Are social businesses the way forward?

When Gaurav Singh decided to leave his successful career with a Fortune 500 company, he wanted to do something more meaningful, something that will help him create value for society. “I went to engineering college, but quickly realised that my real strength lay in problem solving. I would keep creating challenges for myself,” he narrates.

“After finishing engineering, I started working at Accenture. Though I was not unhappy there, I kept looking for a sense of purpose. I wanted to channelise my strength into something bigger than myself.”

Following a stint at the Teach For India fellowship, Singh went on to start his own school for the underprivileged, 3.2.1 Education Foundation, which is in its second academic year. “During my fellowship I realised that one of the core issues in our education system was a lack of belief. Our system didn't believe in the abilities of all our children. Our country needed belief centers – places that would convince us about the potential of all children. So, I decided to skip the Teach for India post fellowship placement process and take the plunge to start my own school. I had no idea how to do it but I knew it had to be done.”

Countless others like Gaurav are taking their entrepreneurial drive one step further to create a societal change. Various organisations have popped up across the country over the last few years who are, through their work, addressing social issues, while simultaneously earning a subsistence profit. They are self-sustaining bodies that are not just empowering society, but also boosting their local economies.

Nobel Laureate Professor Mohamad Yunus, considered as the pioneer of contemporary social entrepreneurship, is credited for having coined the term “Social Businesses”. He has laid tremendous emphasis on the merits of such ventures in eradicating poverty, stating time and again: The current financial crisis makes it very clears that the system that we have isn't really working, and this is the right time for us to undo things and build them in a new way.

What are social businesses?
Aarti Wig, India Country Director, Yunus Social Business, explains the concept of social businesses, “Drawing on his experiences with creating Grameen Bank, Dr Yunus created the idea of social business, a broader concept that includes microcredit. Prof Yunus defines social business quite differently from the generally accepted idea of social entrepreneurship. A social business according to him is a problem solving business, created with the express intention of solving a social problem. It is a selfless business, created without the intention of making a personal profit.”

The ideology behind a social business is expressed as the business model being a means to an end (end-solving a social problem) and not an end in itself.  

Yunus, who is a firm believer in the potentials of capitalism in ending poverty, has frequently asserted how micro lending helps encourage entrepreneurship and dignified development for the poor. “Most often we use charity to avoid recognising the problem and finding the solution for it. But charity is no solution to poverty. It only perpetuates poverty by taking the initiative away from the poor. Charity allows us to go ahead with our own lives without worrying about the lives of the poor. Charity appeases our consciences.”

Danielle Wipperfurth of UnLtd India, which is an incubator for social business based out of Mumbai, agrees. She says, “Problems today are too big to be solved by just the government or just nonprofits or just one sector or model alone. We see a role for social start ups of all kinds, including those with for-profit, non-profit, and hybrid models, to be able to make a difference.” UnLtd India, an incubator for early stage social entrepreneurs that provides support and assistance to start up business by facilitating working space, workshops, bootcamps and other networking opportunities.

Gaurav Singh explains the potential social businesses hold for the youth in India, “India has always been very entrepreneurial. Indian youth want to be engaged in solving the problems of the country. Social entrepreneurship is one channel to be able to leverage their passion into a real solution on the ground.”

Challenges and failures
Capital is the biggest challenge for any start up, and more so for social start-ups. “Of course when you add more than one bottom line (not just profit but social and environmental) it can be challenging to meet costs,” explains Wipperfurth. “One of the things we work on with our investees is to be realistic about how they can generate revenue in creative ways so that they are sustainable and put them in a position to make their impact for the long term.”

Gaurav continues, “Once they have access to capital, they need to be able to access the problem.  Relevant safeguards also need to be set up so that people are held accountable once they enter. Social entrepreneurs also need to be allowed to fail. Entrepreneurship is tricky, and the license to fail is what allows the ones that succeed to dramatically succeed. With such complex problems, we need to go through a few ideas before we figure out which ones will solve the problem.”

“Access to high quality coaches and mentors is necessary. Young people need mentors with business, government or leadership experience to play an active supporting role in their ventures,” he adds.

Do social businesses really make a difference?
Wig explains, “Social Businesses follow the principle that business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximisation.”

However that does not mean that they need to forsake commercial interests. Wig adds, “Financial and economic sustainability, is another important principle of social businesses.” She elaborates the guidelines that drive the Yunus Social Businesses, “Apart from the above mentioned points, it is important to ensure that investors get back their investment amount only and no dividend is given beyond investment money. When investment amount is paid back, company profit stays with the company for expansion and improvement. It is environmentally conscious and the workforce gets market wage with better working conditions, as a result they perform their work with with joy.”

Wipperfurth concludes by emphasising on the need for defining the impact of a social start up. “When you run a business that has a social impact, you have a choice to make about just how prominently impact is going to be in your decision-making. There is actually quite a range—from businesses that just happen to have an impact but don't focus on it, to those for which impact is paramount and would change their model completely if they discovered that the impact wasn't there,” she says.

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