What's a social business?

This post contributed by Paula Cardenau.

Our meeting around social business (which had 23 Ashoka, Ashoka-Lemelson, and Artemisia social entrepreneurs, in addition to staff from Ashoka and Artemisia Foundation) focused on the dilemmas and opportunities facing social businesses in Latin America.

We began by reflecting on the exercise that all of the participants had to complete prior to the gathering: each one had to define what a social business means to them.  As if there weren't enough definitions for this concept, and as many definitions as there are out there, there are names: social businesses, social enterprises, inclusive businesses, and so on. In the end what mattered was not the definition, but the common denominator, the essential points on which we all agreed upon: a social business or enterprise utilizes market mechanisms -- that is, it offers a good or service in exchange for a payment that covers the costs and generates additional revenues -- in order to bring greater benefits to populations that even today are excluded or marginalized from society. In other words, a social business is a means, not an end in itself.

In which way does a social business increase social benefits?

Its productive or distribution processes generate employment opportunities or better income opportunities to vulnerable populations: small producers, women who suffer domestic abuse, people with physical or mental disabilities, at-risk-youth, or other groups that don't have real opportunities to access the job market. E,g,. Agencia Mandalla , El Arca , Granja Andar (on the video above), Naidí, Instituto Papel Solidario, Lua Nova, Aliança Empreendedora and Interrupción.

Another way in which a social business is able to generate positive social impact is by granting bottom of the pyramid populations access to critical goods and services, related to health, water, among others. E.g., Community Enterprise Solutions - CES , ETV , ASEMBIS, Ama - gi, and Solar Ear.

Muhammad Yunus, in his book "Creating a World Without Poverty: Social Business and the Future of Capitalism", mentions a third type of social business, in which a social benefit is not given through a product, service, or the operations, but through who owns it. If the stocks of the business are owned by the poor or by those in a vulnerable position, any of its profits are increasing the quality of living of its owners.

Social businesses or social enterprises--is this concept defined? No. Does it have great potential for high social impact, since it combines the best of social organizations and the private sector? Without a doubt, and as proof one can look at the entrepreneurs that have taken this path. However, there are still challenges ahead of us related to production, legislation, success indicators, governance, or access to financing for these social businesses. This is what we will explore in the next few days.