Social Business

The Concept of Social Business:

We must replace the one dimensional person in economic theory with a multidimensional person-a person who has both selfish and selfless interest at the same time.

When we do this, our pictures of the business world immediately changes. We see the need for two kinds of business: one for personal gain, another dedicated to helping others. In one kind of business, the objective is to maximize profits for the owners with little or no consideration for others. In the other kind of business, everything is for the benefit of others and nothing is for the owners-except the pleasure of serving humanity. The second kind of business, built on the selfless part of human nature, named social business.

In a social business an investor aims to help others without making any financial gain himself. The social business is a business because it must be self-sustaining that is, it generates enough income to cover it’s own costs. Part of economic surplus the social business creates is invested in expanding the business, and a part is kept in reserve to cover uncertainties. Thus, the social business might be described as a “non-loss, non-dividend company,” dedicated entirely to achieve a social goal.

Prototype

In Yunus’ book Creating a World without Poverty—Social Business and the Future of Capitalism, two different types of social businesses are proposed:

• A Type I social business focuses on providing a product and/or service with a specific social, ethical or environmental goal. A prominent example is Grameen Danone.

• A Type II social business is a profit-oriented business that is owned by the poor or other underprivileged parts of the society, who can gain through receiving direct dividends or by indirect benefits. Grameen Bank, being owned by the poor, is the prime example of this type, although it would also classify as a Type...