Edible Yoghurt Pots and Other Great Ideas

Ten percent of all government aid should go to promoting social businesses, argued microfinance pioneer and Nobel Prize winner Muhammad Yunus at yesterday’s panel on innovation at the Clinton Global Initiative meeting in New York. This echoed our call for new, innovative ways to deliver aid based on partnerships between government and the private sector.

Professor Yunus’s model of a social business explicitly means a business that is not run for profit, at least in terms of dividends or capital gains for outside shareholders. His Grameen organisation in Bangladesh is already working on a number of social businesses with big multinationals, such as a partnership with French dairy product giant Danone, to produce nutritionally enhanced but still palatable yogurt, to tackle malnutrition. (Yunus delighted the audience at a later conversation with Matthew at the 92nd St Y with an account of how he first persuaded Danone to switch from plastic yoghurt pots to biodegradeable pots made from corn starch, and has now set the research team on a mission to make an edible, and nutritious, pot!)

As we discuss in the book, in the past Yunus has been critical of those who have tried to use the for-profit capital markets to scale up microfinance. At the 92nd St Y, it seemed that Yunus may have softened his hard line a bit on microfinance (charging an interest rate of cost plus 15 percent or more puts a lender into the “red zone” of exploitation, he argued, less than that may be okay even if it generates profits), but he still thinks social business should be not for profit.

We are fans of Yunus. We share his enthusiasm for his belief that mobile phones are transforming the lives of the poor, in banking (see this excellent series of articles on mobile banking in the Economist) and next, he thinks, in health care. Yet we think his definition of a social business is too narrow and potentially restricts the resources available to social entrepreneurs to take their solutions to scale. The economic crisis has given everyone good reason to be sceptical about capitalism. Yet, it was striking that some of the other speakers on the innovation plenary at the CGI (moderated by Matthew) saw real opportunities in philanthrocapitalist approaches that bring together the head and the heart. 

From the business world, Jack Ma, the founder of Alibaba, China’s eBay, explained how his company has unleashed the potential of entrepreneurs and created thousands of jobs by recognising that long term profitability for the company must be based on serving its customers well and looking after its employees. From the philanthropy world, Judith Rodin of the Rockefeller Foundation announced the imminent launch of a new initiative to promote for-profit investments that help the poor. (Matthew has written an article about this.)

Also on the panel, Al Gore, the former US Vice President, made a typically impassioned appeal for action on climate change at the Copenhagen Summit at the end of the year. “Business leaders and citizens are ahead of politicians on this,” he declared. This assertion may surprise some, who see business as the problem rather than the solution. Gore did acknowledge that some business lobbies were an obstacle to a climate deal but he also saw many smart business leaders who understood that this was the only way to long term sustainable profitability.

This year’s CGI has been marked by a surge in commitments from for-profit companies, spurred in part by the economic crisis to see that “doing well by doing good” is the best business strategy for consumers, employees and shareholders. This is what Bill Gates calls “creative capitalism”, and is an increasingly powerful force in philanthrocapitalism.