'Social business' harnesses corporate brains to help poor

BY HISASHI NAITO AND RYUICHIRO TAKESHITA THE ASAHI SHIMBUN

Muhammad Yunus (THE ASAHI SHIMBUN)

A new business model that blurs traditional distinctions between social activism and business is gaining converts in boardrooms of leading Japanese companies.

"Social business," a concept pushed by Nobel Peace Prize winner, economist and banker Muhammad Yunus, uses traditional business structures and expertise but is focused on addressing social issues rather than making a profit for investors.

Profits that are made are invested back into the ventures.

At a news conference July 13, Yunus sat beside Tadashi Yanai, president of Fast Retailing Co., the operator of the Uniqlo casual clothing chain, to announce a low-priced clothing social business in Yunus's native Bangladesh.

Fast Retailing and Yunus' Grameen Bank Group will set up a joint venture in October that will aim to sell clothing at around $1 (87 yen) apiece to locals.

By employing local residents to assemble and sell the clothing, the operation hopes to offer employment in one of Asia's poorest nations. "No matter how many countries a business may enter, only those businesses that do good for that country will survive," Yanai said.

Yunus, the founder and head of Grameen Bank, was awarded the 2006 Nobel Peace Prize for his pioneering work in developing microcredit loans for people too poor to access traditional banking.

He said the partnership was particularly significant because it was the first of its kind with a Japanese company, and he said he hoped it would serve as an example for others in Japan to follow.

Saying Japanese technology "made Japan the second-largest economy in the world," Yunus added that "you can take this technology, creativity and hard work to solve the problems of the world, and Japan will become the Asian hub (for social business)."

Several non-Japanese companies have already started social business ventures. Danone, the French food and beverage giant, created a joint venture with Grameen in 2006 to produce low-priced yogurt for Bangladeshis.

Emmanuel Faber, co-chief operating officer of Danone, said many Japanese food and beverage companies had specialized expertise that could be applied to social business. He said his company hoped to set up partnerships with such companies.

German sportswear manufacturer Adidas and French water service company Veolia Water International are among big name partners that have set up similar operations.

Traditionally, corporate social responsibility programs have tended to focus on donations and other charitable work, commitments that are often the first to be axed when businesses hit difficulties.

In social businesses, profits can be reinvested into the ventures, potentially making them self-sustaining. Advocates of the paradigm say it also avoids problems such as graft and mismanagement that can plague official development aid programs.

Other Japanese businesses have set up their own programs in developing countries which do not currently follow the social business model.

Ajinomoto Co. is researching nutritional baby foods in Ghana, with an eye to eventually creating a marketable product.

"We are taking a long-term perspective on creating a market," a spokesperson said.

Sony Corp. is looking to sell low priced portable power generators and Terumo Corp. is developing cheap blood packs.

These ventures all aim to provide cheaply priced products that improve the quality of low income groups. The eventual aim of these "base of the economic pyramid" models is to improve people's quality of life and eventually raise their purchasing power.

Yunus points out that such ventures fundamentally pursue a traditional business model. Unlike social businesses, they are still about "making money, simply reaching out to sell their products," he says.

http://www.asahi.com/english/TKY201007220537.html