A social business is a non-loss, non-dividend company designed to address a social problem. The profits are used to expand the company’s reach and improve the product/service.
Social Business in an enterprise that matches socio-environmental goals typical of the Public Sector and of Third Sector Organizations with the economic sustainability and efficiency of a traditional enterprise.
The resources invested in a Social Business, unlike those employed in aid or charity projects, keep on generating socio-environmental benefits thanks to the auto-sustainability of Social Business and can be recouped by the investor.
Professor Yunus wrote the seven principles that every Social Business must follow:
- Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization
- Financial and economic sustainability
- 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
- Environmentally conscious
- Workforce gets market wage with better working conditions
- …do it with joy
There are two different types of Social Business, Type 1 and Type 2:
- Refers to social businesses that create a product which has a direct social impact. For example, Shakti doi, the fortified yogurt, directly fights malnutrition.
- Social business functions as a profit-maximizing business, except that all of the net-profits are placed into a trust, which will help a disadvantaged group of people, or a profit making business owned by the poor people.