11/27/2012 11:31 am ET Updated Jan 27, 2013

Social Business as a New Paradigm to Deal With World Poverty


With nearly 1.5 billion people still living in absolute poverty, eradication efforts have not succeeded and poverty remains the most significant challenge facing humankind. The numbers speak for themselves: we have a long way to go before we can congratulate ourselves on having reduced the number of people faced with alarmingly scarce conditions close to a zero.

Development assistance to ensure that those in poverty can enjoy improved living conditions is neither a sufficient nor sustainable solution. At the same time as a government or a NGO decides to decrease or redistribute their funding, the living conditions of the people being assisted may change rapidly. In other words, people who are getting development assistance are subject to the benevolence of others, and therefore completely dependent on staying a priority to their care takers. Worst case, this dependency undermines peoples' ability to achieve necessary structural changes. Very likely, the majority of people would rather accept reasonable conditions to develop their lives on their own, than traditional aid programs.

A few weeks ago, the Fourth Global Social Business Summit took place in Vienna. The summit is the leading forum for social business worldwide connecting experts from corporations, civil society, governments and academia in order to share their expertise and to exchange groundbreaking ideas. This year over 700 participated -- a number that has increased every year -- invited by Professor Muhammad Yunus, Nobel Peace Prize Laureate and Chairman of Yunus Centre, and Hans Reitz, Managing Director of The Grameen Creative Lab.

At the summit Professor Yunus declared that the most effective and sustainable way to address poverty is to develop the concept of social business. Existing technologies must be combined with human creativity. It is key to include the young world citizens in this process. And we need to scale up -- to say at a rapid pace is an understatement.

According to Yunus, social business is a non-loss, non-dividend company designated to address a social objective. It is distinct from the traditional non-profit sector because the business should seek to generate a modest profit. The profit should be re-invested in the company and used for purposes such as expansion of the company's reach, improvements of the products or services or in other ways subsidizing the social mission. Social business also includes any business which has a social objective rather than financial.

The concept is still in its infancy, but deserves greater interest among decision-makers as well as in the business community and among the NGO sector. We need to meet the requirements of social business by reviewing the way we work today, but also by reviewing the regulations. Unlike business as usual the economic profit is in the case of social businesses always in line with human profit.

The dairy multinational Danone is a good example of how a social business concept can be implemented. In a joint venture Danone and Grameen created a new what they call "base of the pyramid" business in Bangladesh with the support of local suppliers. The initiative aims at providing nutritional high-quality products at prices affordable to the poor as a mean to address malnutrition amongst children. The products being produced in the region have three key features: affordability, access to nutrition and local connections at every level of the value chain. The product mix seeks to meet the goal of offering balanced nutritional benefit at a price adapted to the population's standard of living. To put it short, the prize of the product varies according to the consumer's financial situation, which enables Danone to sell the product not only to those who can afford it, but also to those who actually need it.

There are other ways to take action in order to improve the life of people. The United Postcode Lotteries operate lotteries in Holland, Sweden and in the UK. All profits are donated to charitable causes. Through their participation in the lotteries, the ticket holders support more than 250 charities for people, nature, culture, health and welfare. Since 1989, the United Postcode Lotteries have donated 5.4 billion Euros to charities, which make us the world's third largest private donor to charity.

Starting this year, the United Postcode Lotteries are financially supporting the organization of Professor Muhammad Yunus for its important efforts to develop social businesses. We look forward to seeing the social return of this investment with great anticipation. Our hopes are also that our collaboration with Professor Yunus team will spark and encourage other members of the business and donor community to take actions in the same direction. After all, human profit is greater and in the long run far more rewarding than economic profit.

Marieke van Schaik, Managing Director, Dutch Postcode Lottery

Niclas Kjellström-Matseke, Managing Director, Swedish Postcode Lottery

During the Global Social Business Summit 2012 the United Postcode Lotteries has announced its commitment to fund the establishment of the Yunus and You - The YY Foundation with 1 million Euros for its work during 2013. The foundation will focus on supporting new social business projects and established social business entrepreneurs through social business idea competitions on a global scale.