Seven Principles of Social Business: Professor Muhammad Yunus
- 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!
The emerging field of social business is focused on the concept of using business methods and practices to achieve positive social change. Described by some as “enlightened capitalism,” Social Businesses promote social objectives/goals (e.g., alleviation of poverty) that are as important as their financial goals. Business plans are developed as in for-profit companies including market-rate salaries, management structures, pricing and distribution strategies, sales, pricing, and profit expectations. Investments may be solicited for start-up capital. The difference is that, in a social business, management and investors do not receive a share of the profits. Investors get their money back but they do not receive a share of the profits. Profits are re-invested to grow the company and expand its positive social impact. Stakeholders get a dividend on their investment in the form of social change. Reports of the social impact of their investment accompany financial accounts.
The premise of this approach to social transformation is that money invested is recycled and supports sustainable outcomes rather than short-term results. One of the most reported examples of a social business is a joint venture between Grameen Bank (Nobel Peace Prize recipient, 2006) and Danone Yoghurt, a large multinational food corporation based in Switzerland. They have come together to form Grameen Danone Foods Ltd., based in Bogra, Bangladesh. Their mission is to bring daily healthy nutrition to low income nutritionally deprived populations in Bangladesh and to alleviate poverty through the implementation of a community-based business model, where the investing partners will not receive profits.
How does Social Business differ from Social Enterprise or Non-Profit Organizations?
Many organizations and non-government organizations (NGO’s) are working on various fronts for social development. In many cases, these efforts depend on government grants and/or private funding. Within philanthropy (the framework for non-profit organizations), funds donated are used to provide services or products on a one-time basis. Organizations must seek funding year-after-year to sustain their good works. Social enterprises often rely on volunteer workers and donations to address a social concern (i.e. illness from malaria, unsafe drinking water, lack of education). When the funds are diminished, or when the volunteer ranks are depleted, additional resources must be solicited.
Social Business is a concept that changes the paradigm of social transformation from donated funds to creating sustainable, transferable and scalable businesses. It is important to note that all efforts to create a world without poverty are needed if change is to occur. Social Business is one method to further advance the progress of social transformation.
Described by some as “enlightened capitalism,” social business promotes social objectives/goals that are as important as their financial goals. The leaders of tomorrow will be expected to understand the importance of social responsibility within the larger capitalistic framework and be prepared to lead their companies and organizations accordingly. Since the concept of social business addresses social problems at the local, national or global level, students will be well-prepared to identify and understand these issues through CSU Channel Islands’ unique inter-disciplinary orientation and curriculum.