What is social business

Social business is operated to achieve the social goal; a cause-driven business where the investors/owners will be pay backed gradually the invested money, but cannot receive any dividend beyond that point.  Purpose of the investment is purely to achieve one or more social objectives through the operation of the company; no personal gain is desired by the investors.  The company must cover all costs and make profit, at the same time achieve the social objective, such as, healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water, introducing renewable energy, etc. in a business way.
The impact of the business on people or environment, rather the amount of profit made in a given period measures the success of social business.  Sustainability of the company indicates that it is running as a business. The objective of the company is to achieve social goal/s.

History

Since the beginning of the 80s in many countries more and more businesses and organizations began to pursue social interest instead of profit, within the rules of the free market. Reasons for this are to be found in the inadequacy of both the traditional businesses and of the government policies to respond to social issues. It took several years for the governments to recognize a form of business where the final goal is not profit, but social development. In Italy, for example, a law was introduced in only 2005 to define once and for all the concept of Social Business as a "private organization without lucrative aim, whose main economical activity is the production or the exchange of goods or services to benefit the society or parts of it".
In his book Creating a World without Poverty - Social Business and the Future of Capitalism, Professor Dr. Muhammad Yunus defines what a social business is and what it is not. It boils down to the following requirements:

1. social objectives: it needs to have positive social objectives (help comes from the altruistic social services that the business provides to the poor): e.g. health, education, poverty, environment or climate urgency
2. Non-profit distribution: investors cannot take profits out of the enterprise as dividends.
3. A business may also be classed as a social business if is owned by the poor, and therefore the profits directly work to achieve the social objectives of the business, hence this second definition.

It is often owned by the poor or disadvantaged (dividends and financial growth return to the poor where their fiscal situations are helped bringing them out of poverty): e.g. women, young people or long-term unemployed.
A social business is driven to bring about change while pursuing sustainability. Although from a strictly profit-maximizing perspective it seems inappropriate to pursue a goal other than profit, social business’s aim is to achieve certain social and environmental goals.
Others, including Catalyst Fund Management & Research, argue that there is no benefit in restricting a company's ability to distribute profit to investors and that this may in fact serve to reduce a business's access to much-needed capital. Capital restrictions may then compromise the company's ability to achieve its social aims.[1]
Professor Dr. Muhammad Yunus, a key proponent of the social business model, argues that capitalism is too narrowly defined. The concept of the individual as being solely focused on profit maximizing ignores other aspects of life, religious, ethical, emotional, and political. Failures of this system to address vital needs, that are commonly regarded as market failures are actually conceptualization failures, i.e. failures to capture the essence of a human being in economic theory.
Professor Dr. Muhammad Yunus postulates a new world of business in which profit-maximizing enterprises and social-benefit-maximizing enterprises coexist. In addition, a social business would operate much like a profit-maximizing business in that the company as a whole grows financially and gains profits. The only difference is that the company's shareholders and investors would be re-accumulating their initial investment as opposed to receiving dividends. He calls the latter social business.
Key ingredients to the success of the approach are education, institutions to make social businesses visible in the market place (a social stock market), rating agencies, appropriate impact assessment tools, indices to understand which social business is doing more and/or better than other social businesses so that social investors are correctly guided. The industry will need its Social Wall Street Journal and Social Financial Times.

Principal of social business

Seven Principles of Social Business

These were developed by Prof. Muhammad Yunus at the World Economic Forum in Davos, January 2009

• 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

Feature and goal of social business

Features and goals

A social business is featured to be as follows:

• To be designed and operated to pass on all the benefits to the consumers.
• To be operated without incurring losses.
• To be operated competing with Profit Maximizing Enterprises (PMEs).

Profit making by an SBE shall be consistent and desirable because:

• To generate enough surplus to pay back the invested capital to the investors as early as possible.
• To generate surplus for — (i) Expansion, (ii) Improvement of quality, (iii) Increasing efficiency through introducing new technology, (iv) Innovative marketing to reach the deeper layers of low-income people and disadvantaged communities and (v) Undertake research and experimentation to improve and diversify products and services.

Eleven Features of Social Business Organizations (SBO)

• Innovation: the SBO belief that everyone is creditworthy
• Revolution: the SBO rejects the traditional methodology of the conventional banking
• Objective: the SBO provides banking services at the doorstep of the poor it serves
• Means of production: the SBO provides physical and non-human inputs (e.g., micro credit, machines, tools, training) to poor people
• Operant conditioning: the SBO empowers borrowers through positive reinforcement
• Asabiyyah: the SBO promotes the unity, conscience, and social cohesion among group members through social solidarity
• Syllogism: the SBO applies logical appeal to increase integration among group members
• Commodity fetishism: the SBO applies social relationships to increase social capital
• Self-employment: the SBO provides organizational support to create income-generating self-employment
• Collective consciousness: the SBO uses moral force to create two-dimensional social entrepreneurs
• Oneirology: the SBO help to create a world without poverty, illiteracy, diseases, and slum dwellers

Types of Social Businesses
Type I: focuses on businesses dealing with social objectives only. Eg. The product produced is for the benefit of the poor.
Type II: can take up any profitable business so long as it is owned by the poor and the disadvantaged, who can gain through receiving direct dividends or by some indirect benefits. Eg. The product could be produced by the poor but exported to an international market while net profits would go towards workers benefits.