30 Nov 2012

Social business : success is still to prove

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Social-Business

As part of my professional activities, I attended the Global Social Business Summit on the 8th and 9th November in Vienna, Austria. Such event gives the opportunity in a very short period of time to assess the global trends and the positions of the economic actors regarding the overall social issues the world is facing. This annual event is organized by the Yunus Center, whose Chairman is Muhammad Yunus, founder of the Grameen Bank and Noble Peace Prize Laureate

More than 300 delegates composed of foundations, academics and students, Yunus fellows, large companies … discussed and brainstormed through workshops and plenary sessions on how to implement social business models and marginally how to get the mainstream business more sustainable, even if not entirely social. Great challenge ! “Our challenge is to translate the extraordinary potential of unprecedented technological capabilities combined with unlimited human creativity into meaningful change”, said Mr. Yunus in his opening speech.

“0 dividend” dogma

The definition of social business according to Yunus is an economic activity that does not distribute dividends. All the profit is recycled and reinvested in the company. Part of it can be used as employee incentive for instance, but nothing gets back to the shareholders (concept of “0 dividend”). It is worth to notice that the “no loss, no profit” vision of the early hours has evolved to “we need profit, but no dividend”, said Emmanuel Faber, COO of Danone Group, the leading French dairy products company that has initiated the first social business joint-venture with Grameen of Yunus to make low-cost yoghurts in Bangladesh.
The distribution of dividends has been at the heart of most of the discussions : some argue (myself also) that risk has a price. Shareholders need to get paid for their risk-taking. Between 20 to 25 % financial performance as it is usually required in the traditional private equity sector and the “0 dividend” policy, there is a gap and an equilibrium to reach. 10 to 15 % profit before tax seems to be a reasonable target as I can understand from the Danone-Grameen reported experience. So why not distributing a small part of it ?

Tell the story

Another tricky point is the track-record : how many social business initiatives have succeeded ? Almost 40 years after that Mr. Yunus initiated some micro-lending activities to the poor in Bangladesh, in order to help them generate their own revenues, there is still a lack of released success stories: the Grameen group (including microcredit, cash transfers, mobile phone license, etc …) is over-publicised through the media, whereas smaller initiatives out of the microfinance sector, everywhere in the world may be left behind. It comes up that the social-business case is hampered by a lack of available and comprehensive centralized data which could help build a better image of this sector and give impetus to develop further.
In one of the workshops, it was attempted to draw up the most relevant social business approaches, according to the kind of organisation :

social-business-strategy

 

 

 

 

 

Evolution in CSR practices

Regarding the companies, a new trend in CSR (Corporate Social Responsibility) is appearing with the persistent economic crisis : instead of or in addition to philanthropic actions, more and more companies consider doing social investments for development aid. There are 2 reasons to this : 1) social investment can provide synergies with the core-business of the firm ; 2) in time of crisis, it is easier to engage the company in a project of social investment – where a possible business development can be argued – than to negotiate with the board an allocation of a marginal part of the net profit for investing rather than for donation.
More generally, the following reflections emerged during the summit :
– CSR money should be channeled towards social business instead of just doing social aid. It’s time to be an active player of social business
– How to encourage corporations to support social business ? Business schools are considered as THE FIRST leverage : the social approach goes with education. Demonstrate once a successful social business is a further incentive.
Role of the politics in social business : this topics should be put in the political agenda whatever the ideological convictions of each one. Social business is apolitical by essence.
– What measures would have the greatest impact on the expansion of social business ? Implement incubators everywhere social business is driven by large companies ; family business should be a natural partner of social business
– What issues should we be careful about to protect the social business movement from getting derailed ? No global answer was given …
– What do you think social business can do to address the present economic situation either in a particular region, or in the world as a whole ? Redesigning the mission of the companies with the contribution of the younger generation coming on board.

Muhammad Yunus closed the summit with saying that social business is about adding more tools in the box, not removing the existing ones.

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