What is a social business?

social business

What is a social business?

 

A social business is one that could be characterized by working on solving social, economic, and environmental issues while being keen on providing the less privileged population with access to resources to have a more sustainable way of living. It has become a trend in recent years that multinational companies are gradually coming on board being a part of such a trend.

The definition of social business

social business

It’s noticeable that a social business lies on a spectrum whose ends are either a profit-maximizing business or a non-profit one. Its goals are to maintain a balance between achieving social purposes and attaining financial sustainability in order to be able to persevere. It’s interesting too to note that although it’s a relatively new sector, it comprises a significant part of the economy.

In fewer terms, a social business is a business that:

= addresses a social problem

= Is financially self-reliant and sustainable

= Doesn’t provide or pay dividends to its owners

Is it different from a conventional business?

social business

Yes. A conventional business cares in the first place about making a profit and maximizing it. That’s isn’t how a social business operates though; profitability comes in second, where achieving social goals becomes the first priority. However, it’s important to note that a social business isn’t a charity, and the social business owners aren’t philanthropists; they are entitled to receive their investment, although they don’t receive any dividends from it.

Thus, a social business requires a somewhat similar model to conventional businesses, as it requires marketing, innovation, and management processes.

The benefits of a social business

Social businesses are adept at tackling social problems that couldn’t be handled by either the government or the non-profit civil society organizations. They fill in such gaps, and that’s where they step in to solve various societal problems.

An important note is that the capital surplus is rather directed towards social profit instead of capital growth, i.e. expanding to serve more people, taking on more societal challenges, improving the quality, etc.

A Social business cares in the first place about effecting the positive social impact it’s aspiring to have, where the monetary concerns are still important, too, but to sustain keeping doing social good for as long as it takes.

Who implements the social business?

It’s not uncommon for social entrepreneurs & enterprises to carry out the role of implementing the dynamics of social business, where the investors do not receive any dividends resulting from profits. However, it’s been observed that some social businesses work on returning some dividends to the investors, in a somewhat relaxed manner, while still holding on to a social cause that aims to improve the lives of people.

 

Thriving as a social business

Some important aspects of the popular social businesses are geared towards success and sustainability, where some best practices are adopted in the business model: starting with the shareholders who are acquainted with the positive impact the business brings around in its continuous endeavors, and establishing thriving partnerships that bring on more useful experiences and resources.

 

Examples of a social business

A good and bold example yet remains to be that of Grameen bank which was founded in 1983 by Mohammed Yunus, where it took the initiative to provide funding to projects that cater via products and services to the poorer sections of Bangladesh, while merely acting as an enabler to such projects. One of the Grameen bank’s most successful examples was when it partnered with Danone to create a joint venture called Grameen Danone Food, where its primary aim was to provide dairy products at a relatively low cost to people in rural areas, where such products are fortified with nutrients necessary for the growth of children.

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