Looking Beyond CSR
Farooq Sobhan and Ninette Adhikari explore new approaches to social business and social entrepreneurship in Bangladesh
Azizur Rahim Peu/driknews
When talking about social development, most people would be inclined to refer to different acts of donations for social causes, different non-government organisation (NGO) activities, or any other philanthropic work, but rarely has it occurred to us that such acts of charity do not in reality help to address social problems in the true sense.
Giving away a large amount of money is not the key to solving a problem. It would be tantamount to giving fishing nets and rods to the poor to fish, but not actually teaching them how to fish or how to earn a living through fishing.
Having said that, it should also be noted that the organisations addressing social causes have to survive, and it is not possible to depend only on donor funding, rather a self sustaining system should be developed where the funds invested can be earned by the organisation itself.
It is this approach that has given birth to the concept of "social entrepreneurship," with the hope of building a sustainable organisation based on the principle that the best way to tackle poverty is to help the poor by providing them an opportunity to "earn a living through fishing."
The conventional wisdom is that the private sector is the backbone of the economy and it is more efficient than the public sector in utilising available resources and earning positive returns for its own growth and ultimately the growth of the economy. So why leave the glaring problems of our society in the inefficient hands of the public sector rather than allotting these responsibilities to the more productive and competent sector of the economy, the private sector?
Large corporations have in recent years become increasingly aware and conscious of Corporate Social Responsibility (CSR); most of them have now developed their own CSR programs; some would say that they have done so for their own survival. But today CSR activities in themselves are not enough.
Consumers are forcing businesses to act in a socially responsible way, forcing them into what is called "ethical investment," which aims to integrate social values with investment decisions and seeks to maximise both financial return and social good. Therefore, the challenge that the Bangladesh private sector faces today is how best to become more proactive in its strategy making processes and integrate new socially innovative strategies in its business operations, thus moving towards social entrepreneurship.
There are a lot of disagreements regarding the definition of the new buzzword, "social entrepreneurship." The term is defined according to the convenience of the authors, and no universally accepted definition exists yet. Its boundaries are still fuzzy. The term social entrepreneurship, however, can be outlined as the process of involving innovative use of resources to pursue a sustainable venture to address social needs. Social entrepreneurs have the unique opportunity to serve their social and humanitarian instincts and, at the same time, hone their entrepreneurial skills to create a sustainable and profitable business. Best explained, a social business has a triple bottom line objective -- "People, Planet, Profit" -- i.e. a social business is evaluated on the basis of its contribution towards the people, the environment and of course its return on investment.
A social entrepreneur possesses all the characteristics of an entrepreneur. Like any other entrepreneur he is innovative, creative, problem solver and risk taker. He contributes to private sector development and thus the economy. He is also proactive in nature and is not afraid to take up risky ventures to address social issues that he perceives as the most pressing.
The concept of social entrepreneurship is left incomplete without mentioning Dr. Muhammad Yunus, the Nobel laureate and the managing director of Grameen Bank. His phenomenal work on micro-credit had a far-reaching impact on alleviating poverty by providing the poor with access to finance.
He believed that to tackle poverty to a greater extent his work had to go beyond micro-credit, and thus popularised the new concept of "social business" where the motivation for entrepreneurs would be beyond making profits and in favour of changing the lives of the poor. He, therefore, initiated a social business, "Grameen-Danone," in partnership with Groupe Danone in 2006, which is designed to provide children with many of the key nutrients that are typically missing from their diet in rural Bangladesh.
Dr. Yunus also authored a book on social business, Creating a World Without Poverty: Social Business and the Future of Capitalism, in which he explained two types of social business. The first type he described as one addressing social issues in the community rather than profit maximisation. The product or service produced may be food, housing, health care or education, which would serve as social benefit to the economy. Cost of the business would be recovered through the sale of these goods and services and profit earned would not be distributed to the investors as dividend but rather ploughed back into the business for growth.
The foundation of his business lies on the concept of "no profit, no dividend."
The second type of social business he portrayed is a profit-maximising business owned by the poor, women, young people or long-term unemployed. In this case, the social benefit would come from the distribution of the profit of the business to its shareholders, i.e. the poor people who own the company. The goods and services produced do not necessarily have to have a social benefit but rather the benefit arises from the ownership of the company itself. His book conveys a new way of looking at social business.
Like any other new idea or concept, in its infancy social entrepreneurship faces many difficulties in implementation. Social entrepreneurs face the same problems as the private sector, except that they are more challenging. Start-up and logistic costs are very high for them. Lack of skill and formal education of the human resources and lack of financial access pose hurdles for the social entrepreneurs, followed by lack of a coherent government policy as well as a regulatory environment, which imposes a huge burden on those at the bottom of the social pyramid.
One problem often mentioned in the case of social entrepreneurs is that their businesses tend to be fairly small in nature and are, therefore, unable to have a large-scale impact on the economy. But one of the biggest examples of social entrepreneurship in the country, Bangladesh Rural Advancement Committee (Brac), proves this concept wrong. Brac started with a small pilot project and then later scaled up in three steps. It first focused on its effectiveness, whether the project was accomplishing its desired goals. Then, once that was achieved, efficiency of the project was ensured, whether the job was done with the optimal use of the resources. And finally when the project was both effective and efficient, they scaled up through expansion of their present activities and through perpetual innovation, ensuring future growth and sustainability. However, not all ventures are as successful as Brac has been in generating the necessary funding in developing new ventures; for most of them the funds required are usually difficult to accumulate.
Therefore, social entrepreneurship can be given its shape through participation from all the stakeholders involved. The local communities should be active in promoting social businesses. Technological development and support should be made available along with proper infrastructural support. Youth entrepreneurship is an increasingly common approach for engaging youth in solving social problems. Youth organisations and programs can promote these efforts through a variety of incentives to young people, and encourage them to undertake social businesses and become entrepreneurs. The government can play a big role in promoting social enterprises through policies that actively encourage social entrepreneurship; this will require three major initiatives on the part of the government.
Firstly, major tax incentives will be required; secondly, the government will have to ensure easy access to bank financing, and thirdly there will have to be a comprehensive revamping of the regulatory framework for doing business. Currently, the government grants 10% tax waiver on CSR spending by private sector organisations. Similar incentives can also be provided to entrepreneurs involved in social ventures. But the government will also need to do some innovative thinking regarding access to finance and speeding up regulatory reforms.
Recently, the president of BEI was invited as a social entrepreneur to attend the 8th Annual Global Philanthropy Forum Conference held in Washington D.C. The forum provided a platform where donors, social investors and emblematic agents of change from around the world gathered to strengthen and build cross-sector alliances necessary to resolve global challenges. 18 social entrepreneurs from all around the world attended the conference, where each presented a new approach to the concept of social entrepreneurship. The underlying theme of the forum was to encourage philanthropic organisations in engaging in social businesses. The concluding speech at the conference was given by Dr. Muhammad Yunus, who outlined his ideas and thoughts on social business and its effectiveness in addressing social problems.
Bangladesh Enterprise Institute (BEI) in April this year initiated a project on social entrepreneurship, "Bangladesh Social Enterprise Project," to identify and build innovative partnerships involving the private sector, public sector and NGOs in projects and programs which are commercially viable and directly benefit the poor in alleviating poverty and, at the same time, meet the development objectives of Bangladesh.
Through the course of the project BEI will be organising three workshops with the participation of members from the public sector, private sector and NGOs. These workshops will be essential in information and perspective sharing, identifying key partners and developing action plans for possible business initiatives. The workshops will be designed and moderated by experts on this evolving subject of social business and social entrepreneurship. The first in the series of workshops took place in April, with Mr. Dilip Barua, the minister of industries and Dr. Fazle Hasan Abed, founder and chairperson of Brac, as the chief guests on day one and day two of the workshop. The workshop identified the strengths and opportunities of companies in doing business with the poor, and ways to address the challenges and threats. In addition, it provided an opportunity to identify profitable cooperation with NGOs and the government, and bring to the forefront key gaps in the government's priority for development.
At the end of the project at least five private sector sponsored programs would be initiated, such as promoting business linkages through sub-contracting in specific industries, providing skills training in rural areas to promote job creation, management and supervisory training for women or expanding markets in the rural areas.
This initiative, we hope will serve to encourage and promote social entrepreneurship through partnerships involving the private sector, the public sector and NGOs; such partnerships can bring about a significant impact in alleviating poverty in the rural areas, creating jobs in the hundreds of thousands and arresting or at least slowing down the massive exodus from the villages to Dhaka and other urban centres in the country.
The key to these partnerships will be developing value chains that extend from Dhaka all the way to the villages. The many drawbacks and challenges that small businesses face when operating in isolation can only be overcome when they work as partners of large companies, specially in obtaining their help in producing components for them or in obtaining their assistance in reaching the market in urban centres or overseas. Product development, obtaining certification, meeting standards, etc., require more and more partnerships between big and small companies. This would not only contribute to private sector development but also help promote sustainable and socially balanced economic growth of the country.
Moreover, if Bangladesh is to face the biggest challenge confronting it, which is climate change and global warming, it must, on a top- priority basis, address the key challenge of creating environmentally friendly jobs in the rural areas and halt the endless flow of migrant workers to Dhaka, which is rapidly becoming an urban nightmare.
Social entrepreneurship, being a relatively new concept, is facing a lot of hurdles at the onset of its journey, but with time and proper initiatives this will prove to be a concept that will to a great extent help mitigate the social problems of the present materialistic world.
Farooq Sobhan is President, BEI.
Ninette Adhikari is a Research Assistant, BEI.