Social business has become a buzzword currently in international business management development discourse. The concept of social business emerged in the late 1990s (Jager, 2010, 25) and is still relatively new as well as different from the concept of conventional businesses in terms of using profits. In general, SB is profitable business, but the profit is not for owners, it will be used for business extension to solve social problems. Currently, some scholars (Dees 1998, Ligane and Olsen 2004, Dart 2004, Harding 2004, Haugh 2006, Thompson and Doherty (2006), Hockerts (2006), Hausner, Laurisz, and Mazur 2007, Masseti 2008 to name a few) who are researching on different perspectives of social businesses and presented different views of social business concept. Dees(1998) stated that social business is a private business organization run by public agencies or private market, aim to solving social problems by distributing necessary products or services for the disadvantaged group in one society. According to Dart (2004) the concept of SB differs from conventional business in terms of profits, strategy, structure, norms, and values. He added that SBE is a non-profit business organization sought to innovative business idea.
However, social business practitioners, activists in world are following two patterns of definition, one is USA patterns and another is European patterns. Kerlin (2006), shows the difference between USA and European patterns of social business is as follows: (a) USA emphasize on revenue generation, on the other hand Europe focuses on the social benefit,(b) In the case of USA social business organization type is nonprofit whilst most common organization types of social business in Europe is associations and cooperatives, (c) USA focuses on all nonprofit activities as well as beneficiary involvement is limited. In fact, strategies are developed by foundations and research is done by business and social-science scholars as well, on the contrary European social business focuses on human services, beneficiaries are involved, the strategies are developed by the government, and only social science scholars do research, (d) In the USA SB concept faces gaps between market economy and legal frameworks , whereas European SB context is emphasize on social economy as well as legal frame works are under developed but improved.
This study will focus on the concept of SB; championed by Yunus and proposed Yunus SB concept due to academic as well as research purpose. Without Grameen SB amendment, the concept of SB always be incomplete. Likewise, this research will seek to SB worldwide definition to comprehend what social business is or is not. To understand SB globally; this study will divided SB concept into three perspectives: (a) American perspective, (b) European perspective, and (c) Bangladesh perspective championed by Yunus.
In fact, in the case of USA, SB belong to nonprofit sector; and Johns Hopkins Center for Civil Society Studies (1999) classified these nonprofit sectors into five, such as: (i) Organizations; those who have institutional existence, strategy, and structure(ii) Private; means institutionally separate from the state (iii) Not profit distributing; in other words non-dividend performance, for example SBE (iv)Self-governing; indicates fundamentally self-control institutions(v) Voluntary, here, legal membership is not necessary, members can spend their time and money for voluntary contribution. Similarly, these nonprofit sectors can undertake different kind of activities, such as: (i) culture, (ii) education and research, (iii) health, (iv) social services, (v) environment, (vi) development, (vii) civic and advocacy, (viii) philanthropy (ix) international (x) religious congregations (xi) business and professional, unions and (xii) others (source:Salamon, Anhier, List, Toepler, Sokolowski and Associates, Johns Hopkins Comparative Nonprofit Sector Project, 1999,3-7).
According to Salamon (1994) “nonprofit sector is not dedicated to distributing profits to shareholders or directors, pursuing public purposes outside the formal apparatus of the state (Salamon, 1994, 2)”. Moreover, there are different kinds of nonprofit sectors in world which provides various activities globally. Furthermore, it is not easy to describe their global upsurge due to lack of systematic data, various organizational terms and functions as well. On the other hand, the definitional problems of the nonprofit sectors derive from various national as well as legal structure of different countries where some countries leading charitable or nonprofit organization; similarly, others doing so partially or not at all.
Drucker (1992) stated that nonprofit sector aims at bringing change in individuals and in society as well as nonprofits serve the individual the ability to perform and to achieve. However, he argued nonprofits face different challenges: firstly to convert donors into contributors and secondly to give community and common purpose. Drucker (1992) emphasized that a nonprofit institution gives people a sense of community, find out purpose, and show the direction for various types of nonprofit organizations in the USA.
Oster (1995) stated that the non-distribution constraint is a provision of the law of nonprofits which refrain from distributing their net earnings to those in control of the organizations. Ott (2001) mentioned that in the case of nonprofit sector making money is necessary but not primary. Here, achieving other ends comes first as well as revenues are as resources, not the end purposes.
Briefly, not profit distributing concept is belong to nonprofit sectors and business could be one of nonprofit activities in the case of USA which is very similar to SB idea at a global level.
In the case of Europe SB launched in the 1980s led by civil-society actors, social workers, and in particular third sectors namely Caritas, Diakonie among others (Kerlin, 2006). The government of the United Kingdom(UK) stated that “a social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners”(Jezardand Master-Coles, 2010). Common sources of financial capital for social enterprises include (i) long-term share capital, mortgages, grants and gifts,(ii)medium-term loans, leasing, and hire purchase, and(iii) short-term bank overdraft and trade credit(Jezardand Master-Coles,2010).
According to Birmingham Social Economy Consortium (2001) SBE are not-for-profit organizations inclusion social objectives serves economic and business activities, legally ensure that business properties will not own by individuals and establish trust for the benefits of people and places that are connected with enterprise’s social objectives. Moreover, SBE belongs to cooperative organizational structure emphasis on member’s equal rights. (Jones and keogh, 2006, Cited in Jager, 2010).
Furthermore, Jager (2010) stated that SBs are tightly coupled to markets and civil societies, support communal solidarity, and allocate resources to meet social needs. Faber (2013), vice chairman, Danone Group stated that SB set up a common platform for the public sector, private sector, as well as NGOs emphasis on work jointly for solving social problems. He added that SBE practices collaboration, creativity, and co-creation for the solution of social problems.
BANGLADESH PERSPECTIVE CHAMPIONED BY YUNUS
In the context of Bangladesh, this study will analysis Yunus’s “non-loss, non-dividend” social business theory, sought to drawbacks of concept, and will suggest how to overcome the drawbacks. According to Yunus (2010) Social businesses are non-loss, non-dividend business companies which dedicated to solving social problems; moreover, business owners will reinvest all profits in expanding and improving the businesses. Yunus divided social businesses as two categories such as (a) Type-I (i.e. Grameen Dannone, Grameen Veolia) and (b) Type-II (i.e. Grameen bank).
Yunus(2010) added that social business has seven principles as follows: (a) Social business has social objectives such as to overcome poverty, illiteracy, health hazards, and giving technological support among others; (b) social business enterprises are financially and economically sustainable;(c) in social business, investors can receive only their investment amount due to its non-dividend characteristics;(d) social business`s profit is used for business expansion and improvement; (e)social business is concerned for environment; (f) social business must pay standard market wage with better working conditions for workforce; and (g) all stakeholders must engage in their work with joy and happiness.
Yunus stated that (2008) social business is not a hybrid organization; however, Some scholars (Defourny and Nyssens, 2006; Haugh, 2006; Battilana, Lee, et al, 2012 ) have argued that social business is a form of hybrid organizations of a profit- maximizing business with social objectives. The concept of hybrid organization refers to an organization which combines traditional for-profit and not-for-profit organizations, pursuing social goals by engaging in commercial activities to generate revenue for their operational project (Battilana, Lee, et al, 2012).Battilana et al.(2012) stated that hybrid organizations merge with the social logic of nonprofit organizations and commercial logic of conventional businesses. Battilana (2012) in her recent research findings argues that revenue-generating hybrid organizations with social goals are increasingly common in different sectors though they face many difficulties.
Yunus (2008) disagrees with the people who believe that social businesses are hybrid organizations. Yunus (2008) makes clear that profit maximizing businesses are interested to make profits for individuals, while on the other hand social business is working to achieve some social goals, and personal benefit is not allowed in the social business area. Therefore, it would be better to think of two pure business models, one being the profit-maximizing model and the other social business model. The three components of a conventional business model are shown in Figure 1 (Yunus, Moingeon, and Lehmann-Ortega, 2010, 312).
Value Proposition Value Constellation
Customers Internal value chain
Product/Service External value chain
Instead of three, SB has four components such as value proposition, value composition social profit and financial (economic) profit. It means that people will be benefited financially and socially through SBE. Here, value proposition will answer the question: “who are the business customers and what do business offer to the customer that they value? As well, value constellation is a term which will answer the question “How does business deliver the offer to the customer? Moreover, positive profit equation indicates how value is captured by revenue generation through the value proposition as well as the way of cost design and revenue invested in the value constellation. The four components of a social business model are shown in Figure 2 (Yunus, Moingeon, and Lehmann-Ortega, 2010, 319).
Social Profit Equation
Value Proposition Value Constellation
Stake holders’ Internal value chain
Product/ service External value chain
Economic Profit Equation
No economic loss (full recovery of capital)
In view of the above perspectives of SB in Bangladesh, this study found that there are some conspicuous differences and deviations in the Yunus SB concepts and practices. Yet, properties of these units contradict with the views of Yunus sometimes, however, until now these are treated as real and virtual SBs in the country. Eventually, this study summarizes six visible concepts in Grameen practices with examples as follows:
1. Though Yunus mentioned that social business is not a hybrid organization as well as social business has financial and social profits, in the case of Grameen phone it is quite clear that Telenor stepped in social business supported the concept of social business as hybrid organization as well as by the middle of 2007, Grameen Phone had become the largest tax generating company in Bangladesh, Currently, runs on operation in Bangladesh with more than 56.7 million subscribers (Grameen phone annual report, 2016), became the largest mobile phone operator in the country. Since, it is proved that, people of Bangladesh (from rich to poor) are benefited by Grameen phone.
In spite of Grameen Phone is a very successful project, it is not considered as a social business due to Telenor holding 55.8% of equity (Grameen Phone,2013). As Yunus said Telenor will reduce its share below 35 percent, unless it is not consider as social business.(Yunus,2007,94). As a result, currently, Telenor run businesses in Bangladesh as public company means conventional business and quite clear that Grameen phone business already benefited financially and socially from Bangladesh. In addition, this study found that Yunus social business concept also a bit hybrid from Europe and American social business concept.
2. Yunus (2010) stated that social business and social business enterprise two different concept. He pointed that social business enterprise might be depends on donors but not social business. Grameen use the term Grameen social business while BRAC use the term social business enterprises. However, Aarong is a BRAC social business enterprise, and research found that Aarong is self-sustainable social business enterprise, not depend on donors. BRAC confirms that BRAC is a sustainable NGO due its social business enterprise income. Therefore, this study realized that, there is no difference between social business and social business enterprises theoretically even, practically.
3. Yunus (2010) affirms that SB is not a Non-Profit Organization. He added that a social business may have similar goals like social entrepreneurs, but the particular business structure makes it as distinctive and unique from others. For example, a foundation is a charitable organization depending on donors in raising fund and achieving their social benefit. They are not financially sustainable and they don’t have any income generating activities. However a foundation or a traditional NGO could own a social business by separating legal, tax, and accounting activities. Similarly, a cooperative can also become a social business when the members who own it are poor people.
In the case of Grameen Shikkha (Education), research found that Grameen Shikka is a non-profit company, donor dependent NGO. Md. Nazrul, General Manager (GM) of Grameen Shikkhai (interviewed on March 2, 2017), makes clear that some programs are social business and some are social business way, means similar to social business, try to provide sustainable service for poor in particular under privileged people. However, research found that Grameen shikkha is a donor dependent NGO. According to Mr.Nazrul , some programs that run by Grammeen Shikkha are as follows:(i)Life Oriented Education Program (LOEP, 1997-2003) funded by UNESCO (1997-1998, 2years), American Rockdale Foundation (1999-2003) and then closed. Again, started another program named Total Literacy Movement (TLM) funded by Bangladesh Government and Asian Development Bank (ADB), duration from 2001 to 2003.
In addition, some programs run by Grameen shikkha are as follows: Early Childhood Development (ECD) program which launched in 2001, in collaboration with UNICEF, Plan International, Save the children and Bangladesh Children Academy, another program named Non-Formal Education for Slum Children (nothing mentioned about fund source), Vocational training program named Japan Auto mechanic vocational Institute funded by Japanese NPO named SK dream which also connected with Autobacks Japanese companies, sells automotive related goods and offer similar services. In the same way Arsenic Mitigation Program in collaboration with Department of Public Health and Engineering (DPHE), UNCEF, Grameen shikkha, BRAC among others. Eventually, all of these programs proved that Grameen shikkha is not a social business or way of social business according to Yunus definition. Therefore, Yunus SB theory and practice makes a sort of ambiguity in terms of his definition.
4. Yunus (2010) stated that SB is a profitable business through his non-loss, non-dividend theory. Moreover, he added that business profit will use for business expansion. However, in the case of Grameen Danone, and Grameen Veolia research found that, primary business objective (non-loss operation) could not meet yet. Consequently, due to lack of profits, repayment of initial investment is not possible until now, as well as reinvestment of additional surplus far from the initial projects.
5. In the case of Grameen SB research found that many Grameen family of companies could not get rid of donor dependency. For example, Grameen Caledonian College of Nursing conceptually is a Not-for-Profit organizationii, (mentioned by Principle Niru Shamsun Nahar during her interview period, on March 2, 2017) established in March 2010; in collaboration with Glasgow Caledonian University and Grameen Health care Trust, as well, funded by the NIKE Foundation in initial period and currently supported by Grameen bank. During research interview, the program coordinator of Yunus center mentioned that Grameen Caledonian College of Nursing is a social business; eventually research found that it is not SB at all.
6. Current research found that most of the Grameen employees don’t have any basic idea about business management practices (i.e. mission statement, corporate governance, corporate social responsibility (CSR), human resource management (HRM) to name a few). The limitation of this study is that the concept of SBE is relatively new and a very few researches were done as far to articulate its styles, strengths, issues, and weaknesses. The various aspect of SBEs and their similarities and differences are needed to be studied, namely mission and goal, strategy and structure, human resource management (employment style, training, education, indoctrination, remuneration, motivation, welfare system, etc.), employee-management relationship, governance, and social responsibility to fill up the existing research gap on this rapidly expanding sector. Therefore, if social business design lab of Grameen promotes the concept of various aspects of social business enterprises management practices, will be more effective for promoting social business in world. Further, It is very clear that Yunus social business theory still struggling to set up practically in Bangladesh. To full fill these gaps social business needs a second definition: Social business is a non-dividend business that promotes a new form of capitalism ranging from rich to poor based on explicit management practices to understand various aspects of businesses aimed at contribution to welfare in world society through business venture.