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.

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.

Numerous Grameen social enterprises have had both direct and indirect social development impact. They have clearly demonstrated that some of the social objectives of a poverty alleviation program can be achieved in a business like way. But with more to measure than simply the financial bottom line of the conventional company balance sheets, how is the social impact itself assessed? In case of Grameen social enterprises, a successful social business venture may be evaluated on the basis of the following criteria:

A. The social development impact on a targeted clientele group.
B. Profitability of the business venture to ensure sustainability.
C. Application, development and extension of technologies that can raise productivity of the poor.

The Challenge of Developing Viable Business Plans

The developed as well as the developing countries have had long traditions of “philanthrocapitalism” and different business models have been tried out in many countries. Bangladesh has also been an incubator for many social enterprises. But the primary concern right now is to address the massive task of poverty alleviation. A major challenge is to meet the needs of the poor for their social development in a more business like way, to ensure sustainability in the long run. As with any new business venture, there are inherent risks and challenges that must be addressed by a social enterprise.

It is important for such an enterprise to:

• clearly establish both the social and business objectives of the enterprise, providing it with a distinct corporate identity.
• pilot test and develop the modus operandi for providing social services as well as applications of technology necessary for fulfillment of its objectives.
• develop suitable organization, management and delivery systems that will be able to function at grassroots and ensure full corporate accountability to the board of directors.

Recruitment, Placement of Leadership

Senior management and the board of directors must be both professionally competent and at the same time fully committed to the social and business mandate of the enterprise. There must be a realistic plan to recruit and retain the management team, in the given market context.

Raising Equity and Initial Seed Funds

As with any business start-up, but more so with social ventures, raising the seed capital or equity will be the most crucial challenge. Start up costs can be daunting and investors are reluctant to provide the required seed funds as equity capital. A social business, in which investors do not stand to make much of a profit to recoup their initial investments, may face further obstacles in raising the needed capital.

Enterprises with predominantly social objectives such as education and health, generally require endowment funds to meet start up capital costs.

Management of technology-based joint ventures have proven to be a major challenge, but successful ventures have tend to be more profitable in the long run as evidenced by Grameen Telecom, another not-for-profit company and its Village Phone Program.

The Future Prospects

Globally, and in particular in the USA, there is a strong interest in initiating development and poverty alleviation programs through social business ventures. The existing MFIs, including wholesellers of microfinance services like Grameen Foundation, have in many instances successfully scaled up their microcredit operations. These can be leveraged further for launching new social business ventures.

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 have been interested in the relationship between poor countries and poor environmental records. Why must developing countries sacrifice their natural resources for the sake of development and progress? Why can’t countries learn to make different decisions than countries before them without threatening the environment? More directly, can poor countries afford to be Green?

China, it’s frequently forgotten, is a poor country. Figures we’ve seen from the Grameen Foundation put the number of people in China living below a dollar a day is over 50 million people. But unfortunately, fast-emerging economies inevitably leaves great swaths of people behind.

A Yale University study concludes that as poor countries become richer, they invest more heavily in environmental improvements. No real surprise here, but what is interesting is, while economics is key, good governance is essential. Everyone will gain if poor countries find a way to leapfrog over the phases of development which in so many places do terrible harm to the environment, and policy, regulation and proper stewardship are crucial.

In thinking about social business models, I was recently introduced to NextBillion.net. NextBillion.net is a website and blog about how business drives positive social and environmental change in low-income communities. Its serves as a discussion forum, networking space and knowledge base for individuals and organizations interested in the “next billion” – the next billion people to rise from the base of the economic pyramid (BOP), and the next billion in profits for businesses that strive to fill market gaps by integrating the BOP into healthy economies.

Their goal is to promote the development and implementation of business strategies that open opportunities and improve quality of life for the world’s 4 billion low-income producers and consumers. That’s the kind of big audacious goal we get excited about.

There is more than one way for business to benefit poor individuals. Social businesses as defined by Yunus is one such model. I would like to believe there are others.

While not directly providing a product that appeals to the poor, our model is one that works for us and works for many. And ‘the many’ is important and integral to what we’re about.

Businesses that benefit for the less fortunate, and help make the world a better and more humane place are a leap in the right direction. And we are optimistic that we will see more businesses operating with this kind of compassion and integrity.

Jeff Delkin, co-founder, bambu

I was inspired to write this post for a couple of reasons.

We first became aware of Grameen Bank while living in Asia. More recently we’re personally involved on a volunteer committee to help raise awareness for the work Grameen Foundation is doing in China.

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.

The Grameen Danone case study is the central focus in the book.

The key takeaway is thinking about business differently. Social goals are integral to the mission of the business. And shareholders are redefined company to include customers, suppliers, and employees, and even neighbors. It is a sustainable model that takes into account every individual the business touches. As more businesses reshape their thinking, I believe business more than any other entity can be an important force of positive change.

And the story delves deeper. It is also about utilizing resources with creativity. Grameen Danone brought fresh thinking to address issues of production, refrigeration, sales and distribution, and source of raw materials. For instance, the milk used to make the nutritious yogurt for children comes from the cows that were purchased by borrowers through the Grameen Bank. The Grameen Danone example uses mini-factories built on a local-for-local model that demonstrates small can be as efficient as big. The social business is built on a spirit of innovation and experimentation.

It is a great story about a courageous CEO who convinces his board and managers to create a business unlike any other at Danone.

But we don’t hear enough from Frank Riboud, CEO of Danone. For instance, it would be interesting to learn how he stewards new ideas into an organization that appear to be in conflict with the very purpose of business? Or how do you convince your board of directors that this project is worth investing in? How do you address dissent? How do you leverage this within the company to create a shift in culture? How can this effort have a positive change on the entire organization?

Part 2 of this article will be posted on May 19, 2008.

Heidi Matonis, Founder & President, Positivitee

About three years ago I came up with the idea of creating stylish tees that supported non-profits with 10% donated back to the charity. It grew out of my desire to: be a role model for my children, support causes dear to me, and to try to create a small, viable business to call my own.

In 2007 I made the commitment to “go green.” “Going green” to me meant using certified organic cotton, pigment dyes, waterbase inks, and fair labor practices. I went a step further by also becoming a member of the carbon fund to offset my carbon shipping footprint. None of this was easy.

It required that I manufacture my own product. (I had been buying blank tees and simply screening them.) It caused my product price to jump. The decision to wholesale also raised my internet prices. I figured retail exposure–on which a made little or no profit–would add to my exposure and donations. Although both these choices—green and wholesaling—have had growing pains, they were fundamentally sound decisions.

The first PR package I sent out, got picked by O magazine. My tees were given the title: “What a Concept.” This seemed to validate my feelings for meaningful choices in the marketplace.
Going green has proven sound by merit of the amount of press green movement has gotten. On a personal level, it has been very satisfying to incorporate one of my core values into my business model.

In yoga, we cross our hands in prayer and touch our heads—“positive thoughts,” touch our mouths—“kind words,” touch our hearts—“true intentions.” I try to live my life by this simple mantra. I believe in the end, the key to success in life OR BUSINESS is to keep a clear vision of who you are, how you want to live and put yourself out there. Humans can not go on consuming as we have: mindlessly and with no respect for the planet. We all must embrace change. I choose to be a role model for my children. They are the ones that will suffer for our folly and greed. Change begins with individuals but I don’t believe business always has to be the bad guy.

When you create a tee shirt and give it a tagline: clothing with meaning—you give the consumer an option they didn’t even know they had. You are creating a market instead of meeting a demand. I believe there are enough people out there that will welcome the idea of clothing with meaning and that my small business can succeed and perpetuate to make the world a little gentler place.

Positivitee Grameen Foundation Product Line

Professor Muhammad Yunus announced this week the launch of another social business, a joint venture between Grameen Bank and Veolia Water designed to bring drinking water to the poorest people of Bangladesh. Grameen-Veolia Water will supply clean water to more than 100,000 Bangladeshi and expand throughout Bangladesh. Bangladesh is already benefiting from social business ventures previously initiated by Professor Yunus that have been built around producing low-cost nutritious food for children and health care services, all while promoting the local economy and providing real employment opportunities. These ventures are proving that social business can be a revolutionary approach to affect social change.

With Grameen-Veolia Water poised to make clean water a common – rather than precious – commodity, Bangladesh has one more tool to ensure that it meets all the Millennium Development Goals set by the United Nations. This feat is sure to capture the attention of world leaders and serve as model for other countries seeking real development solutions.

Alex Counts is the President and CEO of Grameen Foundation.

Veolia Water Press Release

More Information

Transforming the world of global business enterprise

Danone and Grameen are, in fact, changing the game of business. They have created a profit-making enterprise where societal contribution is more important than maximizing profit (a “social business”), and opened the door for other new inventions that move us towards a world without poverty.

What could happen in the world of profit-making business if societal contribution became at least the equal of mazimizing profit in boardrooms throughout the world?

There are clear indications that global business enterprise is already leaning toward “changing the game.” Grameen Danone is one example. Others include the recent participation of U.S. major businesses in collaboration with scientists and politicians to address global warming (e.g. USCAP*). Even the emerging importance of corporate social responsibility could be considered a positive indicator.

How do we transform the world of global business enterprise through changing the game as I’ve suggested in Part 1 of this blog? While I don’t pretend to have all the answers, one thing I do know is that every worthwhile global societal transformation began with a small group of people standing up and making a bold declaration followed by committed action.

Muhammad Yunus and Danone have taken just such a bold step. Here’s what I have taken on as one personal expression of my own commitment to changing the game.

The CEO Roundtable to End Global Warming

My partner Paul Dolan and I have taken on an initiative to create what we’re calling the “CEO Roundtable to End Global Warming.”

To end global warming in time, we say the following things are missing:

1. a global goal to end global warming by a specific date (e.g., average mean global temperature shall stabilize at or below 15.5 degrees Centigrade prior to 2050).
2. leadership that takes full accountability for the world achieving that goal.
3. that leadership must:

• have the power to cut through global commercial and political resistance, coalesce the many exemplary initiatives already under way, and galvanize people’s participation around the world;
• include CEO’s from the very industries that have the most to lose by rapid and dramatic curtailment of fossil fuel consumption from the very countries that are the largest consumers of carbon;
• be impassioned in its commitment to the global good.

We are now searching for a global CEO with the genuine commitment to make a profound societal contribution, and with the courage, freedom and influence to pull together the worldwide team to end global warming in time.

If you have a nomination, someone whom you know personally and have direct access to, please let us know at info@starrco.org.

Gordon Starr
Starr Consulting Group
we support visionary leaders in transforming their organizations

*United States Climate Action Partnership
http://www.us-cap.org/

What if the enormous power and potential of global business enterprise could become a force for social and environmental transformation just as it has been for the expansion of global commerce?

Grameen Danone – the world’s first “social business” as conceived and presented by Dr. Yunus in his new book – is a brilliant invention. What Grameen and Danone have done with great courage and insight is open the door to a new future – and to a new whole landscape of possibility for creating a world without poverty. And perhaps much more.

Given this first landmark step, what else might now be possible?

For instance, what could happen in the world of profit-making business if “global viability” became the equal of “maximizing profit” in the boardroom?

Changing the game

From many perspectives, business enterprises have made a profound contribution to human progress since their inception some 400 years ago. However, a fundamental shift has occurred in our world over the last 50-60 years. We are entering a new era.

In the previous era, resources were abundant and people scarce. In this era, resources are scarce and people abundant. Many of the very principles and rules that historically allowed business to make such a remarkable contribution to global progress, if followed today, have the potential to destroy the well-being of our people and our planet.

Fortune’s Global 500 shows that the ten largest businesses in the world accounted for $2.4 trillion in sales in 2006. Nine out of ten of these mega-corporations are either oil or automobile companies. (The other, and largest, is WalMart.)

As those nine oil and auto companies expanded, they fueled an exponential expansion of global commerce. Selling more oil yields more profit – that’s the game we set up, and they have mastered it. However, what we didn’t realize previously is that selling more oil also accelerates global warming, which today threatens to destroy our planet as we know it. And of course, the world’s poor will feel this planetary impact first, foremost and most deeply.

We need new rules and a new game for global business enterprise, consistent with the new era in which we find ourselves. We have become masters at winning the game of business. From my point of view, it would be a mistake to throw out the baby with the bathwater. We simply want to change the game, change the rules of the game and unleash global business enterprise to get the job done of winning the new game with as much vigor and intensity as were applied to the old game. If that were to happen, it would have unimaginable impact on our world.

I agree totally with Dr. Yunus that corporate social responsibility while a laudable step in the right direction is insufficient to make any sustainable difference in creating a world without poverty. In the boardroom, as soon as profit goes down, the virtuousness of corporate social responsibility is one of the first things to go.

We need a new game in which, alongside of profitability (not displacing profitability), and of equal stature in the boardroom, must be an equally clear measure of social contribution (let’s call it “global viability”) that would include environmental sustainability, social justice and spiritual freedom. (Paul Dolan, in his book True to Our Roots, calls this idea the “Triple Bottom Line.”) In this new game, exceeding the “global viability” target would generate the same state of celebration, and falling short the same sense of urgency, as would exceeding or falling short of the profit objectives.

To be continued…

Gordon Starr
Starr Consulting Group
we support visionary leaders in transforming their organizations

The social business panels included topics ranging from eyeglasses to fashion to footwear.

The Coffee Coop combines fair trade coffee from Honduras with a fund raiser for middle school students. The team wanted to support sustainable farming and teach students about micro-enterprise

Local Labels markets Colorado-made products to Coloradans to support local small businesses and reduce the environmental impact of shipping goods across the globe.

Carrie Magnuson described how Scojo trains micro-entrepreneurs how to test eyesight and sell eyeglasses to the poor in remote villages. While eyeglasses are taken for granted in the West, they are missing in developing countries: an estimated 700 million people worldwide need eyeglasses. Scojo is partnering with BRAC in Bangladesh to expand their current operations using micro-franchises.

Stacey Edgar spoke about her experiences founding Global Girlfriend, a provider of women made, eco-friendly, fair trade products. Her company’s micro-entrepreneurs produce fashionable clothing made of organic cotton and purses made out of recycled plastic bags that are fused into a strong fabric.

Anthony Curci from Crocs Corporate Responsibility showed video footage of distributing some of the one million pairs of shoes in 2007. He described how shoes can prevent injury, infection, parasites and other health problems that are common when walking barefoot in developing countries. Though Crocs is a publicly traded, for-profit company, it clearly has a social mission.

The four simultaneous workshop sessions sounded interesting and I wished to attend all of them. They provided a forum where conference attendees could interact with the panelists in smaller groups.

In a session on social business and social enterprise, Grameen Foundation Founder, Alex Counts described the spectrum between a charity, a social enterprise (a microfinance institution), a social business and a profit maximizing business. At the academic applications session, Professor Warner Woodworth (Marriott Business School at Brigham Young University) discussed his efforts establishing the Center for Economic-Self Reliance and student projects where they work with existing social enterprises to empower the poor.

Overall, the conference was very successful and everyone that I talked I spoke with had learned several things and was energized to start working or continue working to eliminate global poverty. Doug Spencer from Friendship Bridge did a great job as master of ceremonies by keeping the conference running smoothly. All of the volunteers should be commended for putting on such a great conference.

My personal highlight was meeting with Muhammad Yunus. After meeting him on January 11, 2008 at a book signing in DC, I committed myself to start a business where the social mission came first and profit was secondary. Two months later, I was at a Social Business conference in Denver with a new LLC company, bank account, website, and I handed a business card to Dr. Yunus, who encouraged me.

John Hatch stated that there is a “big tent” for social business: a business may seek a social mission and avoid losses, or focus primarily on a social mission and allow for profits, or seek a profit while still addressing social concerns. A mix of all types of these organizations will be needed to tackle the challenge of global poverty.

Kevin Gormley is President of MyLocalCause.com LLC, a social business that raises funds and awareness for non-profits and schools.