It was only recently that I became interested in Economics and the critical role it plays in everyday life. What drove me to start reading famous books by economists and attend related events was the fact that I will be studying Economics in college very soon (how exciting!) Earlier this month, I listened to an inspiring talk by the 2006 Nobel Peace Prize laureate, Muhammed Yunus at Sunway University. He captivated the audience with his life story, struggles and optimistic outlook on the world which allowed him to provide beneficial opportunities for those suffering from society's inequity.
The real human being has self-interest but also selflessness.
This was a part of his interesting speech, explaining the utmost importance of social businesses. He defined it as a kind of business:
Whose primary aim is to address a social problem
Which is financially self-sufficient
Which does not pay dividends to its owners.
In essence, he urges businesses to take on a more social-orientated approach to their operations. Social businesses, he explained, are the backbone of a sustainable world economy. As I looked around the room, I saw people from all backgrounds become engrossed in his speech. His clarity and intelligence were evident regardless of being 83 years old. He focused primarily on his 3 Zeros agenda which I'll be talking about in another post, but I was very intrigued to know more about his journey aiding budding social businesses.
So, here are the 7 Principles of Social Businesses which bring purpose and responsibility to their work:
1. Business objectives
This involves determining the business objective to address social problems. We need to identify the social problem, like pollution levels or chemical waste disposal. Developing an objective to address the identified problem is the first step. We need to remember that as a social business, our objective is not profit maximisation (which, many a time, causes many of these problems).
2. Financial and economic stability
Ensuring the business is financially sustainable includes identifying sources of income, calculating operational costs, and comparing the two to evaluate sustainability. True social businesses shall not receive funds from NGOs and other organisations; those who run the business must invest.
3. Investors
Set investors' financial expectations to just recoup their original investment. We need to identify potential investors, communicate the financial expectations to potential investors and secure investment under agreed terms, including no dividends from the investment.
4. Profits
It's a great misunderstanding to think that social businesses should not earn profits. They're very important. Businesses need to reinvent all profits into the business for expansion and improvement. A reinvestment plan must be developed and implemented along with close monitoring as necessary.
5. Environmental consciousness
The business must be environmentally conscious and gender sensitive. Environmental impacts of the business must be identified and there must be strategies to reduce negative impacts. They are to play a major role in the betterment of the environment either directly or indirectly, making this principle very important.
6. Workforce equity
Providing a good working environment and better job opportunities is somehow a challenging task for many profit-orientated companies. Workers getting wages according to the market benchmark is one way to enforce equity.
7. Joy
"Do it with joy." Elements that bring joy to the business process only make social businesses more purposeful. Businesses should continually seek and incorporate new sources of joy into the business. As Prof. Muhammed Yunus said, an incentive of social businesses is "super happiness".
Making money may bring happiness but making others happy will bring “super happiness”.
Do these sound idealistic? Perhaps they are, but our perception of profit maximisation and capitalism is worrying, considering it is bordering on mass ignorance. It is no coincidence that many of the world's problems were caused by money-hungry corporations and governments which backed them up. I do not mean to get political but Yunus' work with Grameen Bank has been phenomenal. His micro-credit system for the people in abject poverty gave them financial freedom by not relying on commercial banks and government policies. Why should economic privilege severely hinder the prospects of the less fortunate?
Watch this space for more on sustainability and economics. As I start college very soon, I am excited to learn more about such important topics and share them with you. In the coming weeks, I'll share more about Yunus' 3 Zeros as well as ESGs. After all, I am all for entrepreneurship for a better world.
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