High on Values, Low on Profits
Financial Express MumbayWhen the Grameen Bank and French food major Danone set up Grameen-Danone Foods in early 2006 in Bangladesh, it was not a usual joint venture.
Though the initial funding of $1.1 million was to be shared equally by Danone and four Grameen Companies, the venture was designed as a social business enterprise to reduce poverty by offering affordable and healthy nutrition to the poor.The venture provided for payment of 1% token dividend to investors. The Grameen Bank founder, Muhammad Yunus, has quoted the example in his latest book to illustrate his vision of tapping into businesses to solve the problem of worldwide poverty. Since he set up the Grameen Bank way back in 1983, his idea of microcredit has grown into the concept of social business. The accidental banker has unveiled it in detail in his just released book, Creating a World Without Poverty: Social Business and the Future of Capitalism. The new way of doing business has become imperative because governments, multilateral institutions and nonprofits have failed the poor,he says.Companies haven't done any better. He is critical of what he calls weak or strong corporate social responsibility (CSR) of Companies. Weak CSR means doing no harm to people or the planet without sacrificing profits and strong CSR means doing good for people and the planet without sacrificing profits. He is not impressed with the concept of triple bottomline either because it's always the financial interest of a company that prevails.
Though he touches upon the contemporary issues of climate change and HIV/AIDS fleetingly, he doesn't dwell on their business cases or for that matter the recent success of sustainable or clean technology or ethical businesses worldwide. If he had done so, may be he wouldn't be so dismissive. US-trained economist feels that the problem lies not with Companies, but with the very nature of business. "It lies with the concept of business that is at the centre of capitalism," he emphasises. Mainstream free-market theory for its conceptaulisation failure to capture the essence of human beings is to be blamed for it. It's this failure that paves the way for his concept of social business.He clarifies that social business is not social entrepreneurship, but its subset. While social entrepreneurship is an innovative initiative to help people, Companies that are cause driven rather than profit driven are social businesses. In fact, they may even turn outto be change agents. Social business is not a charity, but a non-
loss and non-dividend business. The company may earn a profit, but the investors won’t. However, social businesses provide for investors to recover their investment gradually over a period of time. Why would they make such investments in the first place? For the same satisfaction, he says, they get from donating billions of dollars.
Well, it seems to be working. At least for the serial entrepreneur. Intel Grameen is already in the pipeline. Of course, Grameen is not always waiting for big Companies to come along. It’s also setting up Companies on its own.
For example, Grameen Health Care Services has already taken off. Its first programme is to establish eyecare hospitals that can offer affordable treatment to all patients. Its doctors and paramedics are getting training in Madurai-headquartered Aravind Eye Hospital.
In fact, Aravind and Chennai-based Sankara Nethralaya have already come up with a sustainable business model to offer free or affordable eyecare services to millions of patients for the last 30 years, but their success falls short of the achievements of the Grameen initiatives. It may be an important point to ponder over for both Aravind and Sankara to reach their full potential.
In the mean time, the visionary is already thinking ahead. He has gone on to propose the creation of another stock market called social stock market. There are some building blocks that are already in place. The Global Reporting Initiative (GRI) guidelines for measuring corporate behaviour on social and environmental parameters have quite a few corporate followers.
Besides, there are over 200 socially responsible investment groups and funds with an estimated $179 billion in assets. Even Danone has since set up a social business development fund, whose 90% assets are for investment in money market instruments and 10% in social business, yielding no financial returns to investors.
His impressions about other similar initiatives would have built a more robust case for setting up his kind of social stock market. For example, the Global Exchange for Social Investment was launched at the 2002 World Economic Forum. The Sao Paulo Stock Exchange set up its Social Stock Exchange in 2003. The South Africa Social Investment Exchange came up in 2006. Besides, there are numerous sustainability indexes, including the Dow Jones index. He may have reserved the blueprint for his social stock market for another day.
Thebook is a logical sequel to his Banker to the Poor. And by the time interested Companies ponder over it and come up with responses, the Nobel Laureate is sure to move on to find more solutions in his relentless quest to solve the complex problem of world poverty. He has already floated his next big idea to set up an umbrella organisation to invite and showcase IT solutions to end poverty. It could also turn out to be the plot of his next book.
Creating a World Without Poverty: Social Business and the Future of Capitalism
By Muhammad Yunus with Karl Weber; Public Affairs Books; 2008; $26.00; Pp 261
Excerpt
Today’s world is so mesmerised by the success of capitalism it does not dare doubt that system’s underlying economic theory.
Yet the reality is very different from the theory. People are not one-dimensional entities; they are excitingly multi-dimensional. Their emotions, beliefs, priorities, and behaviour patterns can best be compared to the millions of shades we can produce from the three primary colours. Even the most famous capitalists share a wide range of interests and drives, which is why tycoons from Andrew Carnegie and the Rockefellers to Bill Gates have ultimately turned away from the game of profit to focus on higher objectives.
The presence of our multi-dimensional personalities means that not every business should be bound to serve the single objective of profit maximisation.
And this is where the new concept of social business comes in....
