Last November 17th, for the closure ceremony of the Global Microcredit Summit in Valladollid, Nobel Prize Muhammad Yunus advanced his speech to arrive on time for the next day conference on Social Economy and Social Business held by the European Commission.
I had the opportunity to attend different sessions on Social Businesses with Professor Yunus, one of them being more intimate and out of the official programme, thanks to MFI Connect.
There is usually a huge confusion in people's mind regarding the term "Social Business" used for describing a new age of companies using Social Media or Social Networks, or for the so-called Enterprise 2.0. Here we consider it as another perspective of Doing Business, also called Social Business.
According to the European Commission, a Social Business "Seeks to serve the community's interest (social, societal, environmental objectives) rather than profit maximisation. They often employ society's most fragile members (socially excluded persons). They thus contribute to social cohesion, employment and the reduction of inequalities".
In Yunus words, it is a "Business that solves problems rather than make people money", and he calls it Social, "because the profit-making business is about me. It's me-centered. Social business is nothing about me. It's all about others".
The 7 Principles of Social Business
Although a Social Business looks like what the United Nations defines as Inclusive Business, this type of enterprise is supposed to run on "No Loss, No Dividend" basis. What makes it inclusive, is that it involves local enterprises and the local community.
In order to give a general framework, Yunus listed 7 principles to be fulfilled for an enterprise to be called as Social Business:
- The business objective is to overcome poverty, or one or more problems which threaten people and society; the objective is not profit maximization.
- Financial and economic sustainability is necessary.
- Investors get back their investment amount only. No dividend is given beyond investment money.
- When investment amount is paid back, company profit stays with the company for expansion and improvement.
- It has to be environmentally conscious.
- Workforce gets market wage with better working conditions.
- Do it with joy.
Grameen-Danone Social Business (SB)
You may have heard about the Grameen-Danone Joint-Venture, selling now from 8 to 12 Taka (€0,08 to €0,12) a 80 grams enriched yogurt with the aim of fighting children's malnutrition in Bangladesh. In that case, it involves the local community, as the milk comes from local production, and the distribution in remote areas is made through the so-called "Grameen or Dani-Ladies". Although this programme faced some difficulties to be well implemented in the rural areas, it does not end here.
M. Yunus mentioned a verbal agreement with the recently elected Brazilian President Dilma Rousseff, to implement this low-cost, nutrients-enriched-yogurt in the lunch pack of all public schools around the country, to prevent regular children's bad nutrition. The same interest is coming from China, to use it in some remote areas like Sichuan.
Other Aspects of Social Business
As Yunus mentioned during the MFI-Connect conference, a Social Business is "not only poverty related". Considering the societal objective, Muhammad Yunus explained the case of Japan, ranked as #1 country for suicides*. Fukuoka as recently been named "Social City", as local stakeholders and a university will be involved in fostering Social Businesses, mainly for the survivors of the March 2011 earthquake.
Another aspect of SB will be the environment: In Haiti, one of Yunus' main idea is to help the creation of Social Businesses for tackling the country's deforestation, considered by some experts as one of the worst example of ecological disaster worldwide.**
Long Path Towards Social Business Democratization In Europe
Culturally, if Social Businesses are mostly held and supported by the private sector in the United States, in European countries they tend to get it backed by Institutions.
The European Commission is strategically focusing on developing Social Businesses, and seems to take it into account seriously, as a viable solution for unemployment reduction and economic growth. From 2010, the Social Business Initiative belongs to the 12 priority actions of the Single Market Reform, together with the European Programme for Social Change and Innovation (2014-2020).
For 2011, only a legislative proposal on social investment funds has been made last Wednesday, 7th of December, and is pending for approval.
However, the European Commission, by definition, does not separate Yunus' understanding of Social Businesses from the general aspect of Social Enterprises: It is really difficult to clarify and define the sector. Therefore, 2012 will be the year of SB's visibility on the agenda of the European Commission, focused on measuring the number of Social Enterprises, creating a platform and, eventually, labels and certifications.
We will have to wait at least 3 more years (2014) to start talking about Social Businesses' financing, which is the first barrier for SB's development. Apart from developing a legal & institutional environment to foster investment priority for Social Enterprises (as part of the Structural Funds regulatory package 2014-2020), €90 million will be injected for Social Businesses to get access to private funding. Besides, the European Investment Bank (EIB) has committed to give up to
€50 million for the European Social Investment Facility (ESIF) provided at least €50 million comes from other private sources.
Private Initiatives To Foster Social Business
Although Ashoka was the first association in helping Social Entrepreneurs, few initiatives are now emerging: A couple of weeks ago Deloitte launched- along with Yunus- the "Deloitte Social Innovation Pionners", in order to boost up to 50 SBs to become investment-ready.
There are growing opportunities for increasing SB and Social Innovation's knowledge in Universities, like the Skoll Centre for Social Entrepreneurship and the Saïd Business School in the UK or the Yunus Social Business Centre University of Florence in Italy. Some SB's Think Tanks have also appeared, like the Helsinki Design Lab or the former not-much-successful Social Polis European Platform project. But then still comes the financial issue.
Few venture and philanthropy funds exist in Europe, mixing grants and capacity building for Social Businesses. The term "Social Business Angels" is emerging, through some initiatives like the Co-Fund in the UK, or through Social Business Angels Networks (SBAN) like Clearly So, also in the UK. But seed fundings are still missing.
Social Investment Funds, or Socially Responsible Investing (SRI) funds, are growing fast: There were almost 900 SRI funds in Europe in 2010, with a more than 25% increase a year for the last 3 years. Legislative initiatives in the UK and France enabled both countries to own 50% of the European SRI market, while others like Spain and Italy has decreased their SRI assets. However it is still a niche market, representing less than 1.5% of the total assets available in the European markets.
There are more opportunities for SB's venture capital: Apart from the Skoll Awards on Social Entrepreneurship that provides funding to very few applicants, Social Banks are increasing. Banks like Triodos or Charity Bank with almost exponential growth are now gathered through different consorsium like the FEBEA (European Federation of Ethical and Alternative Banks), the GABV (Global Alliance for Banking on Values) or the INAISE (International Association of Investors in the Social Economy).
European Social Business Innovations
Few innovative initiatives sprang up recently, that would let think there is hope for SB to really emerge in Europe:
From Prof. Yunus' side, the city of Wiesbaden- Germany has been declared the first "Social Business City". It includes a SB network, the Grameen Creative Lab that promote SB worldwide, as well as a Social Business Lab.
The Social Innovation Park in Spain, created by Dekoinn, the Basque Centre for Social and Corporate Innovation, is aimed to become a "Social Silicon Valley". It will gather more than 50 NGOs, social businesses and cooperatives to tackle some regional social issues. The interesting part is that it takes all SB's lifecycle into account: Starting from the Social Innovation Academy or G-Lab that search for social emerging trends, to the Social Enterprise Generator for SB's knowledge and to the Incubator of Social Enterprises and their "Social Angels Club" for seeds capital.
Another way of doing is the Naples 2.0 calls for proposals, where the Euclid Network, Unicredit Foundation and Project Ahead identified 6 issues in the city of Naples, Italy, and organized a Social Innovation Competition in 2011 for SB entrepreneurs to create solutions, along with local partners. Naples is evolving into a national hub for social innovation, and the results of this event should be measured by the end of 2012.
On a broader picture, apart from the obvious use of SB for job creation, there is a huge potential in Europe for Public Procurement, which represents around 17% of GDP of the European Union. Social Demand which is not covered by the Welfare system, as we know, is a good opportunity for new enterprises, but also what already is***. The civil society is asking for more, although there is still a need for developing its practitioners' skills and capacity. We need a favorable environment, and to react quickly if we want Social Innovation in Europe to achieve its full potential.
* Officially, 32,000 people per year commit suicide in Japan (mainly young people), although unofficial sources say the real data can be 3 times more.
** In the mid 20's, 60% of Haitian's landscape was held by the forests. Nowadays, they cover less than 2% of the country.
*** Some surveys, like the YouGov poll of 2007 in UK, found out that 60% of British would prefer local services to be run by social enterprises instead of Government.
This article is re-published with permission from the author. It first appeared at Microfinance Focus website.