Social Business: What it is and What it is not

Economic theories have created a one dimensional world; people who know the price of everything and value of nothing. The concept of ‘the individual’ is one who is solely focused on profit maximizing and ignores other aspects of life, religious, ethical, emotional, and political. Failures of this system to address vital needs that are commonly regarded as market failures but are actually conceptual failures.

However, the reality is quiet different i.e. people are essentially multi-dimensional and not every business is bound to serve the sole objective of profit maximisation. This forms the basis of the concept that is known as Social Business. The term was coined by Professor Dr. Muhammad Yunus (Grameen Bank) when he suggested and propagated a whole new world of business in which profit-maximizing enterprises and social-benefit-maximizing enterprises coexist.

So let’s now probe further to understand what Social Business is and what the various features it has are. The idea behind a Social business is not to achieve limited personal gains but specific social goals pursued against the capital market theory. It is quite different from a social entrepreneurship. The underlying objective here is to touch lives and derive social benefits out of it. It is cause driven and not profit driven. The business in every sense recovers the costs and no charity is done but the investors just re-accumulate their initial investment as opposed to receiving dividends. As far as competitiveness is concerned, it competes with other Profit maximising businesses and incurs no loss profit made by social business enterprises. The basic functioning remains the same as any other business for that matter. The surplus cash/ profit generated is either used to payback capital invested and/ or used for expansion, improvement of quality and efficiency.

Broadly, Professor Yunus has defined two kinds of business:

  1.  All about me - Profit Maximising Enterprise

  2.  All about others nothing about me – Social Business Enterprise

The first category is the common, businesses we have had till now fall into this category. But the times are changing people are moving from game of high profit towards something human. Corporate Social Responsibility (CSR) and concerns about the bottom of the pyramid are on the rise. We now induce concerns into Economic theory and can create in various businesses, the ones that can be classified as Social business, e.g. Grameen Danone. It is started with idea that dividend goes not to the owner but rather stays back so that investors get back their Invested Capital. It addresses major problems, anything that would help the poor. The various forms and examples:

  1.  A social business that manufactures and sells high-quality, nutritious food products at a very low price to a targeted market of poor and underfed children.

  2. One that designs and markets health insurance policies that provides affordable medical care to the poor.

  3.  Another which provides renewable energy systems and sells them at reasonable prices to rural communities that can't otherwise afford access to energy.

  4.  One that recycles garbage, sewage and other effluents that would otherwise generate pollution.

The very idea behind such a business is to help the poor and downtrodden. For centuries it was accepted that poverty is a part of human destiny. Now it is clear that poverty is created and sustained by the economic and social system that we as a society have designed for ourselves. The concept of social business can be very well adopted to give every individual a fair chance to unleash their energy and creativity.     


More by :  Shubham Jaiswal

Top | Business

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