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On the 6th November 2017, the Mayor of Paris, Anne Hidalgo, made Muhammad Yunus an honoury citizen of Paris. The crowd of 600 people gathered at the Global Social Business Summit (GSBS) cheered loudly at this achievement. They knew, just as Yunus acknowledged in his speech, that this was not just the continued acknowledgement of a remarkable man, but also a victory for the movement he started. Social Business, which a few years ago was nothing more than an ideological hope of an optimistic individual, was slowly becoming globally recognized as a viable business model.

Written by Margot Leger, with input from Milande Busquet.

Milande and I had the opportunity to attend the 8th GSBS in Paris last month. Being just a few months into our PhDs, this was a great opportunity for us to gather ideas and meet people working in social business and social entrepreneurship. After the many panel discussions, interactive workshops, and stirring speakers, we left with lots of ideas and inspiration to take back with us to Utrecht. In this blog post, we share Yunus’s understanding of social business, and discuss three take-aways from our experience. 

What is social business? 

In the field, different definitions and ideas exist of what social entrepreneurship and social impact ventures are abound. Yunus, however, has a clear definition of how he perceives social business. It is a business that is created and designed to address a social problem. It is a non-loss, non-dividend company. Profits are redirected into the company, or activities that will further improve the social problem. No profit is given out to shareholders, and investors are only entitled to their original investment – no more, no less.

This is a controversial standpoint. Instead of business aiming to maximize profit, their goal is to maximize social impact. Entrepreneurs, existing businesses, and indeed consumers, struggle to imagine a world that deviates from the status quo of business benchmarks being issued in monetary terms. Yet socially minded ventures are becoming a necessity, as the fragility of our current financial model is exposed. 

Lesson 1: “Integrate People and Environment into Profit Margins”

Key figureheads like Jean Bernou, the CEO of McCain, and Emmanuel Faber, the CEO of Danone, came up on stage to say that we need to start consuming things differently. We cannot just follow a linear trajectory of consumerism, we need see the world as circular, considering the wider consequences of our actions. Sustainability and human rights are largely seen as separate from the financial markets, as something in the domain of governments and NGOs. But financial markets are embedded in societies, and profits have real-world consequences.

The wealth gap on our planet is extraordinary. The saddest part is that it is unnecessary. At this point in time we have the technology and abundance to feed and clothe all the people on the planet. Yet we have not worked out the logistics or the redistribution of wealth to allow this to happen. As Yunus puts it: “We need to transform this greed based civilization into one based on real human values. We can do it, if only we want to.” This is both an inspirational thought and a dire warning. We stand to reap the consequences if we don’t reign our selfishness in. 

Lesson 2: “Make sustainability sexy”

Consumers play an important role in the success of social business. We need to make sustainability sexy. This starts with people being cognizant of the impacts of their consumption decisions. The increasingly connected global world we live in contributes to these insights, but to really make the transition to a sustainable economy we need to scale up this awareness. We need the public to see being sustainable as being cool. 

At least 8 million tons of plastics end up in the ocean – the equivalent of one garbage truck being dumped into the ocean every minute. This costs as much as 20 billion dollars to our planet, far exceeding the profits of the plastic industry. Society should not have to shoulder that burden. Our planet and society cannot take on all the risk, while individuals benefit from unnecessary and bloated profits. We need new models that further promote social impact and hold those reaching only for profit accountable for their societal impacts. Conscientious consumers will push for sustainable business services. 

Lesson 3: “We can’t just fix the problem, we need to change the system that caused the problem in the first place” 

We cannot hope to achieve the SDGs while continuing with an unchanged system. Yunus believes that we need a new model, that we need to overhaul the system, in order to ensure that we can fix it in the long run. Things need to change on all levels. Not just with more cooperation between countries and changes in governance, but with models of business and finance too. His solution to this is social business. 

Whether you agree whole-heartedly with him or not, profit maximizing methods come at a high cost. We should at least have alternatives at the table. Businesses that put social impact over profits will render us more resilient when hardship comes. The challenge is to make this ideology mainstream. 

Food for thought

We walked away from the conference with a much better understanding of all these arguments. In no ways is the concept of “social business” a perfect solution. Like all existing models, there are flaws. It is very difficult to quantify how much “social good” a business produces. This results in inefficiencies and can lead to company’s ‘green washing’ their social contributions. As a non-profit maximizing venture, social business has the difficult task of quantifying the intangible good it is adding alongside being financially sustainable. It is harder to demonstrate why particular social businesses should warrant more investment, which make the scaling and replication of models challenging. 

However, through our interactions at the Conference, we were convinced that social business plays an important role questioning the current system. It demonstrates that there are alternatives to profit-maximizing models. It is clear from the caliber of participants that entities from cities to CEOs and corporations are interested in developing these ideas parallel to conventional models. It’s not that everything will change overnight, rather that people recognize the value of having more options.

Our time in Paris grappling with the possibilities and the imperfections gave us promising insights of the core role the private sector can, and should, play in contributing to healthy people and a healthy planet, and our hope for the alternative models facilitating this. We are optimistic that this movement continues to grow and we are excited to be part of it. But for now, there is lots to research and think about!