Throughout the years we have been trying to tackle the big problems of the world through different mechanisms: philanthropy, charity, Corporate Social Responsibility, Non-Governmental Organizations, and social businesses
What is the role of each of these organisations and how are they making a difference?
Philanthropy is the desire to promote the welfare of others, expressed by generous donations of money to social causes. The term originates from the Greek word philanthrōpos, a compound word from phil (love) and anthrōpos (human being), which translates as love for humankind. Thus, philanthropy is a desire to help people you do not know and without expecting anything in return.
Charity is different from philanthropy in that it focuses on alleviating the suffering caused by social problems, without addressing the root cause of the problems.
According to Financial Times, “Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders”. The notion was conceptualised in 1953, by Howard Bowen, as “social obligations”, and was defined as a way “to follow those lines of action which are desirable regarding the objectives and values of our society.”
Ngo.org defines a non-governmental organisation (NGO) as a non-profit, voluntary citizens' group driven by people with a common interest. NGOs perform a variety of service and humanitarian functions, bring citizen concerns to Governments, advocate and monitor policies and encourage political participation through provision of information. Some are organized around specific issues, such as human rights, environment or health. They provide analysis and expertise, serve as early warning mechanisms and help monitor and implement international agreements.
According to Prof. Muhammed Yunus, social activist and Nobel Prize laureate, “a social business is a non-dividend company created to address and solve a social problem.”
In a social business, the investors can get their money back but are not entitled to dividends. Once the original investment has been recuperated by the investors, the profit is reinvested in the company to increase the social impact. The purpose of the investment is solely to achieve one or more social objectives. The company must cover all costs and be financially sustainable while solving social problems in sectors such as healthcare, education, poverty alleviation, environment, housing, climate urgency.
How to build and scale a social business?
In the book “The world of three zeros”, Prof. Muhammed Yunus’ advances the thesis that the big problems of humanity can be solved through entrepreneurship. It all starts with the mindset. People from developing countries have to be empowered to create change in their communities. Unfortunately, the educational system does not encourage students to plan a study path, careers, how to serve the community, and ultimately how to fulfil their potential.
Prof. Yunus created the social business “The Village Bank” in Bangladesh, the first microlending institution that developed into the first financial institution that lent money to the poor. It started as a research project in 1976 to test the possibility of establishing a credit delivery system to provide banking services to impoverished citizens whose skills were underutilised by the society. In 1983 the project was transformed into a bank by government legislation. Prof. Yunus was awarded the Nobel Peace Prize in 2006; the organisation's Low-cost Housing Program and World Habitat Award in 1998.
Social businesses trigger profound change
The cultural implications of creating an institution like the Village Bank, now Grameen Bank, are vast. Besides lifting people out of poverty, the project generated mass cultural change. One of the significant changes is the empowerment of women. In a country where banks would not lend them money, Grameen Bank managed to make women realise they are part of the decision-making process of a new purchase or loan contracting. Along with women empowerment, came setting up a healthcare system, insurance schemes, the use of renewable energy and many others.
Lessons from social business practitioners:
-Start small. Start with what’s easy to do. Make the first step and then work your way up to more complex issues;
-Every contribution matters. Any company, no matter how small, can make a contribution; i.e. can tackle unemployment by hiring someone;
-Building social businesses has a lot to do with the intrinsic motivations of a person to make a difference in the world. In an interview for the World Economic Forum, Prof. Muhammed Yunus explains that his primary purpose is to dedicate his life to making people happy;
-Imagination, creativity, lots of energy, a love for humanity and the desire to be a part of a project that is going to make life easier for the next generations is all it takes to make a difference.
Every business can be a social business. The advantages are numerous: boosting employee morale, performance improvement, and good PR. However, most importantly, people in developing countries get a voice. They are invested with the confidence that they can build a profitable project of their own, based on their skills and abilities.