By Bernardo Javalquinto
University of Maryland
Thursday, November 17, 2016
Social business: a change of paradigm for economic and development diplomacy?
Economic and development diplomacy are not neutral; in fact, they are always based on specific developmental and economic paradigms. Taking a step back, diplomats do well in re-thinking some of these paradigms. Last year’s Financing for Development Conference in Addis Ababa made suggestions regarding the role of philanthropy and innovative ways of financing. Taking this as a starting point, this blog post offers reflections on the social business model.
A recent article in the Harvard Business Review argued that ‘the social business model is both an efficient way of fighting poverty and a productive source of new business ideas.’Indeed, the vision of many people is that a number of global problems we face can be solved through the creation of social business.
A social business is a form of business mainly driven by a cause, rather than by traditional business-school objectives, such as profit maximisation with minimal investment and cost reduction. The social business concept goes far beyond accomplishing personal or investor goals. It focuses on the human being and seeks to achieve one or more social objectives through a company. In this new model, a company is doing things well from the beginning; all costs are covered so that investors or owners recover their investment, albeit through a reduced dividend distribution policy that places the social cause first, thus bringing a new perspective to what is morally ethical. This new concept of social business allows obtaining benefits, but on the condition that those benefits are maintained within the company and reinvested; investors and shareholders receive a fair return equal to their investment and will always make some profit.
Thus, social business brings a new dimension to the business world and a new sense of social awareness to the community. If social objectives can be achieved more efficiently and effectively by adopting a social business format that is sustainable, then, why not take this route?
Why give up the notion of profit, if it has established itself in mankind as a key performance indicator? To abandon the idea is quite illogical and contravenes the essence of human beings. To do so would cause great surprise. To be totally clear: social business does not ask people to give up a compensation for their effort. The idea of ‘giving something up’ is usually a cause of a tremendous shock in any human being. But this paradigm for social enterprise or social entrepreneurship does not ask anyone to give anything up. Rather, it proposes that if you are concerned about a social problem like youth employment, empowerment of women, care of the elderly, climate change, alleviation of poverty, social justice, so on, then you can make a significant contribution, perhaps even through your current activities, to solving a problem that involves all of us. Perhaps this could even open a door that leads to solving a world problem. It is up to you to reinvest the company's money in itself and make it grow, which will benefit everyone within, from the janitor to the owner, the customers; the community as a whole, the region, the country, and perhaps even the planet.
With this practice, you will be contributing towards humanizing the economy, a purpose that has long been lost due to the greed of people in all business sectors due to their lack of business ethics education, and lack of solidarity to the disadvantage in the economic system.
So, in conclusion, successful economic and development diplomacy needs to take this into account, because social and economic concerns affect all of us simultaneously.
Bernardo Javalquinto-Lagos is a Latin American economist University of Maryland. He was born in New York and raised in Egypt and Chile. During the 1990s, he worked at the World Bank/IFC and the embassy of Chile in Washington, DC. In 2015, Javalquinto-Lagos received the SCIACCA Economic Award in Rome. The Argentine Senate as awarded him twice as one of the leaders in development and poverty alleviation in Latin America.