Social Business Initiative

Social Business Initiative

Policy context

This is referred to - under the heading social entrepreneurship - in the 13 April 2011 Communication on the Single Market Act:

Within the framework of the European Platform against Poverty and Social Exclusion, the Commission will support the development of the social economy as an instrument for active inclusion by proposing, in 2011, a "Social Business Initiative" and by facilitating access to the Union's financial programmes for use in this area.

Content

At a meeting of the European Parliament's Social Economy Intergroup on 11 Mar 11 Pamela Brumter-Coret of the Internal Market DG explained that the Commission is working on the following issues:

• better visibility of the social economy to investors – by assessing existing rating schemes and if possible improving them to create a ‘social rating’ which could improve investor confidence
• a ‘stock market’ for social economy finance – this is part of the Competitiveness and Innovation framework Programme 2014-20;
• a solidarity investment fund – a legal instrument to improve investor confidence - consultation on social investment funds launched on 13 Jul 11;
• microfinance – the first €20m loan under the EPMF has gone to Qredits in the Netherlands, and the question of whether JEREMIE can help the social economy more is being looked at;
• an equivalent to the USA’s Community Reinvestment Act (CRA) which obliges banks to report on whom the lend to.

Process

DG MARKT's 'roadmap': http://ec.europa.eu/governance/impact/planned_ia/docs/2011_markt_021_social_business_init_en.pdf

The Euclid network has launched a collaborative comment paper on the SBI: http://www.euclidnetwork.eu/data/files/resources/867/en/Social-Business-Initiative-recommendations-from-the-civil-society_v4-BJ.pdf

On 5 May 11, Grameen Creative Lab announced its participation in an internal European Commission workshop on 25-26 May which focused on building the right ecosystem for social entrepreneurship in Europe:

Not a political event, the objective of this internal workshop is to materialize the Commission's commitment taken under the Single Market Act, which is to design an adequate policy to help develop social entrepreneurship in the European Union. The Commission regards social entreprenurship as an important driver to help shape the conditions of revived growth in Europe. Commission officials and experts (including GCL) will discuss how best to build the right ecosystem for social entrepreneurship in Europe before the adoption of a Communication on Social Entrepreneurship next autumn 2011.

The SBI communication was published on 25 Oct 11, in parallel with the communication on Corporate social responsibility (CSR).

Some proposals for actions to be taken: SBI proposals

The SBI was launched at a high-profile conference on 18 Nov 11.

Webcast of the SBI conference: http://webcast.ec.europa.eu/eutv/portal/archive.html?viewConference=13363

Guardian online Q&I session on SBI: http://www.guardian.co.uk/social-enterprise-network/2011/nov/22/european-social-business-initiative

Parallel definitions

There is a great deal of overlap among the terms social economy, social enterprise, social entrepreneurship and social business.

Grameen

The Grameen Foundation defines social business as follows:

Muhammad Yunus, founder of the Grameen Foundation, set out his concept of social business at the World Economic Forum in Davos in January 2009:

We live in a world of terrible injustice and widespread poverty. Governments and charities have the will to improve it, but they lack the efficiency and innovativeness of the private sector. So why not combine the two sides? Let's bring the methods of business to the task of solving social problems such as poverty and create - social businesses!... Social business provides a necessary framework for tackling social issues by combining business know-how with the desire to improve quality of life. Therefore instead of being self-focused social business is all about others.

The 7 principles of Social Business

• 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.

Schwab

The Schwab Foundation defines three organisational forms for social entrepreneurship, one of which is social busines ventures.

ClearlySo

ClearlySo is pushing a distinction between "social business" and "social enterperise" whereby a "social business" is a business that creates social benefits while returning profits to investors (whereas a "social enterprise" principally reinvests its profits).

A social business is a business that integrates two objectives:

• A commercial objective: To achieve and increase profits and realise growth (like any traditional business) and...
• A social (and ethical and environmental) objective: As set out in our list of social benefits

A social business can be large or small, a start-up or an established player, it can take any legal form (CICs, co-ops, Ltd companies, and so on) and can operate in most industrial sectors (it's difficult to imagine a social arms manufacturer/trader).

So do companies with grand corporate social responsibility (CSR) projects count as social businesses?

No. A further test of social businesses is to think whether or not an investment into the business which advances the commercial activity of the business will also increase its social impact (i.e. is there a clear correlation between the two and are they of equivalent importance?). If the answer is yes they are a social business, if the answer is no then they are not. Investing in Kraft or BP will not increase their social impact so, despite their efforts, they are not social businesses.

What if a business fits the definition above but does not identify itself as social?

It is still a social business. We have identified two types of social business:

• Those where the social benefits are intentional and the business pro-actively integrates the two objectives (commercial and social).
• Those where the social benefits happen by virtue of its commercial objective not requiring a pro-active approach in integrating the social objective. It's a business that integrates commercial objectives (growth, profits) with a social, ethical or environmental one, but they may not call themselves a social business.

Investment perspective: Social businesses can, in the case of financial surplus, return all or a portion of it to investors (in the form of capital appreciation or dividends) as well as what is known as the ‘social return’.

Source: http://www.clearlyso.com/what-socialbusiness.jsf

IBM

Confusingly, IBM is using the term in an entirely different way, to mean the use of social media such a blogging to improve business effectiveness. Here, "social" refers to the way a firm works internally, and organises its human resources, rather than its principles or its impact on the world at large:

A Social Business isn't just a company that has a Facebook page and a Twitter account. A Social Business is one that embraces and cultivates a spirit of collaboration and community throughout its organization—both internally and externally.

IBM has identified three distinct characteristics of a Social Business:

• A Social Business is engaged — deeply connecting people, including customers, employees, and partners, to be involved in productive, efficient ways.
• A Social Business is transparent — removing boundaries to information, experts and assets, helping people align every action to drive business results.
• A Social Business is nimble — speeding up business with information and insight to anticipate and address evolving opportunities.

References