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Dhaka Tribune

Social Business: Changing how world does business

Update : 30 Apr 2014, 07:24 PM

“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. In this context, the idea that making a profit was the only goal of business might have some sense.” But in a time when the values of the business world largely influence the values of society as a whole and the possibilities of future generations, the purposes and goals of business need to be questioned and expanded. And so did Muhammad Yunus, the only Nobel Prise winner from Bangladesh who came up with a theory of microfinance to question the status quo and to change the way the world does business.

The way the present world does businesses and its true colour

Modern day businesses are based on the core concept of making profits and maximising the wealth of its shareholders – an outcome of the free market economy aka capitalism. Theoretically, capitalism was supposed to do a favor to the society as a whole, which it did to some extent after the fall of mighty Soviet Union in 1991. Still today, capitalism is flourishing 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: 94% of world income goes to only 40% of the people. Just imagine how devastating the real scenario is when 60% of the world’s population has to fight among themselves to get a share out of this tiny, little 6% of world income!

This gets scarier when you convert the 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! The rich are getting richer and the poor are getting poorer throughout the world. Imbalance in power and wealth is dividing the world into uneven halves, destroying the core values of humanity. As a result, several unprecedented, major crises such as high food prices, energy crisis, financial crisis, and the ever-worsening environmental crisis have combined forces to bring even greater misery and frustration to the world’s bottom 3 billion people.


Social business is redefining human nature from selfish to selfless

However, there are still many people left in this world for who 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 the selfishness perspective is a “fundamental flaw” in the whole structure of economic theories that maintain that business is only for making money.

“We have misinterpreted humans. People are selfish; at the same time, they are selfless too. Theoreticians have never looked into that,’’ he said.

With the idea of social business, Prof Yunus has introduced a new dimension for capitalism: A business model that does not strive to maximise 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.

At the same time, unlike today’s not-for-profit organizations, ie 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. According to Prof Yunus,”A charity dollar has only one life; a Social Business dollar can be invested over and over again.”

To remove disparity in income and wealth distribution throughout the world, it is high time that the world embraced social business as a tool that cares for its inhabitants and can turn the current financial woes around. As the microcredit pioneer says: “There is no alternative to social business to solve social problems. We cannot continue destroying our planet. If we can come up with an idea, we will be able to change the world. We have to do that before the world reaches a point of no return.”


The difference between traditional business model and social business model

The business model concept offers a consistent and integrated picture of a company and the way it generates

revenue and profit. But social businesses cannot be based on simply replicating conventional for-profit business models. New value propositions and new value constellations have to be created so as to match into a positive profit equation.

The figure, one can easily identify the basic difference between these two. In the social business model, there are three changes: Addition of social profit equation (Impact Investment) to the conventional model, putting a condition in economic profit equation to ensure total recovery of capital employed and replacing the customers with stakeholders in the value proposition to broaden the scope of social businesses.

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