Innovative models

Building social businesses to alleviate poverty

The rise of social business

The economic, social and environmental challenges we have to face today are immense. These challenges call for a sustainable response involving all parts of society, including large companies. Corporations have understood that they can play a role in the alleviation of poverty, precariousness, and exclusion, but the question remains as to how to do this.

The innovative model of social business appeals to an increasing number of large companies, who have created joint-ventures to fight against poverty in the global South.

The definition of social business was forged by the 2006 Nobel Prize laureate Professor Muhammad Yunus, who founded the Grameen Bank in Bengladesh. A social business is a social enterprise whose aim is to provide a new solution to a social problem. Its business model entails a more global and a fairer approach to value creation.

A social business is a non-loss, non-dividend company, which means that it has to be financially self-sustainable, and that the profits realized by the business are reinvested in the business itself, with the aim of increasing social impact.

This approach must be distinguished from the « bottom of the pyramid » (BoP) approach. The rationale underlying BoP-driven businesses is that poverty at the very bottom of the Maslow pyramid of needs is a huge and promising market for large companies. Adressing this market would enable them to make a profit while serving the poorest of consumers and contributing to development.

Social business embodies an alternative and sustainable model which can serve as a real catalyst for change.

The implementation of social business in France started in 2008

A large number of French companies have shown interest in social business initiatives. They are either building new projects to facilitate access to basic goods and services, either drawing inspiration from this method to carry out their corporate social responsibility policies.

The unsuspected potential for private companies to engage in the fight against poverty calls for the co-construction of innovative business models by the private sector, NGOs and the public sector. This potential also feeds into the French government’s reflections on impact investing, currently underway.

In the same vein, the HEC academic chair « Social and Business » was created in 2008. It is centred around three French companies : Renault, Schneider Electric and Danone. The two co-chairmen are Muhammad Yunus (Nobel Prize laureate and founder of the Grameen Bank) and Martin Hirsch (Chief Executive of the Greater Paris University Hospitals). Its aim is to contribute to a more inclusive economy, creating both economic and societal value. The three missions of the chair are education, research, but also the co-construction of innovative business models aiming at reducing poverty through partnerships. The Action Tank Business and Poverty was created to carry out this very last mission.

Social Business explained by Professor Yunus

The Action Tank and social business

The social business approach is widely used by the Action Tank to develop new projects with and within companies. The projects which are designed and implemented vary depending on the sector.