How to define the social business

Article published on Aug. 25, 2010
community published
Article published on Aug. 25, 2010
An interesting discussion regarding the definition of social business has been initiated by the Rodney Schwartz (CEO of ClearlySo): "To change the world once is remarkable. A second attempt invites deification. But Muhammad Yunus, the founder of Grameen Bank and pioneer of microcredit, has embarked on yet another crusade: to foster a new kind of organization, 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 form first cropped up in the Victorian era—but he considers it a new form of economic organization that links a social, ethical, or environmental objective with a commercial or financial one. He also lays out a road map for how these new firms can grow and prosper. Indeed, I found much to admire here and in the man, whose work I have 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 business, where he repeatedly stresses the need for social business to be “at least as well managed as any profit-maximizing business” and notes the importance of speed, planning, regular reevaluation of plans, and understanding one’s market. He also provides many glimpses of the compelling genius behind Grameen Bank, which, together with Yunus, won the Nobel Peace Prize in 2006. We meet Yunus “the master salesman,” astutely aware of the brand he has created and its value—especially to large corporate partners. We peer into the mind of a visionary thinker who sees boundless possibilities and constantly enables and energizes those around him—he was one of the first to see the untapped potential of those living at the bottom of the pyramid. But we also gain access to the practical genius who understands that every long journey begins with “a small step.”

All that said, I was troubled by the book. One of Yunus’s core ideas—his definition of a social business—is simply too rigid and dogmatic; it may cause unintended harm to objectives Yunus holds dear. Too many organizations fall outside Yunus’s definition of a social business. He dismisses cooperatives founded in the United Kingdom in the mid-1800s, for instance, though many people, including me, consider them prime examples of social businesses. No, “a cooperative is not … social business,” he writes. “Some people think that a social business is a kind of nonprofit organization. This is not correct.” But the highly successful and well-known Ben & Jerry’s and The Body Shop aren’t social businesses either, according to Yunus. Yet I am certain that The Body Shop’s founders, Anita and Gordon Roddick, saw it very much as a social business. And should Yunus’s definition influence tax policy, some social businesses would lose out."

What do you think yourself about defining the social business?

You can read the whole article over here.