The Power of Social Business

The Power of Social Business

          
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The Power of Social Business

Lessons from Corporate Engagements with Grameen
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    The distinction between the business and social sectors is becoming increasingly fluid. Corporations are seeking to more actively address the challenges faced by society, and they are leveraging their business expertise to do so. Social organizations are looking to companies in the private sector for the best practices, skills, and know-how needed to deliver greater value to populations in need and to increase operational efficiency.

    The Power of Social Business

    New approaches such as impact investing, hybrid value chains, and shared value are emerging at the intersection of the social and business sectors, aiming to blend the best of both worlds. In 2011 alone, 60 impact investing funds were created, raising the combined total capital available for social investments to an estimated $40 billion. About 2.8 percent of U.S. workers are already involved in hybrid social enterprises. And the European Union estimates that 25 percent of all new enterprises in Europe can be considered social enterprises.

    Within this context, the concept of “social businesses”—companies with a primary objective of solving a social problem by applying business principles—has attracted particular attention. This report takes a closer look at social businesses from the perspective of a corporate organization. It highlights the value of the concept and how companies can develop a social business, with a special focus on the lessons and best practices needed to succeed.

    While the report focuses on best practices for social businesses, many of the same lessons can be applied more broadly to other ventures at the intersection of the social and business sectors.

    The report has been written in collaboration with Professor Muhammad Yunus, Nobel Peace Prize Laureate 2006, founder of the Grameen Bank, and early developer and implementer of the social business concept. It is based on an analysis of the lessons learned from ten social businesses that operate in Bangladesh today, each tackling a different social problem affecting people at the bottom of the economic pyramid. (See Exhibit 1.)

    exhibit

    Many of the social businesses described are joint ventures between a Grameen organization and a multinational partner such as Danone, Intel, Veolia, and BASF. While several of the businesses are still in the learning stage, others—such as Grameen Shakti and Grameen GC Eye Care Hospital—have already achieved social impact, significant scale, and financial self-sufficiency.

    The contents of this report are based on on-site workshops with managing directors and key staff, site visits and customer interviews, interviews with corporate partners, a web survey of the managing directors, and a detailed data analysis.

    Impact investments aim to create positive social impact beyond financial returns. For more information, see EVPA, “European Venture Philanthropy Industry 2010/2011,” May 2012. Hybrid value chains leverage business and social-sector capabilities to provide cost-effective delivery of goods and services to poor populations. For more information, see the explanation of hybrid value chains at the Ashoka website. The shared value concept suggests that businesses can create social value and thereby advance their competitiveness at the same time. For more information, see Michael E. Porter and Mark R. Kramer, “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review, December 2006.
    Cathy Clark, et al. “The Impact Investor—A Market Emerges: The Six Dynamics of Impact Investing,” October 2012.
    Siri Terjesen, et al. “Global Entrepreneurship Monitor: Report on Social Entrepreneurship,” 2011.
    European Commission, “The Social Business Initiative of the European Commission,” 2012.
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