To profit or not to profit. Is that the question?
The Guardian, by Rob Greenland
On Social Business Day, Leeds-based social entrepreneur Rob Greenland challenges one of the Yunus Centre’s seven principles of social business.
I’ve been working in social business now for around fifteen years. I started out volunteering for a fairtrade social enterprise in Leeds. Except it didn’t call itself a social enterprise because the term hadn’t yet made it that far up north. We were a not-for-profit, and proud of it.
I remember the pride I felt in telling people that we were not-for-profit. It was shorthand for "we’re the good guys". Privately I would question the motives of some of the people in the world of fair trade who ran for-profit businesses. How could you possibly make a profit on the backs of poor coffee farmers and hard-up sculptors of soapstone?
Fast-forward to 2011 and I find myself more relaxed about people making money out of social business. Why? Because I think if we are going to tackle the enormous social problems that we face we need more people running social businesses. And, to achieve that scale, we will need a variety of business models – many of which will require investment.
Where will that investment come from? From entrepreneurs themselves – and from investors – both of whom, in many cases, will want some kind of financial return related to the risk that they are taking. Yet they’ll all have one thing in common – the primary aim of the business will be a social one.
Things start to get more complicated when you move away from the black-and-white world of not-for-profit. But I think we’re just going to have to learn to live with that, and get better at holding businesses to account for the profit they make.
This is where I have some difficulties with the view of social business put forward by the Yunus Centre, the people behind Social Business Day. One of their seven principles of social business is "Investors get back their investment amount only. No dividend is given beyond investment money."
That’s pretty unequivocal. It’s also, in my opinion, too simplistic, and needs to be challenged. I have enormous respect for Muhammad Yunus – and I’m told that his approach to profit is more nuanced than the principle above suggests. However, just as I would expect him to challenge me if I was to suggest an appropriate business model for offering credit to the poor in Bangladesh, I’d like to challenge him – and the Yunus Centre – on their approach to profit and dividends in the context I work within.
The fair trade social enterprise I worked for never paid any dividends. But it paid interest on loans. It paid wages. It paid Business Rates. It paid National Insurance contributions. All paid for by us taking goods made by poor farmers and artisans – and doubling the price.
How is paying wages and loan interest out of profits different to paying dividends? I suppose it’s partly about fairness – and the financial reward being commensurate to the effort that’s made and the risk that’s taken. So shouldn’t we take the same approach to dividends – and have some mature debate about where they’re OK, and where they might get in the way of achieving sustainable social change?