Grameen Shakti, a social business that aims to provide renewable energy to the rural poor of Bangladesh, was awarded the coveted Green Energy Prize from the Ashden Awards for Sustainable Energy. Dubbed the "Green Oscars," the awards recognize the leading renewable energy efforts in the world. The award further demonstrates the ability of social business to achieve best-in-class services while still focusing on a social-driven mission that benefits society at large.
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At Grameen Foundation, our goal is to spur innovation in the global movement to eliminate extreme poverty. Part of that work is to develop better solutions and share them with people like you.
On GF Insights, we share lessons learned from our leaders in the field, news about efforts to expand access to financial and information services for the poor, and how poverty-focused organizations are using data to improve the way they work.
The following is a summary of a report to the Board of Directors of Grameen Foundation regarding social business viability by Khalid Shams, Former Deputy Managing Director, Grameen Bank.
Grameen’s Social Business Initiatives
Grameen Bank has been experimenting with new social business ventures since the early ‘90s. It has effectively used the microfinance platform for launching several social enterprises. Some of these were ‘for-profit’, while others were ‘not-for-profit’ entities, but each had a distinct corporate mandate for social development. Grameen Bank itself would be an example of such a social business enterprise, which provided microfinance related services to the designated rural poor and the bank is also owned solely by the borrowers themselves. Some of the social enterprises were created in direct response to the demand of GB borrowers i.e. the Sixteen Decisions of the bank, as well as the rural poor, for essential services needed for development of health, education, nutrition, and alleviation of poverty.
Some of the enterprises were concerned with extension of new technologies that could directly raise the income and productivity of the poor trapped in such traditional sectors like agriculture, fisheries, rural industry. New ventures were also launched for development of information and communication based technologies.
More recently, Professor Yunus has taken the initiative of setting up “social businesses” that aim to provide nutrition and health services to a targeted client. In these new ventures, after the initial capital costs have been fully recouped, the investors agreed to take only nominal dividends, plowing back all profits for further expansion of the social business. Grameen-Danone Foods Ltd, and the newly formed Grameen Eye Hospitals are the latest examples of more rigorously designed social business models.
In a May 16 op-ed piece in the Guardian, Muhammad Yunus issued a call to action to world leaders for more aggressive action in solving the looming global food crisis. Yunus laid out a six-point plan to prevent a humanitarian disaster of world starvation, the potential scale of which has prompted the United Nations to dub it the “silent tsunami.” Key to his plan is the formation of a “poverty and agriculture fund” paid for by a small tax on the sale of oil. The fund would be managed by these contributing nations and used to create social businesses that would be tasked with improving the health care, education and other needs of developing nations. Read the full article and discuss your thoughts.
Jeff Delkin, co-founder, bambu
It’s our belief, that we have a responsibility to ‘give back’ to the planet and to the communities where we operate. It has always been central to who we are. We wanted to recognize and benefit the communities in which we work and live. And that place is China. While we may not be a social business as Yunus describes, we do provide support and volunteer services to the work of Grameen Foundation in China. We do donate over 1% of our total sales (not just profits) to non-profit organizations preserving and restoring the natural environment in China and around the world. We do donate to the local schools where the children of many our or craftspeople attend.
We are not a social business in the strictest sense of the word. We are a for profit company that strives to do good. And as such, I am not convinced that the social business model that Yunus describes is the best model.
Yunus argues that businesses with a social responsible strategy will have too often forego their good corporate citizenship for profit motives. And unfortunately, too often this does happen. But it happens to organizations which have not integrated their principles firmly into their business.
A simple spectrum of business models could look like this.
Social Business > Compassionate Capitalism > Profit Focused Capitalism
Our own business reflects more the ‘Compassionate Capitalism’ model. Yunus supports globalization and believes it brings more benefits than its alternative. He also recognizes the importance of marketing by conducting product testing, naming and identity development, and a tiered pricing strategy. Given that, businesses that practice compassionate capitalism can benefit many.
I was inspired to write this post for a couple of reasons.
Secondly as founders of a small business, bambu, we are interested in the concept of ‘social business’ that Dr Yunus’ introduces in his new book, Creating a World Without Poverty.
Central to our sense of purpose and value set at bambu, we concern ourselves with responsible stewardship of resources, giving back to the people and the communities in which we work in China and Vietnam, and preservation of the natural environment.
We strive to create an organization that acts with integrity. We describe ourselves as a values-driven company as opposed to a profit-driven company.
Dr. Yunus’ book presents some paradigm-breaking ideas that are a positive force for change, and made me reflect on our own business, and the role of business in general.
The notion of ‘social business’ is introduced in the first few pages. Yunus makes some important distinctions in defining what a social business is.
Importantly, he distinguishes a social business as one that directly makes products that poor people are willing to pay for, and one which directs all the profits back into the enterprise.