What exactly is “social business”?

To be honest, I’m more of a medical and public health person, but these areas increasingly seem to overlap with finance, insurance, and other business-related fields. I’m slowly trying to learn about such things, which are often counterintuitive to me.

So last week, I was very excited to be able to attend a lecture by Muhammad Yunus of Nobel prize and microcredit fame. It was sponsored by FICCI, the same Indian chambers of commerce group that co-hosted the microhealth insurance conference I wrote about back in November.

I don’t think Yunus said much in his talk that he hasn’t publicly said already, but much of it was new to me. He seems to be trying very hard to promote the concept of “social business,” even to the point that the term comes across as a brand name.

The way I understand it, social business is a way for companies to conduct business that benefits the poor, with the main rule being that they can’t turn a profit. A company can break even, but isn’t allowed to recoup any money beyond its initial investment. It must also keep such projects financially separate from any profit-seeking ventures, in order to avoid conflicts of interest.

Yunus’ main example was an agreement he says Grameen Bank, his microcredit organization, has made with the French corporation Danon to manufacture nutrient-fortified yogurt for children in Bangladesh. The plan is for Danon to build a yogurt factory and then sell the product at above cost until it pays for its investment. Interestingly, the yogurt will not even be marked with the Danon logo, because Yunus fears this would cause the food to become a status item sought out by brand-savvy people and lead to shortages.

In a quick Google search, I couldn’t find many details about the Grameen Danon partnership.

This leaves me with several questions: After Danon makes back its money, then what? Will the yogurt drop in price? Or will the profits be used to fund additional projects that benefit the poor? Most importantly, what does Danon get out of this? Financially, legally, etc., how does this differ from donations to charity that can be tax write-offs? What motivates the company to take on the risk of creating the infrastructure to produce and distribute this product?

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