Social Business Enterprise

Clipped from The Non-Toxic Times Newletter. I hope this idea takes off.

For Best Results, Stir Up Fruits of All Kinds From the Bottom of the Economic Cup


As I recounted here last month, in late February I spent a couple of weeks exploring India with my family. We saw extraordinary sights at almost every turn, but the thing that made the biggest impression on me was the unbelievable poverty. It was overwhelming in every sense, and it made it hard to come home to my own life of relative luxury knowing that so many people were living in conditions so far beneath my own. Something must be done, I thought. But where do you start?

How about with something called social business enterprise? That’s the name of a new idea from Muhammad Yunus, a Bangladeshi economist, winner of the 2006 Nobel Peace Prize and founder of Grameen Bank, an institution that itself has already done much to erase poverty in those places most afflicted by it.

Grameen Bank operates on a simple principle. It extends microcredit (i.e. very small loans) to impoverished people, especially women, who lack the collateral, credit history, and other trappings of wealth that traditional banks insist on before they’ll loan money. These tiny loans are used to start small businesses whose income then permits borrowers to raise themselves up out of poverty and create a better standard of living for their families. Grameen Bank empowers disadvantaged people to take charge of their destiny and improve their circumstances. It’s an idea that’s spread around the world and become a huge success story that collectively has made $9 billion in loans a few dollars at a time.

Now its creator is spreading the gospel of his next idea: social business enterprise. Social business enterprise (SBE) is based on a new kind of capitalism, one that understands there can be more than one kind of profit. A recent article in Fortune magazine summarizes this idea extremely well.

“What if we lived in a world where companies didn't measure their performance only in terms of revenue and profitability? What if pharmaceutical companies reported on their bottom lines, along with those familiar figures, the number of lives saved by their drugs every quarter, and food companies reported the number of children rescued from malnutrition?

“What if companies issued separate stock based on social returns, and people could buy the shares of those that saved more lives than others, or sell the shares of energy companies that polluted more than their competitors? What if, by raising "social capital" and investing it in sustainable businesses without a profit motive, companies could reach into new markets, expanding their core businesses at the same time they improved lives?”

What if, indeed. The world would certainly be a very different place. And in Borga, Bangladesh construction on that world has begun.

Borga is the site of the world’s first SBE, a small yogurt factory being built by the French company Danone. Here’s how the factory will work: Grameen Bank borrowers in the area will obtain loans to buy cows. The milk from the cows will be sold to the factory and turned into yogurt by its 15-20 women employees. The yogurt will be fortified to fight malnutrition and sold door-to-door by Grameen-funded vendors for a locally affordable 7¢ per cup.

Over the course of the first three years of operation, Danone will slowly recoup its start-up costs of $500,000. After that, all the revenue generated by the facility will be reinvested in the community. Danone says this one factory will produce income for 1,600 people living nearby. And its environmental impacts will be negated by the use of biodegradable cornstarch-based yogurt cups, solar electricity, and a rainwater collection system.

For its part, Danone can take credit for the wealth of social benefits its new plant will provide. Danone CEO Franck Riboud says the company may even report these benefits on its bottom line, a “social dividend” of sorts that will likely make the firm’s stock more attractive to socially concerned investors. As the factory’s influence spreads and lifts more and more people out of poverty, Danone may be even be creating a new market of loyal customers for its products. (I know I’d be more than happy to buy what I needed from the company that made it possible for me to afford the purchase in the first place.)

That’s what I call thinking outside the box. It’s the kind of answer that works for everybody from start to finish. In the end, it doesn’t cost anyone anything yet ultimately delivers all kinds of returns. That’s quite a feat. And it shows just what businesses can do when they decide to play a role in making ours a just and sustainable civilization. In fact, it makes quite a convincing case that business can and should be leading the way to that destination. Corporations certainly have the power to do that and more. It’s just a question of how evolved and involved they choose to be. Fortunately for the people of Borga, Danone has elected to be very much so on both counts.

If the Borga factory works, Danone plans to build 50 more just like it. But for now, there’s just the one. One little yogurt factory somewhere out in a corner of the Bangladeshi countryside being built on one absolutely enormous idea. Is it an idea that will erase poverty in our lifetime? I have no way of knowing. But I cannot recall ever having been so hopeful that it’s an idea that might.

For more information on SBEs and the new Danone plant, I recommend reading the excellent Fortune magazine article at http://money.cnn.com/magazines/fortune/fortune_archive/2007/02/05/8399198/index.htm.

For more information about microlending and Grameen Bank, visit http://www.grameen-info.org/.