownership structure.  Investors and venture capitalists are not the owners of a social business.  To illustrate, the third principle states that if an investor invests in a social enterprise she or he may only take back the amount of the original investment.  Unlike in a capitalist firm, investors are not the owners of the enterprise and receive no dividends from the profits.  In fact, the next principle of social business is that all the profits must be reinvested in the business to improve its services.  In this way, investors may be seen more as donors, or rather lenders, than traditional investors as they receive no profit from their contribution.

  Social businesses also place great importance on environmental consciousness and fair labour-relations.   The fifth principle states that a social business must try not just to avoid doing damage to the environment but to actively protect and improve it.  Likewise, the sixth principle of social business is that all employees must be paid a fair wage and working conditions should be as good as possible.  As the aim of social business is to improve and serve society, it stands to reason that they should be good employers with happy well-looked after employees in a clean environment.  After all, the final principle of social business is to do your work with joy and a fair, clean working environment is essential for this.

   The seven principles of social business set out above, describe the approach taken by social-business organizations such as Grameen International, other enterprises may adopt slightly different approaches.  What all social businesses have in common, however, is a desire to use entrepreneurial skills and know-how to serve the poor and oppressed rather than to make a profit for the already wealthy.        

 Ebru M. (A long suffering teacher…)

Source: Yunus, Muhammad:  Building Social Business,The New Kind of Capitalism that Serves Humanity’s  Most Pressing Needs (PublicAffairs, New York, 2010)