Social business: A solution to ills

• Miscellaneous
• 28th June 2010
• YC

Yunus explains his concept in an exclusive interview with The Daily Star on the eve of Social Business Day

Arun Devnath

Build business on the selfless nature of mankind. It is business with a difference, social business -- that is. It has a social goal -- to find a solution to a local problem. It may be the seed of a solution to a global problem. Someday, perhaps.

As Muhammad Yunus puts it, an investor in a social business aims to help others without making financial gains for himself. For the company, it is business and must be self-sustaining. The Nobel laureate says it must generate enough income to cover its own costs. In his latest book, Yunus describes a social business as a non-loss, non-dividend company, dedicated entirely to achieving a social goal.

Yunus sat with The Daily Star on the eve of Social Business Day to set a tone for the future of social business, a concept that promises to bring a fundamental change to the traditional economic structure.

 

The idea of designating June 28 as International Social Business Day was born to celebrate the vision of eradicating global poverty through social business. The day will be observed today in Dhaka, Hangzhou, Shanghai, Beijing, Karachi, Roorkee (India), Mumbai, Porto (Portugal), Indore, Bangalore, New York City, Tokyo, Buenos Aires, Wiesbaden and Johannesburg.

Social business is a new category of business and does not stipulate the end of the familiar profit-maximising model. But it widens, in Yunus's words, the market by giving a new option to consumers, employees and entrepreneurs.

Yunus is not opposed to making profit within social business. Profit in itself is not a bad thing, he says. Social business is allowed to earn profit to be sustainable -- with the condition that the profit stays with the company and is used in expanding social benefits it provides. This sets social business apart. Conventional businesses are geared to maximising revenues and the profits earned by them benefit the owners.

Social business is not charity either. "It is more effective, much more transparent than charity." When it comes to charity, Yunus says, people write cheques or reach into their pockets to give away money. "And once you have done this, you forget about it."

In social business, on the other hand, people get involved. "You personally get involved and have to make sure you get the money back. That's why you have to meticulously design it. Your energy goes into it and that's a big difference."

Yunus does not shy away from capitalism. In fact, social business is a new dimension to capitalism, but he does not agree with the way capitalism is presented today.

Yunus criticises the present system of capitalism that defines humans as one-dimensional beings whose only mission is to maximise profit. "No doubt humans are selfish beings, but they are selfless beings, too. Both these qualities coexist in all human beings," Yunus says.

"Human beings have both sides. I am not saying there are selfish people and there are selfless people. All I am saying is, selfishness is as strong as selflessness; or selflessness is as strong as selfishness in every human being. But selflessness remains dormant because of the practice of the capitalist theory."

Yunus insists that a single person may want to do both: he may have a beautiful business to make money and use all or some of his money in social business.

"The essence of capitalism is free market, which is fine. The essence of capitalism is to create options for people. I am free and I decide. Each individual has to have options," Yunus says. "The more options you have, the more it will enhance the quality of capitalism."

Social business is a new option to people within the framework of capitalism. Yunus resists the assumption that he rules out other options of solving social problems. "I am not removing other models. It is not the substitute for other models. Do everything you do. My idea is to offer more options. If you think you can do it (social business), do it. If you think this is not your way, this is fine. I am not saying you have to do it. So it is not something you impose on people."

Yunus explains where the social business funds will come from. "People give away money. There are foundations that give away money." Yunus says even a small part of charity going as an investment may be a source of money for social business.

Then come big corporations that earmark money for corporate social responsibility. Big companies take the CSR fund from profit and set it aside for society. So 50 or 25 or 10 percent of the CSR funds can be channelled into social business as an investment. Yunus says this can be a second source of funds for social business.

The third source is the government fund given away through social safety nets. "If you take 5 percent of this money to create a social business which is devoted to helping the poor (who are dependent on charity), you will create a business that helps lift them out of charity."

International donors who give a huge amount of money every year can be another source, he says. "You may take 5 percent of that money to create social business for the same purposes such as education, heath and skills development."

The logic is, donor funds do not create new funds. If donor funds are invested in social business however, they lead to accumulation of funds for social business purpose, which is a sustainable model.

Yunus puts a question here. Why does the World Bank not open a social business window to invest in social businesses? The World Bank regional development banks can be another source of fund "if they want to create it".

"If the funds from the donors are loans, these funds, instead of being paid back to donors, could be put by the donors into a local social business fund," Yunus says.

Funds from donors could be used as equity for social business development banks. When the social businesses return the money it can be put into the local social business fund, he adds.

Then come the serious businesses. Many of the funds may come from big companies. "I cannot just dismiss the serious companies and say they are never interested in social business. They are interested in social business and more and more are coming to us and say 'can we do some social business?'."

Yunus insists that he did not go to companies to "convince" them into social business. "But then read my book."

Each of his books -- one is the continuation of another -- has been a driver of his social business concept.

His latest book, Building Social Business: The New Kind of Capitalism that Serves Humanity's Most Pressing Needs, has come up with concrete examples of social business.

In this book, Yunus shows how social business has evolved from being a theory to an inspiring practice, adopted by leading companies including BASF, Intel, Danone, Veolia and Adidas.

He demonstrates how social business transforms lives, offers practical guidance for those who want to venture into social business, explains how public and corporate policies must adapt themselves to make room for the social business model and shows why social business holds the potential to redeem the failed promise of free-market enterprise.

Is social business meant to be done only by massive companies?

Not really.

"When I talk about social business, I do not talk about massive companies. Anybody can do it. Any individual can do it," Yunus says.

Why should we do it? Why should we get involved in social business anyway?

To answer this question, Yunus pauses and says: "Why do we get excited about politics? Does somebody pay for it? Why do you do that? Why do you get involved in religion? Why do you get involved in music? Why do people set up schools using all their money? What is the answer?"

The questions lead to a simple answer. "They do it because they enjoy it. They think this is the right thing to do."

One of the seven principles in social business is "to do it with joy." Yunus says this is something that makes people feel good. It makes people feel "you have done something nobody did before".

In social business, each selects his own project. "If I am capable of doing it for my own village, I will do it for my village. If I am capable of doing it for my country, I will do it for my country. If I am capable of doing it for the whole world, I will do it for the whole world."

"So I do it for the same reason that I see it needs to be done and needs to be solved. And that's how we solve it."

In traditional thinking, Yunus says, people come to business to maximise profit. "The more money you make, the more successful and the happier you are. So success and happiness are measured in terms of money. I say that's not true."

SOCIAL STOCK EXCHANGE
For Yunus, a social stock exchange is a logical consequence of social business as it brings investors and projects together.

If somebody wants to invest in a social business project, Grameen-Danone, for example, people can buy into the company if it is listed on a social stock exchange. Unlike the traditional stockmarket, it is not based on profit or dividends.

Only those who want to see a problem solved and help others will come to social stock market to invest. Yunus says a social stock market is a place where people will invest their money to reach out to those they want to help with. It is not a place to make money. "There is a clear distinction and that's why we need a separate stock market."

Yunus is strict about the definition of the term: social business is different from social entrepreneurship.

Anybody wants to help people can get into social entrepreneurship and it does not have to be business, he says. Social business is a small sub-section of social entrepreneurship, as Yunus defines the term. "You do NOT say these are equals."

"The definition must be very sharp-edged. You have to clearly define it, otherwise it gets fuzzy."

Yunus is aware that the idea of social business is subject to being "misused and perverted". This risk is true for any basic concept. In his book, Yunus urges well-intentioned people to be on guard against those who would abuse the name of social business.

Yunus believes the ultimate fate of social business will depend on whether it has touched any special chord in people's hearts.

"If social business becomes part of people's dream of a better world, then nobody can stop it. It will flourish, even under adverse circumstances."