The FINANCIAL — Many corporations are seeking ways to use their business expertise to address the challenges faced by society.
At the same time social organizations are looking to the private sector for the best practices, skills, and knowledge needed to deliver greater value and increase operational efficiency. Within this context, the concept of “social businesses”—companies with the primary objective of solving a social problem by applying business principles—has attracted particular attention, according to the report published by The Boston Consulting Group.
A social business is a company created for social benefit rather than private profit. Like an NGO, it has a social or environmental mission, but like a business, it generates its own revenues to, at a minimum, cover its cost. Applying business principles to social problems can increase the effectiveness and efficiency of the solutions and create long-lasting, self-perpetuating benefits.
“A charity dollar has only one life. A social business dollar can be invested over and over again,” explained Professor Muhammad Yunus, chairman of Yunus Social Business and coauthor of the report.
But beyond the social benefits, various business benefits for participating corporate partners also became evident: Unlike traditional, donation-based corporate social responsibility (CSR) activities, social businesses allow companies to directly use their skills, expertise, and business network to address a particular social problem. In this way, social business activities can be aligned with the core commercial business. If designed and managed effectively, this alignment not only generates lasting social impact but also can lead to tangible business benefits, says the report.
According to the corporations surveyed, the most important business benefit that social businesses can provide is the potential for learning and innovation. All along the value chain, companies have found that approaches and innovations aimed to better reach those most in need in fact can also have broader commercial applications and can be a source of competitive advantage for the core business. A less tangible but equally important business benefit is providing a sense of purpose and personal and professional development opportunities to employees. Companies engaging with social businesses can provide their employees experiences particularly valued by today’s "Millennial" generation—thereby strengthening employee engagement, job satisfaction, and retention.
“Social business can be a powerful vehicle for corporate social engagement as it allows companies to directly use their skills, expertise, and business network. By aligning social activities with the core business in this way, they can also become a source of innovation and competitive advantage,” said Ulrich Villis, European Leader of BCG’s Social Impact practice and coauthor of the report.
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