Stepping ahead: Social enterprise – where margin and mission meet
Model holds huge potential to drive economic growth.
Social enterprise, clearly defined, effectively regulated, and aggressively pursued, should be a major component of the regional growth strategy. PHOTO: FILE
LAHORE:
Social enterprise was a South Asian invention. The model holds huge potential to drive economic growth and its South Asian birthplace is the perfect – and most necessary – market to scale the model up.
The lines used to be clear, there were profit-maximising corporations and mission-driven non-profits. Corporations could and often did run their operations with a commitment to good corporate citizenship, but that was not the goal, profitability was.
Meanwhile, non-profits, the strong ones at least, often had a “run it like a business” mentality but business-like rigour was meant to meet a social-mission end.
Then in 1976, in South Asia, the once clear lines began to blur. Muhammad Yunus lent the now-famous sum of $27 to a group of very poor women weavers in the Bangladeshi village of Jobra. These women, formerly considered charity cases, used the loan like businesswomen, to enhance their weaving microenterprises and paid it back with interest in a timely fashion.
Yunus’s experiment quickly grew into Grameen Bank, one of the world’s first and best known social enterprises. Grameen won the Nobel Prize in 2005, but its greatest achievement may be the way it changed the world’s perception of the poor.
Creators of value
Non-profits had for the most part regarded poor people as victims, to be pitied; businesses regarded them as a non-market, to be ignored. But thanks in large part to Yunus, we now see the world’s low-income people, self-employed in the informal economy, as highly capable, resourceful creators of value. We also now see them as a vast consumer market, thanks to The Fortune at the Bottom of the Pyramid, the seminal treatise by another son of South Asia, CK Prahalad.
This profound shift in perception matters because how you engage with people depends on how you see them. Considering that South Asia is home to more than 40% of the world’s poorest people, the region has a lot at stake in sustaining the clear vision of the poor – as viable consumers and value-creators – that the success of the homegrown concept, the social enterprise model, is demonstrating to the world. The task now is to bring that model to a scale commensurate with its huge potential to drive economic growth.
Clear definition
The first step is to define clearly what a social enterprise is, and then set some basic ground rules. Since the publication seven years ago of an influential paper from Stanford University Business School, the accepted definition for social enterprise focuses on businesses that disrupt the status quo through direct entrepreneurial action. This definition distinguishes social enterprise from both social services provision, which works within existing systems rather than disrupting them, and from social activism, which disrupts existing systems but through influencing others rather than through business activities.
In this framework, for example, Mother Teresa of Calcutta was a social services provider, Mahatma Gandhi was a social activist, and Muhammad Yunus was a social entrepreneur.
B corps
With some basic definitional clarity about social enterprise, the next step is to put some meaningful and standardised metrics in place.
There is an outfit led by the Skoll Foundation called B-Labs. B-Labs is a non-profit that certifies social enterprises as “B corps” or “benefit corporations” – essentially a designation that is to businesses what Fair Trade certification is to coffee, or conflict-free is to diamonds, or organic is to foods.
Since its founding in 2006, B-Labs has put together universal standards and best practices for social enterprises, and has granted B-corps certification to more than 1,000 social enterprises in 33 countries and over 60 different industries.
B-Labs is also working with policymakers all over the world to advocate for recognition of the B corps as a new corporate form.
Whether we embrace the B-corps model or some alternative, South Asia should make it a top priority to bring social enterprise to a massive scale in the region where it first came to global prominence, we cannot afford not to.
Success in reducing poverty lies in sustainable market-based solutions for a simple reason: the money isn’t coming from anywhere else. There is not enough tax revenue – even if we did a decent job of collecting tax – or philanthropic resources in the world to make a meaningful dent.
Business is the engine that drives economic growth, and economic growth holds the key to meaningful social progress. Social enterprise, clearly defined, effectively regulated, and aggressively pursued, should be a major component of the regional growth strategy.
The writer is the CEO of Finca Microfinance Bank Limited
Published in The Express Tribune, January 26th, 2015.
Social enterprise was a South Asian invention. The model holds huge potential to drive economic growth and its South Asian birthplace is the perfect – and most necessary – market to scale the model up.
The lines used to be clear, there were profit-maximising corporations and mission-driven non-profits. Corporations could and often did run their operations with a commitment to good corporate citizenship, but that was not the goal, profitability was.
Meanwhile, non-profits, the strong ones at least, often had a “run it like a business” mentality but business-like rigour was meant to meet a social-mission end.
Then in 1976, in South Asia, the once clear lines began to blur. Muhammad Yunus lent the now-famous sum of $27 to a group of very poor women weavers in the Bangladeshi village of Jobra. These women, formerly considered charity cases, used the loan like businesswomen, to enhance their weaving microenterprises and paid it back with interest in a timely fashion.
Yunus’s experiment quickly grew into Grameen Bank, one of the world’s first and best known social enterprises. Grameen won the Nobel Prize in 2005, but its greatest achievement may be the way it changed the world’s perception of the poor.
Creators of value
Non-profits had for the most part regarded poor people as victims, to be pitied; businesses regarded them as a non-market, to be ignored. But thanks in large part to Yunus, we now see the world’s low-income people, self-employed in the informal economy, as highly capable, resourceful creators of value. We also now see them as a vast consumer market, thanks to The Fortune at the Bottom of the Pyramid, the seminal treatise by another son of South Asia, CK Prahalad.
This profound shift in perception matters because how you engage with people depends on how you see them. Considering that South Asia is home to more than 40% of the world’s poorest people, the region has a lot at stake in sustaining the clear vision of the poor – as viable consumers and value-creators – that the success of the homegrown concept, the social enterprise model, is demonstrating to the world. The task now is to bring that model to a scale commensurate with its huge potential to drive economic growth.
Clear definition
The first step is to define clearly what a social enterprise is, and then set some basic ground rules. Since the publication seven years ago of an influential paper from Stanford University Business School, the accepted definition for social enterprise focuses on businesses that disrupt the status quo through direct entrepreneurial action. This definition distinguishes social enterprise from both social services provision, which works within existing systems rather than disrupting them, and from social activism, which disrupts existing systems but through influencing others rather than through business activities.
In this framework, for example, Mother Teresa of Calcutta was a social services provider, Mahatma Gandhi was a social activist, and Muhammad Yunus was a social entrepreneur.
B corps
With some basic definitional clarity about social enterprise, the next step is to put some meaningful and standardised metrics in place.
There is an outfit led by the Skoll Foundation called B-Labs. B-Labs is a non-profit that certifies social enterprises as “B corps” or “benefit corporations” – essentially a designation that is to businesses what Fair Trade certification is to coffee, or conflict-free is to diamonds, or organic is to foods.
Since its founding in 2006, B-Labs has put together universal standards and best practices for social enterprises, and has granted B-corps certification to more than 1,000 social enterprises in 33 countries and over 60 different industries.
B-Labs is also working with policymakers all over the world to advocate for recognition of the B corps as a new corporate form.
Whether we embrace the B-corps model or some alternative, South Asia should make it a top priority to bring social enterprise to a massive scale in the region where it first came to global prominence, we cannot afford not to.
Success in reducing poverty lies in sustainable market-based solutions for a simple reason: the money isn’t coming from anywhere else. There is not enough tax revenue – even if we did a decent job of collecting tax – or philanthropic resources in the world to make a meaningful dent.
Business is the engine that drives economic growth, and economic growth holds the key to meaningful social progress. Social enterprise, clearly defined, effectively regulated, and aggressively pursued, should be a major component of the regional growth strategy.
The writer is the CEO of Finca Microfinance Bank Limited
Published in The Express Tribune, January 26th, 2015.