d4d lab

by Social Edge

Muhammad Yunusin his book “Creating a world without poverty” defines two possible kinds of Social Business:

  1. Companies that focus on providing a social benefit rather than on maximizing profit
  2. Profit-maximizing businesses that are owned by the poor or disadvantaged

Today, probably because of Muhammad Yunus’ focus on poverty, the definition that people remember from his book is the second definition, as presented in Wikipedia:

“In his book Creating a World without Poverty – Social Business and the Future of Capitalism, Professor Dr. Muhammad Yunus defines what a social business is and what it is not. It boils down to the following requirements:

  1. social objectives: it needs to have positive social objectives (help comes from the altruistic social services that the business provides to the poor): e.g. health, education, poverty, environment or climate urgency
  2. community ownership: it needs to be owned by the poor or disadvantaged (dividends and financial growth return to the poor where their fiscal situations are helped bringing them out of poverty): e.g. women, young people or long-term unemployed
  3. non-profit distribution: investors may not, after having had their investments paid back, take profits out of the enterprise.”

Unfortunately this definition allows to address only a narrow slice of the issues, mainly around poverty (because of item 2 and 3). Meanwhile the world has a need for entrepreneurs with social businesses to be funded to address the whole spectrum of poverty, diseases, global warming, etc…

The way out of these issues is that both in developing and in developed countries any business anywhere should have the opportunity to become a social business.

So I would like to offer the following definitions:

Social Capital: the trust that you have accumulated within your family and your community (back to the original use of the term as presented in Wikipedia:

“those tangible substances [that] count for most in the daily lives of people: namely good will, fellowship, sympathy, and social intercourse among the individuals and families who make up a social unit….The individual is helpless socially, if left to himself….If he comes into contact with his neighbor, and they with other neighbors, there will be an accumulation of social capital, which may immediately satisfy his social needs and which may bear a social potentiality sufficient to the substantial improvement of living conditions in the whole community. The community as a whole will benefit by the cooperation of all its parts, while the individual will find in his associations the advantages of the help, the sympathy, and the fellowship of his neighbors “

Social Business: any business which is focused on optimizing both Social Capital and profit rather than just maximizing profit.

This should help transforming existing regular businesses into social businesses, and it should help resolve the current issue of creating and financing social businesses. There is today a lack of understanding on the part of regular investors, and a lack of focus from those who do social investments.

Matching demand (social businesses looking for cash) with supply (social investors with precise ideas of what they think should be fixed) can be difficult. It will stay like this until there is a way to bring focus (option #1) or until the lack of focus is compensated by volume (option #2).
I believe that the answer is in option #2, and the adoption of a much broader definition is the way to get there.

My questions to you are:
•    how do you define Social Business?
•    do you believe in existing businesses becoming Social Businesses?
•    do you agree that it would help financing of Social Businesses?

Join Marc Dangeard, founder of the Entrepreneurs Commons, in the conversation.

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