Building Social Business

Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs
Muhammad Yunus, New York: Public Affairs, 2010, 226 pages.

As one of the recipients of the 2006 Nobel Peace Prize, Muhammad Yunus has often spoken out on the failure of the capitalist system to perform its duty to provide for the world’s poorest people.

In Building Social Business, Yunus expands on his self-proclaimed world-changing mechanism for social change that he introduced in an earlier book, Creating a World Without Poverty: Social Business and the Future of Capitalism. He fleshes out the idea more fully in this work by not only defining social business clearly and providing examples of how it has been successful already, but also by drawing distinctions between social business and other socially conscious organizational structures.

For Yunus, there are two types of social business: one is a for-profit corporation that is owned by the poor, and satisfies its social mission by improving people’s lives. The second is a business that fulfills the following seven criteria: there should be no profit for initial investors and no ongoing profit for investors/owners of the company; the business should be dedicated to a social cause; financially self-sustaining; ecologically responsible; it should pay better than market wages to its staff, and this should be done with joy.

Producing a business plan with all of these limitations is a formidable challenge. The requirement that there be no material benefit to the business owner helps offset some of the added costs associated with ecological soundness and paying better than market wages. Still, one is left wondering how reasonable it is to expect an average person to engage in this sort of business venture, especially when there is a clear injunction on the owner making a profit.

When Yunus presents examples of successful businesses, we start to get a more accurate picture of how they can meet these stringent criteria. Almost all of the examples provided in the book are about partnerships with massive multinational corporations, such as Groupe Danone and Veolia Water.

By applying the company’s human resources to a novel problem in their area of specialty, social business partnerships look more like R&D projects with the goodwill of a charity attached. Rather than take resources out of the company and give them to a charity to spend, the company can better its employees and make an impact on the lives of others. Cynically, this raises the question of who is using whom, but the net outcome is that people’s lives are improved.

Part of the book is dedicated to drawing distinctions between social businesses and more established socially minded organizations such as NGOs and charities. The primary difference is that social businesses strive to be self-sufficient and not reliant on private donation or government largesse to survive. But they must also meet the other criteria stipulated – most importantly, that it not be a vehicle of increasing personal or investor wealth.

Ultimately, Yunus has faith in people’s ability to change the world and make it better for all. His observation that human beings are not one-dimensional profit- maximizing creatures leads him to recommend a business structure that eschews personal profit in order to maximize the other dimensions of human happiness. This boundless optimism towards the creative drive of capitalist enterprise is truly refreshing.

Still, I have to ask myself for whom this book is intended. That the captains of industry are re-invigorated by a social business is wonderful, but what practical application does it have for the common person who wants to make a difference? The message seems to be: start a traditional business and build yourself a multinational presence. Then, if you want to do some good, give us a call.

Paul Kaminsky lives in Toronto and is a ten year veteran of the financial services industry.

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