http://www.muhammadyunus.

org/Social-Business/social-business/

Social Business
Muhammad Yunus
Winner of the Nobel Peace Prize 2006.
Social business is a cause-driven business.  In a social business, the investors/owners can
gradually recoup the money invested, but cannot take any dividend beyond that point.  Purpose of
the investment is purely to achieve one or more social objectives through the operation of the
company, no personal gain is desired by the investors.  The company must cover all costs and
make profit, at the same time achieve the social objective, such as, healthcare for the poor, housing
for the poor, financial services for the poor, nutrition for malnourished children, providing safe
drinking water, introducing renewable energy, etc. in a business way.
The impact of the business on people or environment, rather the amount of profit made in a given
period measures the success of social business.  Sustainability of the company indicates that it is
running as a business. The objective of the company is to achieve social goal/s.

Clarifications on Social Business

I am not opposed to making profit.  Even social businesses are allowed to make profit with the
condition that profit stays with the company, owners will not take profit beyond the amount
equivalent to investment.  Social business is a new category of business.  It does not stipulate the
end of the existing type of profit-making business.  It widens the market by giving a new option to
consumers.  It does not intend to monopolize the market and take the existing option away.  It adds
to the competition.  It brings new dimension to the business world, and a new feeling of social
awareness among the business people.

When we approach the concept of social business from the philanthropy side it looks very
convincing and logical.  Why everything in philanthropy should be given away.  After all our
purpose is to achieve the social goal.  If some of these goals can be achieved more efficiently and
sustainably in a (social) business format why not take that route?

But when you approach it from the orthodox business side, it tends to look a bit out of tune.  Why
on earth give up profit?  Why should anyone run a business without profit ?  I understand the
surprise perfectly.

Let me clarify: I am not asking any businessperson to give up any of their businesses.  Nor am I
asking them to convert some of their businesses into social business.  The idea of "giving up"
something creates this shock wave.  I am not asking anybody to "give up" anything.  All I am
saying, if you are worrying about a social problem (while totally engaged in your routine business)
I have a message for you, you can make a significant contribution in resolving the problem.  If you
put your mind seriously into it, you may even open the door to eliminate the problem globally. 
You can do both: conventional business and social business.

It is all upto you to decide whether you want to do a such thing or not.  Nobody will raise an
accusing finger at you if you do no such thing.  But you may feel happy if you do it.  I am

1
suggesting a way which may make you a happier person.
*
A Learning Process
It is a great learning process.  You are doing things which you never did before.  You are thinking
in a way which you never did before.  You are surprised to see you are enjoying it a lot.  You start
digging into your experiences to see what is relevant for the task.  You check through the reservoir
of technology that you are familiar with start contacting the pool of experts that you got to know in
your business, to achieve your new goal.  You start exploring a new world which was totally
unknown to you.  You realize that you are now wearing "social business glasses" on your eyes.
You see things which you never saw before.  You start sensing that your eyes were fitted with
"profit-maximizing glasses" all along, while you thought these were your natural eyes in your
economic world.

Now when you turn your eyes to your own profit-making businesses you start noticing things
which you never noticed before.  You bring new-gained experiences from your new business to
your old businesses.  Slowly you move towards becoming an multi-dimensional person, rather than
a robot-like person.
*
Some people ask me why can't you run businesses with some profit and some social benefit —
"doing well by doing good" as it is popularly described.

Of course, it can be done.  I am never against it.  But I am trying go to the ultimate point where
you don't make any profit for yourself at all.  This is easy to identify, easy to handle in day to day
decision making.

When you mix profit and social benefit it gets complicated for the CEO.  His thinking process gets
clouded.  He does not see clearly.  More often this CEO will take decision in favour of profit, and
exaggerate  the social benefit.  Owners will go along with it.  Social business gives a clear
unambiguous mandate to the management.  There is no balancing act involved.  If you can agree to
take a "small" profit, you can also persuade yourself to take zero profit.  Once you get there you
get rid of all old ways of thinking.  You prepare yourself to explore a new world, a new way of
seeing things, and doing things in a different way.  When you were in the world of a "small profit"
you were still operating in the old world, with old ways of doing things, only restraining yourself
here and there.
*
Another way to put the same question is: Why can't you allow thee investors in social business to
get a small fixed profit — say, 1% dividend.  My answer is the same.  I may describe by saying
something like this: you are in a "no smoking" building, you are arguing "Why can't I be allowed
to take just one small puff?"  Answer is simple —  it destroys the attitude.  In Ramadan, Muslims
are not allowed to eat or drink until the after the sunset.  Why not take a sip of water during the day
?  It destroys the strength of the mental commitment.  You lose a lot for a small favour.
*
Social business is about making complete sacrifice of financial reward from business.  It is about
total delinking from the old framework of business.  It is not about accommodation of new
objectives within the existing framework.  Unless this total delinking from personal financial gain
can be established you'll never discover the power of real social business.  Sometimes you can set
up a technically correct social business with the purpose of making profit through your other

2
companies by selling products or services to this social business company.  This will be a clear
sabotage of the concept.  There may be many other subtle ways by which one can weaken the
concept and practice of social business.  A genuine social business investor must make all efforts
so that he does not walk into this trap unwittingly.
*
Capitalism has created poverty by focusing exclusively on profit.  It built a fairy-tale of prosperity
for all.  This never happened.  That's why Europe decided to entrust the government to take care of
poverty, unemployment and health.  They were smart enough to figure out the emptiness of
capitalism in solving these problems.

Author's Summary on Creating a World Without Poverty

While free market capitalism is thriving globally almost unopposed now and bringing
unprecedented prosperity to many, half of the world lives on two dollars a day or much less.
Eradication of poverty remains the biggest challenge before the world. Colossal social problems
and deprivations, mostly poverty-related and very unevenly distributed around the globe, continue
to shame us everyday. Obviously the free market has failed much of the world. Many people
assume that if free markets can’t solve social problems governments can. After all, the government
is supposed to represent the interests of society as a whole. But decades and even centuries of
experience has shown that while government must do its part to help alleviate our worst problems,
it alone can not solve them.

Fortunately for us there is a keen desire among many to lend a hand through charity for addressing
the problems of poverty and other social problems. Charity is rooted in basic human concern for
other humans. These days concern is usually expressed in the shape of non-profits and NGOs
which may take various names and forms. Then there are aid organizations sponsored by rich
governments–bilateral and multilateral. Nonprofits and aid organizations are trying to keep the
problems within some control. But charity is a form of trickle-down economics; if the trickle stops,
so does help for the needy. On the other hand multilaterals like World Bank focus only on growth
as the means of helping the poor, but cannot see that the poor people can be actors themselves.
There are serious questions about the type of growth that can help the poor. As another response to
the global social problems some businesses are identifying themselves with the movement for
Corporate Social Responsibility (CSR), and are trying to do good to the people while conducting
their business. But profit-making still remains their main goal, by definition. Though they like to
talk about triple bottom lines of financial, social, and environmental benefits, ultimately only one
bottom line calls the shot: financial profit.

I always believed that poverty can be totally conquered in our own lifetimes if the right approach is
adopted. I based my belief on the inherent ability of the poor that can be unleashed once they are
given the opportunity to help themselves. This I have proved in action through my three decades of
experience with Grameen Bank. The concept of microcredit did not exist before I initiated
Grameen Bank in Bangladesh, which basically recognized that credit without collateral is a
fundamental right of the poor. Our success with this in my own country has been widely replicated
all over the world including in some of the richest countries; and the Nobel Peace Prize 2006 for
Grameen Bank and myself is one recognition of that success. The story of Grameen Bank has been
told in my earlier book: ‘Banker to the Poor’. In this new book I have described the further
evolution of Grameen System. But more importantly I have introduced and elaborated here my

3
broadened concept of Social Business, that Grameen experience has led me into.

Grameen allowed the poor to be an actor in the free market and to enjoy some of its fruits to try to
come out of poverty. It is fundamentally a business model, pure and simple, but a social Business.
There can be other Social Business. They are just like any other business; but for social objectives
and not for personal gain or dividend. I have tried to show in the book why Social Business can
succeed in addressing social problems where other means mentioned above have failed. Social
Business should not be confused with the term Social Enterprise which is used in a more
encompassing sense and includes NGOs, personal initiatives, charities etc. and may include Social
Business too.

Social Business introduces a totally revolutionary dimension to the free market economy. It does
not interfere with the mechanism through which the normal Profit Making Business (PMB) works
and prospers – capitalization, expert business management, competitiveness etc. – but investors
here do not receive any dividend, though they can recover their investment if they want to, to
reinvest in other Social Business or PMB. The satisfaction gained in achieving the social goals are
the only motive behind the investment, and the business will be evaluated according to that
standard. Essentially it is a non-loss, non-dividend business aimed at social objectives – education,
health, environment, whatever is needed to address the problems faced by society. The profits here
remain with the business and help it to grow further. The whole thing is based on the premise that
entrepreneurs need not be motivated only by the profits they personally receive, but can also be
motivated by social goals and may enjoy success there with equal satisfaction. The important thing
is not to mix up a Social Business with a PMB. In fact the inclusion of Social Businesses alongside
PMBs in the business world will give the free market capitalism a larger, nobler and a more
fulfilling purpose. Its advantages over straightforward charity are many–efficiencies, continuous
use with each turnover, competition with PMBs following the same rules, utilization of business
innovations being some of the most important ones.

There can be two types of Social Business. Type one focuses on businesses dealing with social
objectives only, as has just been mentioned. Type Two can take up any profitable business so long
as it is owned by the poor and the disadvantaged, who can gain through receiving direct dividends
or by some indirect benefits. There are various ways how the ownership can go to the poor. The
two types can be mixed together in the same Social Business as has happened in the case of
Grameen Bank. In a similar mixture of the two types, a socially beneficial rural toll road or bridge
can be built by a company as a Social Business whose ownership will belong to the poor. On the
other hand a huge project such as the Deep-Sea Mega Port in Bangladesh I have been advocating
for, which will be used by several countries in the whole region and can potentially change the
economic face of Bangladesh, can be built as a Social Business owned by the poor women of the
country.

Is this an utopia? Will there be Social Businesses outside the realm of microcredit? Who will
invest in such Social Businesses? I could answer these questions confidently in my new book, not
only because I have faith in my idea and on the ability of the entrepreneurs to have social motives
as well as profit making motives; but also because I am seeing this actually to happen at this very
moment. I have devoted a good part of the book on the details of the first such Social Business we
have started – Grameen-Danone Company which went into operation in early 2007. The idea of
the company was born over just a casual lunch I had with Franck Riboud, the Chairman and CEO

4
of Groupe Danone, a large French corporation – a world leader in diary products. It took just that
time for me to convince him that an investment in a Social Business is a worthwhile thing for
Danone shareholders. Even though it will not give any personal dividend to them, he agreed to the
proposition even before I fully explained it to him. It took somewhat more time to fix up the
modalities, the product (a fortified sweet yogurt for the poor malnourished children of Bangladesh
at a price they can afford), the financing, tax and regulatory issues, new yard sticks for evaluating
business and many other such details. And I have devoted many pages of the book on these details
to show how all these things can be taken care of. The yogurt – ‘Shokti Doi’ (Energy Yogurt) is
already in the market.

The Grameen System has invested in a second Social Business – this time an Eye Hospital where
the poor can have eye treatment and cataract operations at a very low cost and all others in the
small town and the villages around will have an excellent medical facility where there was not any
like that before.

Social Business is a new concept and its practice is just beginning. As my book reveals, it has to
make a lot more exploration while gaining more experience. There are challenges to be faced and
solutions to be developed. For example, we had to invent a totally innovative marketing system to
keep the market fragmented so that the low cost ‘Shokti Doi’ is reserved only for the poor children
and does not disappear in the urban market for the well to do. I have also touched upon other
issues such as how can the ownership of the Type Two Social Business be transferred to the poor,
or how can the wonderful opportunities offered by IT be best deployed for the Social Business.

One thing is very clear to me – that with the Social Business taking off, the world of free market
capitalism will never be the same again, and it then will really be able to deliver a deathblow on
global poverty. I am sure, many business wizards and successful business personalities will apply
their abilities to this new challenge – the challenge of creating a poverty-free world within a short
time. At the moment we are seeing merely the line of horizon. Soon a good part of business genius,
creativity and innovation of the world will devote itself to this new goal of social good. A whole
new stock market with its new indices will thrive in the financial capitals of the world motivated
by this new incentive. It will accelerate the process of poverty eradication to an unthinkable pace
using the same market mechanism which accelerated the global prosperity for the rich in the first
place.

Welcome to the new world of Social Business.

Muhammad Yunus
25 December 2007

Types of Social Businesses

Type I: focuses on businesses dealing with social objectives only.

Eg. The product produced is for the benefit of the poor.

Type II: can take up any profitable business so long as it is owned by the poor and the
disadvantaged, who can gain through receiving direct dividends or by some indirect benefits.

5
Eg. The product could be produced by the poor but exported to an international market while net
profits would go towards workers benefits.

http://marketplace21.wordpress.com/2009/04/08/147/

CSR BEST PRACTICES: Figaro

Posted on April 8, 2009 by marketplace21

Finding a Cause in the Quest

for Barako 
“CSR  is not simply philanthropy or dole outs, it is about sustainable
activities that benefit a business while it benefits all stakeholders,
and making business itself sustainable”
 
By Justine P. Castellon
Customers are worn-out with oversaturated messages from different brands touting the EST
(best, hottest, newest and cheapest).  In this advertising-bloated and customer- centric
society, customers’ behaviors and preferences have evolved.  They prefer a better
relationship with you and eventually want to align themselves to what your brand stands
for. And, for entrepreneurs, corporate social responsibility (CSR), also known as corporate
stewardship is becoming a best bet alternative to stand out from the crowd and forms
instant relationship with the customers.

CSR is generally understood to be the way a company achieves an integration of the

business, communities, shareholders, and stakeholders. Its primary focus is the
commitment to improve community well-being through discretionary business practices and
contributions of corporate resources. It is seen to help improve corporate image and clout,
strengthen brand positioning, enhance employee commitment, increase appeal to investors,
and strengthen financial performance and profitability.

CSR in the Philippines is becoming an ever more important field for the business. Today's
companies are investing in corporate social responsibility as part of their business strategy
to become more competitive. However, very few understand the real principle of integrating
CSR in the business.
 
SOCIAL RESPONSIBILITY IN THE COFFEE BUSINESS.
The success of the Figaro Coffee Company which started in 1993 is a popular coffee store
and a 100 percent Filipino-owned that can compete internationally. Apart from the superior-
tasting coffee that a customer can enjoy, Figaro is known for the social cause for saving the
coffee industry that gives the coffee an added value to the customers.  Figaro’s popularity is
not the effort of a public relations spin-doctor; rather, it started from the very core of its

6
business perspective. The CSR came about because of the state of the coffee industry in the
country. 

The overall coffee industry in the Philippines was in risk and Figaro cannot just sit and relax,
and watch as the industry declines. As the company sourced coffee around the country,
they discovered that a lot of coffee trees were chopped down due to volatile prices and
conversion of lands to golf courses and subdivisions particularly in Batangas and Cavite.
Figaro looked for the variety Liberica or “Barako” and found out that farmers are no longer
interested as no one was buying Barako and the tree occupied more land and bore less
fruits as compared to Robusta which the instant coffee manufacturers readily bought from
farmers”.

In 1999, they formed the Figaro Foundation Corporation to help resuscitate the Philippine
industry, and make it a major coffee-producing country. The campaign‘Save the
Barako’ was formed and the company donated part of the sales of the Barako beans to the
project.  The project also encompasses awareness programs, research, and targeted
marketing. Today, Barako is the highest bean seller in all its stores and commands a better
price. Now, farmers are back in the farms planting Barako.

ENGAGING CUSTOMERS, EMPLOYEES AND SHAREHOLDERS.

Since CSR agrees with almost everything they (Figaro) do and everyone they deal with, all
social responsibility programs are geared toward the business entity. For Figaro, it is not
simply philanthropy or dole outs. It is about sustainable activities that benefit a business
while it benefits all stakeholders, making business itself sustainable.  Most importantly, it is
not the sole responsibility of the company’s shareholders; it is the involvement of
employees, suppliers, community and the customers.

Figaro holds coffee tree planting and coffee harvest tours twice a year, and engages Figaro
coffee club members to join the tours. They continuously conduct tree-planting activities
with volunteers from among managers and employees, and with volunteers from among our
customers.  The announcements were made through newsletter in the stores or it in the
website. 

When you encourage staff to play an active role in the local community, you are not just
developing employee skills, but increasing morale and building successful teams. Employees
value the company more if they enjoy your interest and support. You will attract and keep
staff who are committed and enthusiastic. Your business, and the way you run it, has an
impact in your environment.  Your customers, employees, suppliers and the local
community are all affected by you and what you do.

INTEGRATING CORE VALUES IN THE BUSINESS.

While CSR’s primary purpose in the beginning is to make a brand differentiation, it
eventually evolves in taking responsibility for society. Running a business is not all about
making money, it is about moral responsibility to share the blessings, and bringing it back
to the community.  While the foundation’s agenda is to secure the supply of local coffee,
Figaro secure the business first to continue to help farmers and the coffee industry and help
address the lack of supply in the market.

7
ALIGNING THE BRAND AND COMMUNITY PROGRAMS.
At the same time as it deals directly with people in the community, it also aims to nurture
them and develop them to become their brand advocates.  The consumer’s willingness to
act as an advocate gives them a very personal stake in the brand. So it is important that
activities must be in tune with brand.

Align your CSR activities to your business.  This is also the formula for  a sustainable
program.

The corporate activities and programs are the extension of the brand message and they
play key roles in the company’s overall mission to deliver a competitive and sustainable
return to shareholders.  Coffee business is Figaro’s business – from raw materials down to
the single cup enjoyed by customers.  Putting coffee farmers as the top priority in the
program is binding. 

BALANCING THE  BOTTOM LINE CONCERNS.

The most important lesson to be learned in CSR is sustainability. It must be inherent in an
organization’s objective strategy, and not just simply to aid the well being of society. It
should become part of the way in which a company carries out its business. Further, your
business makes a profit first before it can contribute to a society in dire need. Hence, when
the business entity is profiting, social integrity can be regarded as preeminent concern.
Always remember, without the bottom line concerns, social responsibility cannot be
implemented.

The quest of Figaro in looking for Barako, paves its way to a cause which involves the
business, its employees, the community it serves and the customers who patronize them. 
And with the clear vision to give back to the industry it serves, Figaro’s undaunted spirit
enables the company to see this project through. The business becomes more profitable,
and the brand itself gains its maturity in terms of brand equity.
 
COMPONENTS OF CSR
Cause Promotion

 Increase awareness and concerns about social cause

 Support fundraising

Cause-Related Marketing

  Donate a percentage of revenues to a specific cause based on product sales

Corporate Social Marketing

  Focus on behavior modification

Corporate Philanthropy

  Create corporate social initiatives that benefit to direct contribution to a charity

8
Community Volunteering

  Empower and motivate employee to volunteer their time support local community

Socially Responsible Business Practices

 Conduct discretionary business practices to improve community well-being