Definition & Principles


There are two meanings for the term social business (SB):

  1. A social business is a non-loss, non-dividend company designed to address a social objective. The profits are used to expand the company’s reach and improve the product/service.
  2. A social business is an organization designed consciously around sociality and social tools, as a response to a changed world and the emergence of the social web.

The remainder of this page is based on the older (first) meaning for social business, which has grown from the work of Muhammad Yunus and others. The newer (second) meaning is an outgrowth of the Web 2.0 technology space, and is based on the form of social tools, social media, and social networks.

Social businesses can be defined as follows:

Social business is a cause-driven business. In a social business, the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point. Purpose of the investment is purely to achieve one or more social objectives through the operation of the company, no personal gain is desired by the investors. The company must cover all costs and make revenue, at the same time achieve the social objective, such as, healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water, introducing renewable energy, etc. in a business way. The impact of the business on people or environment, rather than the amount of profit made in a given period measures the success of social business. Sustainability of the company indicates that it is running as a business. The objective of the company is to achieve social goals. In addition, Social Business may also mean the business application of social media and social networking technologies.

Features and goalsA social business is featured to be as follows :

  • To be designed and operated to pass on all the benefits to the consumers.
  • To be operated without incurring losses.
  • To be operated competing with Profit Maximizing Enterprises (PMEs).

Profit making by an SBE shall be consistent and desirable because:

  • To generate enough surplus to pay back the invested capital to the investors as early as possible.
  • To generate surplus for — (i) Expansion, (ii) Improvement of quality, (iii) Increasing efficiency through introducing new technology, (iii) Innovative marketing to reach the deeper layers of low-income people and disadvantaged communities and (v) Undertake research and experimentation to improve and diversify products and services.Eleven Features of Social Business Organizations

Eleven Features of Social Business Organizations

In the 17th century, the world’s dominant challenge was slavery. In the 18th century, this became discrimination against women. In the 19th century, it was segregation against blacks. In the present century, it is poverty. The failure of formal institutions to serve the poor led to the creation of the social business concept. Eleven general features of Social Business Organization—e.g., Grameen Bank have been identified in the book titled Yunusism:

  • Innovation:                               the SBO belief that everyone is creditworthy
  • Revolution:                                the SBO rejects the traditional methodology of the conventional banking
  • Objective:                                   the SBO provides banking services at the doorstep of the poor it serves
  • Means of production:            the SBO provides physical and non-human inputs (e.g., microcredit, machines, tools, training) to poor people
  • Operant conditioning:           the SBO empowers borrowers through positive reinforcement
  • Asabiyyah:                                 the SBO promotes the unity, conscience, and social cohesion among group members through social solidarity
  • Syllogism:                                   the SBO applies logical appeal to increase integration among group members
  • Commodity fetishism:           the SBO applies social relationships to increase social capital
  • Self-employment:                    the SBO provides organizational support to create income-generating self-employment
  • Collective consciousness:    the SBO uses moral force to create two-dimensional social entrepreneurs
  • Oneirology:                                the SBO help to create a world without poverty, illiteracy, diseases, and slum dwellers

Seven Principles of Social Business

These were developed by Prof. Muhammad Yunus at the World Economic Forum in Davos, January 2009

  • 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 maximization
  • Financial and economic sustainability
  • Investors get back their investment amount only. No dividend is given beyond investment money
  • When investment amount is paid back, company profit stays with the company for expansion and improvement
  • Environmentally conscious
  • Workforce gets market wage with better working conditions
  • …do it with joy

(source: http://en.wikipedia.org/wiki/Social_business)

P.S.  Add more information about it: study cases, models, venture organizations, etc