Can social business be applied to the environment?
Social Business and the environment : Afforestation
Social Businesses could also be created to fight against climate change. Social business investors, with a strong environmental commitment, could invest in a company which plants trees, increasing the space under forest cover and oxygen in the atmosphere. Entire tracts of land where forests once existed could be regenerated through social business. Other potential areas can also be brought under forest cover through social business.
Should social business avoid making profit ?
No, it does not avoid profit. The first aim of social business is to achieve the social objective in a financially sustainable way. It should not give up social objective to make profit beyond sustainability. Making profit without sacrificing social objective is welcome. Social businesses do not give dividends to the investors, all the profit is reinvested in the company for expansion and improving the quality of the product or service.
What kind of non-monetary return could social businesses generate?
Social business is an investment opportunity with "non-monetary returns". Among these returns the most important one is the "gratification" derived from helping others. People who are doing good for society becomes role models for others, particularly young generation. Society as a whole gives them special recognition. Besides there is a personal satisfaction that one's life has touched other people's lives.
How do you very the measurement of the impact of the social business?
There are third-party sources that will come and assess the impact of the social business. For example, to measure the impact of Shakti Doi, the fortified yogurt that we are producing in Bangladesh, an international organization called GAIN (Global Alliance for Improved Nutrition), has been commissioned to continuously measure the impact on the mal-nourished children eating the yogurt.
How do you measure the success of a social business?
In a profit-maximizing company, you measure success by the amount of profit made in a given year and developing the prospect of earning more in future years. In a social business company, you measure success by the success achieved in reaching the social goal in specific measurements (reducing the number of malnourished children, reducing the death of infants, number of people receiving safe drinking water, etc)
Does it only have to be a multinational company investing?
No, anyone, any institution, can invest.
Do the same laws of businesses govern social businesses?
Yes, the same laws that govern a PMB apples to social businesses as well, because there is no other law as yet.
Are social businesses taxed?
Yes, since there is no category of business in the company law known as social business, it will appear to the tax authority as a PMB and will be treated as such.. Social businesses will be taxed the same way as the PMBs.
If I do not have the funds to invest, but I have a good idea, whom should I contact?
If you have the motivation, drive and a good idea for a social business, you can apply to a social business fund for financing.
Who can invest?
Anyone can invest.
Can someone who started a social business decide to take profit?
Yes, a social business can be transformed into PMB if the owner wants it. Since there is no law governing the creation and termination of a social business, no procedure has to be followed. When laws will be passed there will clear guidance as to the protocol of registration and termination of the status.
What is the difference between a social business type II and a PMB.
Essentially they operate in the same manner. In all its operational practices they are exactly the same. However, a type II social business is either owned by the poor people who receive the dividends, or the profit of the company goes to a Trust which is created for promoting well-being of a specific population or achieve any other social objective.
Do the fund investors get their money back?
It is a “donation” to a social business fund, then the donor makes it clear that he does not want it back. But if it is an “investment” into the fund , of course, the investor will get back the money.
What is the difference between a donation to charity and donating to a social business fund?
When you donate a dollar to charity, it goes towards a social cause, but then the use of that dollar ends there. When you donate a dollar to a social business fund, it is invested to achieve a social cause and then the amount returns to the fund for re-use. The power of a dollar donated to a social business fund is much stronger and more effective.
Who will invest in social business? Why?
Social business is based on the intrinsic desire of self-sacrifice that resides in all human being for the promotion of well-being of its own species, all living beings, and the planet. Given opportunity, most people who can afford it will choose to invest in social business. In addition, institutions, foundations, businesses, governments, donors agencies, any entity which is involved in investment or charity will invest in social business.
What is the forecast of sustainability?
In order to qualify as a “business” social businesses must be sustainable. There is no escape from this. Like other kind of business they may go through ups and downs, but it must prove its financial strength at the end.
Who runs the social businesses?
Just like the PMBs social businesses will hire a team of managers and workers to run their businesses. But the mission of the team will be very different than the mission given to the team in the PMBs.
How much do social business managers and workers earn?
Managers and workers will earn market wages to function with incentives as in a PMB. Social business will endeavour to provide better job conditions and financial terms to workers on the lower end of the salary scale. Their working conditions will be watched carefully. Social businesses will be very careful to make sure they do not violate one social objective in order to achieve another social objective.
What is wrong with earning a profit?
There is nothing wrong with earning a profit and taking dividends from a company’s earnings. It is very important driving force of the economy. Growth of the economy is linked with profit –making. By introducing the concept of social business we are not condemning PMBs, or arguing for elimination of it. We are only arguing for the introduction of a new business in the market place. Even social businesses will be making profits, but the profit will stay in the company. It will not be distributed to the owners because they do not wish to take it beyond recouping the investment. In PMBs taking profit is the objective of the business.
Will social businesses create competition with regular businesses?
Social businesses usually produce things which are not produced by traditional businesses, or it targets areas which are not served by other type of businesses, or the prices for the products are very different than the prices of the products of the profit-making businesses (PMBs) Social businesses encourage the PMBs to new areas of business, discover new businesses. Social businesses can compete with PMBs by offering lower prices. For example, a social business may sell drugs at lower prices than the PMBs. In the market place social businesses will offer additional options to people and strengthen the market.
How can regular businesses and social businesses operate in the same market?
A social business is like any other business. It will follow the same principles of competition, and bring more competition in the market. Consumers will be the beneficiaries. The more the number and varieties of businesses the more is the competition. Social business will strengthen the forces of free market.
What is the difference between corporations with donation programs and social businesses?
A social business is a business. A donation program is a charity program of a profit-making business.
What is the difference between non-governmental organizations (NGOs) and social businesses?
An NGO is a voluntary, non-profit organization that operates, contributes to, or participates in, various projects on education, training or other humanitarian, progressive, or watchdog activities. They usually collect donations for running programs for disadvantaged or distressed people. The difference is that NGOs operate on donations, whereas a social business is a self-sustaining business.
What is the difference between corporate social responsibility (CSR) and social business?
Corporate Social Responsibility (CSR) programs are the philanthropic programs of companies. CSR is part of a corporation, which is a profit-maximizing company. A social business is a company by itself which is dedicated to social impact-maximization.
A common way of practicing CSR is by donating money for social causes.
What is the definition of a type II social business?
Type II social business functions as a profit-maximizing business, except that all of the net-profits are placed into a trust, which will help a disadvantaged group of people.
Or a profit making business owned by the poor people.
What is the definition of a type I social business?
Type I refers to social businesses that create a product which has a direct social impact. For example, Shakti doi, the fortified yogurt, directly fights malnutrition.
What is the definition of a social business?
A social business is a non-loss, non-dividend company designed to address a social problem. The profits are used to expand the company’s reach and improve the product/service.
Why not compensate for inflation?
Somebody invests $100,000 in a social business. He will get back a total of $100,000 in 5, 10 or 20 years, and cannot take any dividend beyond that. Isn’t it unfair? He should at least get back the real value of $100,000. Why not compensate for inflation? Or give some return on investment.
You are right. In social business, investor gets back exactly the same amount money he invested, no inflationary adjustment or any other compensation is allowed.
First, in social business we have taken out the idea of getting “personal monetary benefit”, such as, profit.
Secondly, we want to get rid the notion of “compensation” for financial sacrifice. Once we open the flood gate of “compensation”, we’ll have to deal with many such compensations, such as, inflationary adjustment, opportunity cost adjustment, present value adjustment, risk adjustment; one can keep making this list longer and longer.
If you yield to one type of compensation, it will be extremely difficult to defend yourself why you cannot agree to allow the next type of compensation.
Best thing would be to the keep the concept free from all types of compensations.
On the question of return, two principles of social business are:
a) No financial benefit in terms of profit (beyond getting the investment money back in its monetary units).
b) No compensation, for the losses in real value of the invested money, or on any other ground.
Social business is based on the “selflessness” of a person. Selflessness is expressed in his total commitment to the ultimate result in terms of impact on people’s lives, not worrying about small financial “sacrifices” along the way. Selflessness means surrendering self-benefit.
Not getting the various financial compensations may be personal sacrifice in monetary terms but it is a gain in psychic terms. This is actually a form of social investment. His pleasure becomes more intense in reaching the social goal because he made those ‘extra’ investments. That is really the ultimate compensation. Instead of receiving financial compensation one gets compensation in terms of pleasure received from the outcome of the investment.
Supposed some one does not want to trade this financial compensation by psychic compensation – is there any way he can still be in social business?
Of course, he can. He can do it very easily. He can divide his investment in two parts. One part will be equity, accepting all its associated conditions (no profit, no compensation). Another part of this investment may be in the form of a loan with interest rate fixed just enough to cover all the financial risks around the equity investment, without making any extra financial gain for himself.
In such a case he may be considered as a full supporter of social business but his shareholding portion will be lesser than before.
This loan will be different kind of a loan from a profit maximizer lending to a social business. Profit-maximizing lender is lending to a social business without any consideration that it is a business dedicated to a social cause. He lends to this social business because it a good profit making investment opportunity for him.