Social Business: Changing the Way the World Do Businesses

“For thousands of years, business existed only at the fringes of society. Society thought little of people in business, and people in business expected little of society. Profit was their only reward because power, social status, and even social acceptability were closed to them.” (Solomon & Hanson, 1983, p. vii).

However, today when the values practiced in the business world essentially influence the values on which the society builds upon, the purposes and objectives of businesses need to be redefined.¹ And so did Muhammad Yunus, the only Nobel Prize winner from Bangladesh who came up with a theory of micro-finance aka social business to question the status quo and eventually change the way the world do businesses.

The way the present world does businesses and its true color

Modern day businesses are based on the core concept of making profits and maximizing the wealth of its shareholders – an outcome of the free market economy aka Capitalism. Theoretically, capitalism is supposed to do a favor to the society as a whole; which it does to some extent, as businesses are growing and so is the world trade. However, not everyone is reaping the fruits of success. It is as clear as crystal when we look at the real picture of the global income distribution ²:

This gets scarier when you convert this figure into dollar terms: half of the world lives on two dollars a day or less while almost a billion people struggle with their lives severely with less than one dollar to spend per day! Rich is getting richer and poor is getting poorer throughout the whole world. Imbalance in power and wealth is dividing the world into uneven halves, destroying the core value of humanity.

Social business: redefining human nature from selfish to selfless

However, there are still many people left in this world for whom it’s very hard to envisage a world where words like “Humanity” and “Selflessness” are ruled out of the dictionary and replaced by “Greed” and “Selfishness”. Dr Yunus is one of those men who not only faced difficulty in imagining such a world but also tried to get rid of it by bringing up a revolutionary theory of social business which is said to be capable of changing the face of the world.

Dr Yunus believes that economic theories have so far interpreted human beings as selfish, ignoring the spirit of selflessness among individuals. To him, explaining humans from only selfishness perspective is a ‘fundamental flaw’ in the whole structure of economic theories that maintain that business is only for making money.

With the idea of social business, Prof Yunus has introduced a new dimension for capitalism: a business model that does not strive to maximize profits but rather to serve humanity’s most pressing needs. According to him, social business is a non-loss, non-dividend enterprise and dedicated entirely to achieving a social goal, where an investor aims to help others without taking any financial gain for him/herself, contrasting the core concept of traditional businesses.³

At the same time, unlike today’s not-for-profit organizations i.e. INGOs and local NGOs which depend on donations or on private or public grants to survive and to operate, social business generates enough income to cover its own costs which makes it sustainable; any surplus is invested in expansion of the business or for increased benefits to society.⁴

Therefore, to remove disparity in income and wealth distribution throughout the world, it is high time that the world capitalized social business as a device that cares for its inhabitants and can turn the current financial distresses around.

Next part of this SB series will cover the challenges faced by social businesses and how these challenges make way for rise of the impact investment.

References:

1. The Evolution of Business: Learning, Innovation and Sustainability in the 21^st Century by Kathia Castro Laszlo, Ph.D.
2. Creating a World Without Poverty by Muhammad Yunus.
3. The Journal of Social Business: Social Business and New Economics Paradigm, Volume 1, No. 1, January 2011.
4. Building Social Business Models: Lessons from the Grameen Experience by Muhammad Yunus, Bertrand Moingeon and Laurence Lehmann-Ortega.