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Social business - Wikipedia

Now that the model has proven its viability, efforts are under way to scale it up further, and two other eye-care hospitals are under construction. Similarly, the other social businesses highlighted in this report create tangible social impact—the degree and extent of which depends on the business stage they are operating in.

Grameen Yukiguni Maitake has created 8, jobs in the cultivation of mung beans, providing new employment opportunities for farmers in rural Bangladesh. Furthermore, it recruited new employees as field supervisors and built a sorting factory. These solutions are designed to provide long-lasting, self-perpetuating benefits. Unlike traditional charitable organizations, which spend donated funds every year, a successful social business has self-sustainable operations because it is set up to recoup every dollar it invests. Social businesses also empower populations in need, transforming them from beneficiaries of charitable aid to independent consumers who have a choice and a stake in their own futures.

In addition, by tracking sales figures and working with a business mindset, social businesses can achieve greater accountability and efficiency—further increasing the social return of every dollar invested. Unlike traditional, donation-based corporate social responsibility CSR activities, social businesses allow companies to directly use their skills, expertise, and business network to address a particular social problem.

In this way, social business activities can be aligned with the core commercial business. If designed and managed effectively, this alignment not only generates lasting social impact but also can lead to tangible business benefits. According to the corporations we surveyed, the most important business benefit that social businesses can provide is the potential for learning and innovation. All along the value chain, companies often find that the new products, operating models, marketing strategies, and distribution approaches aimed at reaching those most in need have a broader commercial application and can be a source of competitive advantage for the core business.

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For instance, Grameen Danone Foods set a goal of improving the health of children in Bangladesh by selling nutritious, affordable yogurt to local families. To maximize efficiency and create local employment opportunities, Grameen Danone Foods built the smallest plant that was technically possible—its capacity is below 4 percent of the typical capacity at a Danone factory in Europe. This production approach sharply reduces capital expenses and provides an innovative blueprint for small-scale production that Danone can leverage in other emerging markets.

When companies enter a new region, social businesses can also provide valuable insights into the legal, regulatory, and political environments. Social businesses can also provide less tangible but equally important employee benefits. Giving employees an opportunity to become involved in a social business can give them a sense of purpose and new personal- and professional-development opportunities. By providing experiences that enrich the lives of their employees, companies can strengthen employee engagement, job satisfaction, and retention.

For members of this generation, experiencing a sense of purpose is an integral part of their lives and plays an integral role in their career choices. Public campaigns to encourage corporate recognition of social issues demonstrate the growing power that external stakeholders can have on business success. Best practices for developing a successful social business, however, are not as well known. While social businesses can apply many of the same business principles to achieve financial sustainability, guidance on how to achieve and maximize social impact is less straightforward.

These factors are clustered across the five critical steps for developing a social business: choosing the right focus area, designing a successful business model, continuously learning and adapting, building efficient and sustainable operations, and managing for impact. In the following sections, we look at these steps more closely, along with the key lessons associated with them. For an overview of the steps, see Exhibit 4. Any successful business identifies and meets a specific customer need. A social business is no different, except that it focuses its efforts on addressing an unmet social need or unsolved social problem.

When identifying a social problem to address, companies should start from a baseline of their core capabilities, goals, and learning agenda. By targeting a specific need that their core capabilities can address, social businesses gain a clear sense of purpose and can generate real impact.

Building Social Business Models: Lessons from the Grameen Experience

Danone, for instance, drew on its own expertise in nutrition when it chose to address the problem of poor nutrition among children from the lowest-income families in Bangladesh. Similarly, Veolia Water built upon its capabilities in providing safe water solutions by addressing the issue of arsenic-contaminated drinking water in Bangladesh. Understanding the goals and learning agenda of the organization also helps orient the company to particular problems while maximizing the potential business benefits.

Addressing the root causes was important for Grameen Veolia Water, a joint venture with Veolia Water, a leading provider of water treatment services.

Corporate Innovation

Given its core capabilities, Veolia Water identified the issue of providing safe drinking water to the people in rural Bangladesh as a potential focus area. To truly understand the complex web of underlying issues, the company invested a significant amount of money and effort, even commissioning an in-depth study of the cultural and religious aspects of the problem. As it turned out, there were several root causes. Despite growing awareness among villagers of the presence of arsenic-contaminated water, they continued to drink it.

A UNICEF report noted that 80 percent of the local people knew arsenic could be a problem in tube-well water, and even though contaminated wells had been painted red to increase awareness, many villagers still used the wells either because there were no other alternatives or because of convenience and cost considerations. By understanding these underlying causes, Veolia Water realized that an effective solution would require addressing not only the availability of safe drinking water but also the local perception and use of water. While Veolia Water has undisputedly strong expertise in designing the right technical solution, the company realized that solving behavioral issues would require additional skills and a focus on educating the local people.

Understand the landscape of stakeholders, legal issues, and activities of other players. Understanding the landscape of players is important in any business activity. But it is even more important when aiming to address a social problem, as the social sector is often very complex and fragmented. Fully understanding the regulatory environment as well as the activities and plans of the many players that are active in a given social area is key to deciding whether a new engagement can truly deliver impact.

For instance, BASF originally planned to address the problem of malnutrition in Bangladesh with a multinutrient product.

But its detailed review of the complex landscape directed it to another option. In addition, there is a broad set of regulatory processes connected to the sales or distribution of micronutrient supplements in the country.

Social Business

After investigating this complicated network of stakeholders in detail, BASF Grameen recognized that there were already plans for a similar product and that regulatory hurdles would be too high to allow for a quick market entry. An effective business model—with a clear value proposition—is as important to a social business as it is to a commercial business. The challenges that the social business model must tackle, however, are exceptionally difficult, particularly in the context of a developing country. Three other challenges were consistently mentioned: achieving a price point that the targeted population can actually afford, physically reaching those most in need, and generating sufficient demand for the new offering.