Social business is a theory devised by social entrepreneur and Nobel Peace Prize laureate, Professor Muhammad Yunus. Social business is basically a business driven by social cause. The business should be a non-dividend and non-loss company which is designed to address a social objective. In social business, the investors cannot be motivated by personal gain and profits. The main purpose of the business is to achieve one or more social objectives by the means of the company’s operation.
For example, a company running a social business model needs to do all it can to make profit and cover all cost, while at the same time try to achieve social goals such as helping out with social issues like providing healthcare for the poor, financial services for the poor, providing housing for the poor, help to give nutrition to malnourished children, help to provide safe drinking water to a community, help to introduce renewable energy and so much more – all through methods of business.
Social business does not oppose making profit. Social businesses should make profit, especially to cover all running and managing cost. However, the main goal of social businesses is to achieve social goals, and profits should be used to run the company seamlessly, as well as add on to efforts to expand towards more social capital. While profit is not opposed, social businesses should focus on achieving social goals.
According to Professor Muhammad Yunus, there are two different social business prototypes. The first prototype or model, also known as Social Business Type I focuses on providing services or products that has a specific environmental, ethical or social goal. For example, selling food at a very cheap and affordable price to malnourished communities. The Social Business Type II business model focuses more on businesses which are profit-oriented and owned by the poor.
There are seven principles of a social business, and they are:
When companies put ahead social responsibilities ahead of profit generation, the community will be a much better place.
Currently I’m involved with Kotoudutaan yhdessä social business in Finland.
although social business’s goal is not to make profit but somehow they make profit and consider it as a non profit organization 😀
As with any business goal is to make profit (as opposed to making loss), so that this profits could be invested back to the business. Difference between social and for-profit business is how profits are used. In social business owners can not take profits out from the business.
This is always the difficulty: for people to understand the difference between non-profit organisations and “for” profit. I have found I have to help the NPO’s to shift the mindset from that of deficit to that of Abundance for the cause. This shift in Mindset will help the world- with both NPO’s and FPO’s- is the idea of Social Business- and not in a traditional sense of “CSI” but in a mindset of being a citizen of the world and helping the world better.
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