The term Social Business defines a new business model, where the declared and pursued objective is maximising the produced social value, bound by economic self-sufficiency. According to Muhammad Yunus, who thanks to his Grameen Bank helped introduce the idea of Social Business to the world, a business with social goals must be lead like an actual company – with products, services, clients, markets, costs and revenues; though the goal of maximising profits must be replaced with obtaining a social advantage.
Yunus defines Social Business as
“Companies that focus on providing a social benefit rather than on maximizing profit for the owners, and that are owned by investors who seek social benefits such as poverty reduction, health care for the poor, social justice, global sustainability, and so on, seeking psychological, emotional, and spiritual satisfaction rather than financial reward.”.
(Yunus, 2007, Creating a Wolrd without poverty)
Therefore, Social Business is a sustainable enterprise operating towards a social goal, without producing losses or distributing dividends. A company which operates as a Social Business is led by altruistic reasons and any profit is used to expand the business’ reach, improve output or create other Social Businesses to solve certain problems.
A company with social goal is a particular type of social enterprise, but this doesn’t mean that all entrepreneurs that are socially involved operate in a Social Business. It is not a matter of charity, nor public contributions: on the contrary, the Social Business is a form of economic initiative capable of stimulating the best dynamics of free market, while balancing them with the search for a more human and civilized world.
From a more conceptual point of view, the Social Business is an innovative business model that combines the socio-environmental objectives of the public sector and of service organizations with the efficiency and economic sustainability of a traditional business.
Unlike the resources invested in assistance projects, the ones invested in a Social Business are never depleted; instead, in a virtuous cycle, they continue to generate socio-environmental benefits for the community, thanks to the economic self-sustainability of the model.
These are the seven principles that M. Yunus uses to define a Social Business:
The objective of a business is to overcome poverty, or to solve one or more social issues, not the maximization of profits.
- The objective of a business is to overcome poverty, or to solve one or more social issues, not the maximization of profits.
- The business is financially and economically sustainable.
- Investors regain only invested capital without any dividend.
- When invested capital is paid back, profits remain within the business and are used to expand and improve its activity.
- The business commits to adopting an environmentally sustainable conduct.
- Workers are paid salaries on par with the market’s average and benefit from better work conditions.
- It is important that all this be done with motivation and participation.
The model envisioned by Yunus includes two types of Social Business:
1st type
A business that tries to contribute to the solution of a social issue keeping budgetary balance, that does not distribute profits and that commits to investing any surplus in expanding and improving itself.
2nd type
A business typically oriented towards profit, whose ownership is in the hands of the poor, directly and indirectly, through a trusteeship committed by statue to solving a specific social issue.