Not Just for Profit

Friday, February 27, 2009

When Muhammad Yunus and the Grameen Bank received the Nobel Peace Prize in October 2006, one endeavor lifted into the limelight was Grameen Danone Foods Ltd. This was a pathbreaking collaborative en­terprise, launched that year as a 50–50 joint venture between Groupe Danone — the US$16 billion multinational yogurt maker — and the Grameen companies Yunus had cofounded. Yunus called the joint venture a “social business,” which he said could be a pioneering model for a more humane form of capitalism. As Yunus explained in his book Creating a World without Poverty: Social Business and the Future of Capitalism (PublicAffairs, 2007), a social business is a profit-making company driven by a larger mission. It carries the energy and entrepreneurship of the private sector, raises capital through the market economy, and deals with “products, services, customers, markets, expenses, and revenues — but with the profit-maximization principle replaced by the social-benefit principle.”

The mission of Grameen Danone Foods is to bring affordable nutrition to malnourished children in Bangladesh with a fortified yogurt, under the brand name Shokti Doi (which means “yogurt for power” in Bengali, the country’s language). It began in October 2005, when Franck Riboud, the CEO of Groupe Danone, took Yunus to lunch in Paris. “We would like to find ways to help feed the poor,” said Riboud. Yunus suggested the revolutionary joint venture and proposed that a new structure be invented for it, a hybrid between nonprofit and for-profit.

Like a conventional business, Grameen Danone must recover its full costs from operations. Yet, like a nonprofit, it is driven by a cause rather than by profit. If all goes well, investors will receive only a token 1 percent annual dividend, with all other profits being plowed back into the business. The venture’s primary aim is to create social benefits for those whose lives the company touches. For example, the first Grameen Danone fac­tory, which opened in November 2006, was deliberately built small, as a prototype for community-based plants that would provide jobs across Bangladesh. “It’s just a tiny little plant, but it has a big message,” said Yunus in a speech to the Global Alliance for Improved Nutrition, the nonprofit organization brought in to monitor the company’s impact on local health. “While we make money, we can also do good.” Riboud adds, “I’m deeply convinced that [humanity’s] future relies on our ability to explore and invent new business models and new types of business corporations.”

Yunus and Riboud are not alone in seeing the critical importance of instilling a purpose other than short-term profits at the core of corporate designs. In a celebrated January 2008 speech at the World Economic Forum, Bill Gates called for a new form of “creative capitalism.” And around the world — largely beneath the radar of mainstream awareness — alternative designs are being developed that, like Grameen Danone, seamlessly blend a central social mission with profitable operation. These include the burgeoning microfinance industry, emerging hybrids like nonprofit venture-capital firms, new architectures like that embody “for-profit philanthropy,” dual-class shareholding structures, employee-owned companies, the foundation-owned corporations of northern Europe, and a variety of cooperatives on every continent. These models vary enormously in size and mission, but they are significant for the same reason: Together, they represent an evolutionary step in the development of corporate structure.

Continue reading “Not Just for Profit

(Thanks to Savitha Peri for the article suggestion!)

Source: strategy+business (link opens in a new window)