Building Social Business organization: The New Kind of Capitalism that Serves Humanity'southward Near Pressing Needs

Muhammad Yunus

256 pages, PublicAffairs, 2010

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To change the world once is remarkable. A second attempt invites deification. Simply Muhammad Yunus, the founder of Grameen Banking concern and pioneer of microcredit, has embarked on yet another crusade: to foster a new kind of organisation, the "social business."

In his new book, Building Social Business, Yunus devotes many pages to narrowing down the existing definition of a social business—many people precede him in defining it, since the class starting time cropped up in the Victorian era—merely he considers it a new grade of economic system that links a social, ethical, or environmental objective with a commercial or financial one. He too lays out a road map for how these new firms can grow and prosper. Indeed, I found much to admire hither and in the man, whose work I take long respected.

The book is a refreshingly easy read. Yunus might have started life as a professor, but he certainly doesn't write like an academic. Instead he fills his book with practical examples, tactics, ideas, and insights—especially in his chapter on launching a social concern, where he repeatedly stresses the need for social business organisation to be "at least as well managed as whatever profit-maximizing business concern" and notes the importance of speed, planning, regular reevaluation of plans, and understanding one'southward market. He also provides many glimpses of the compelling genius behind Grameen Bank, which, together with Yunus, won the Nobel Peace Prize in 2006. Nosotros come across Yunus "the main salesman," astutely enlightened of the brand he has created and its value—especially to big corporate partners. We peer into the heed of a visionary thinker who sees boundless possibilities and constantly enables and energizes those effectually him—he was one of the first to see the untapped potential of those living at the bottom of the pyramid. But we likewise gain access to the practical genius who understands that every long journey begins with "a small stride."

All that said, I was troubled past the volume. One of Yunus'southward core ideas—his definition of a social business concern—is just too rigid and dogmatic; information technology may cause unintended impairment to objectives Yunus holds honey. Too many organizations fall exterior Yunus'due south definition of a social concern. He dismisses cooperatives founded in the United kingdom of great britain and northern ireland in the mid-1800s, for instance, though many people, including me, consider them prime number examples of social businesses. No, "[a cooperative is] not … social business organization," he writes. "Some people think that a social business organization is a kind of nonprofit organization. This is non correct." But the highly successful and well-known Ben & Jerry'southward and The Body Shop aren't social businesses either, according to Yunus. Yet I am certain that The Torso Shop's founders, Anita and Gordon Roddick, saw information technology very much every bit a social business. And should Yunus's definition influence revenue enhancement policy, some social businesses would lose out.

Yunus would likewise exclude the Ethical Property Company, a U.K. house lending just to social change organizations—even though it works hard to strike the right residue betwixt shareholders, clients, and staff interests. Isn't this balance precisely what nosotros should encourage in our currently unbalanced economic system? JustGiving, a profit-seeking social business that facilitates charitable giving, would be out, as well—even though it has proven more than successful in raising money for charity (more than than £500 million) than all its competitors combined. So are nosotros to ignore the benefit of this firm'southward contribution and strike information technology from the roster, merely because it as well generates returns for its management, staff , and equity investors? Maybe this incentive has helped bring about the social benefi ts. And the results should still matter.

Yunus's definition of social business concern does not withstand scrutiny, either. He includes big corporate partners who have created social business joint ventures with Grameen simply considering they receive no direct fiscal return (non even i percent—a Yunus dominion). But to advise that they get no fiscal reward is misleading. They receive substantial corporate social responsibility benefits (an expenditure thus avoided), and 1 partner, the French company Veolia H2o, even derives substantial enquiry and development and market enquiry benefits from its piece of work. I practise not begrudge Veolia these gains and am delighted that they work with Grameen, but permit us not pretend that these returns differ in any substantive way from dividends, interest, or capital gains. Huge multinational corporations tin can also forgo current income on certain investments, but struggling social enterprises may need to raise capital letter from investors who insist upon a fi nancial return. Why penalize these organizations merely considering they lack Yunus's exceptional admission to large corporations?

Furthermore, Yunus'southward brand of social business concern allows profits to exist earned, but only if totally owned by the poor. But he doesn't say how poor these "poor" must be, and isn't clear well-nigh what happens if the social business organisation succeeds and the owners become less poor. Are these social businesses then disqualified? There is some problem with a model when success leads to disqualification.

My last objection to Yunus'due south definition: His limitations will severely constrain activity and discourage innovation. Past insisting merely on cipher-return-seeking capital, he greatly restricts the bachelor majuscule sources. This handicaps those of us who seek to encourage more uppercase into the sector. Fifty-fifty without Yunus'south rules, the pool seems far likewise small—why on globe should nosotros further limit the capital available to them?

My visitor, ClearlySo, seeks to build a broad church within the sector—not to exclude the many wonderful and innovative ventures on what experience like technicalities. Possibly that is why I have such umbrage at Yunus's definition. However, I consider the volume a vital contribution to the exploration of social business organization.

Rodney Schwartz is CEO of ClearlySo, an online market for social business and enterprise, commerce, and investment. He is the main author of ClearlySo'south "Social Business Weblog" and lectures on social finance at the University of Oxford'due south Saïd Business School. He besides advises leading U.Thousand. social businesses and enterprises, sits on the board of the Upstanding Belongings Company, and is chairman of Green Thing. He served as chairman of JustGiving from 2003 to 2006.