Defining Social Business by BCYF

Š Benita & Catalino Yap Foundation 2017 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher.

Published by SACT Press For the Benita & Catalino Yap Foundation Mabalacat City, Pampanga Philippines 2010

2

Contents Introduction

4

Definition

5

Social Business and Social Enterprise (Commonalities and Differences)

5

Commonalities Among Social Business Types

7

Differences Among Social Business Types

7

Seven Types of Social Businesses

8

Notes

10

Works Cited

12

3

Introduction Throughout time, people have taken various paths to contributing to the common good through business. These can be summarized in 3 statements they say: (1) “We made money and we want to help society” (2) “Helping society is good for business, but we can only do good if we do well in our business” (3) “Because we want to help society, we will build this business” One thing is common -- all these three groups of people want to help society through business.

The first group would be categorized as organizations with CSR models (Corporate Social Responsibility). They often engage in activities of philanthropy.1 The second one would be businessmen who strive to help society but who also recognize that they can do so significantly only when they have a profitable business.2 Many would categorize the third group as social enterprises. But for us in BCYF, the third may be bifurcated into either Social 3 Enterprises (SE), or Social Businesses (SB).

4

What is a Social Business?

A social business is any sustainable commercial activity with a social impact delivered after profit and government payments.

Social Business & Social Enterprise Clearly for us, although both may be similar, the way social enterprise and social business operate, and the results of their operations, have important distinctions.

Commonalities between Social Business & Social Enterprise (1) It has a specific social impact (2) There is voluntary spirit (3) They have to be both financially viable or have a business case (4) There is a strong leader (5) They help people and society at large Differences between Social Business & Social Enterprise While both try to solve social objectives, social enterprises are more focused in doing so because they integrate the social objective in their cost of doing business. On the other hand, Social businesses contribute to their social objectives after profit is earned.

We think both models are good. Needless to say, they are both important drivers to social development. Neither is better than the other.

But it is up to the entrepreneurs to decide which model works best for what they want to achieve.

5

BCYF believes that both models are not only good, but needed in society. Needless to say, these development models can be 4

important drivers for “social development”. Neither is better than the other. It is up to the entrepreneurs concerned to decide which model works best for what they want to achieve.

Contribution to the Economy The differences between Social Enterprises (SE’s) and Social Businesses (SB’s) are important in that their respective approaches may become the subject of governmental interest, particularly if incentives are considered.

BCYF believes that SE’s, by the very nature of their continuing and “a priori” commitment, deserve special mention, and thus, consideration by government. SB’s are expected to be more numerous but in a way, operate more like charitable institutions.

Overtime, SB’s will tend to have continuing, regular and focused commitment like SE’s. However, such will still be subject to the vagaries of the market.

As a group SB’s provide various mechanisms for good people to do good.

6

Commonalities Among Social Business Types 1. They run their business after profit 2. They have a narrower focus in terms of their participants and/or members 3. They are all growth models that will affect poverty

Differences Among Social Business Types 1. They are different forms of business organizations, both legally and operationally 2. Scaling is particular to the business model 3. Role of government 4. The personnel and management structure There are 7 types of Social Businesses. These types are not based on forms of organizations, but rather on methods of delivering social responsibility outcomes. This publication acknowledges that there are possible overlaps among the social business types since various organizations can employ a combination of methods to deliver social value through business.

But for purposes of classification, these are the 7 types: (1) CSR-based business, (2) Cooperatives, (3) Fair Trade, (4) Not-for-Profit Organizations with a for-profit model for social impact, (5) Poverty Alleviation groups, (6) Charitable groups, (7) Other Cause-Oriented Groups doing revenue generating activities.

7

5

(1) CSR-based Business The organization practices corporate sustainability and responsibility. It integrates CSR principles in its business such as shared value creation,6 good governance, societal contribution and environmental integrity.

7

(2) Cooperative An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly -owned and democratically-controlled enterprise.

8

(3) Fair Trade According to the World Fair Trade Organizations, there are 10 principles of Fair Trade: Principle One: Creating Opportunities for Economically Disadvantaged Producers. Principle Two: Transparency and Accountability. Principle Three: Fair Trading Practices. Principle Four: Payment of a Fair Price. Principle Five: Ensuring no Child Labor and Forced Labor. Principle Six: Commitment to Non Discrimination Principle Seven: Ensuring Good Working Conditions. Principle Nine: Promoting Fair Trade. Principle Ten: Respect for the Environment

8

(4) Not-for-profit Organizations with a for9 profit model for social impact.

There are non-profit organizations who have implemented hybrid models to deliver social value.

These hybrids combine for-profit business to sustain and grow the impact of the non-profit

10

(5) Poverty Alleviation groups Several organizations who are mission-focused on poverty alleviation employ strategies to deliver business solutions to solve poverty. Some employ strategies like bottom-of-the-pyramid where goods and services are delivered to those who live on less than USD 2.00 a day.

11

(6) Charitable Groups Philanthropy still plays a significant role in shaping social movements and establishing new organizations and institutions. But aside from the traditional way of giving donations, a number of philanthropic organizations choose to funnel charitable funds into more sustainable and effective means for social change, like in impact investing or venture philanthropy 12 (7) Other Cause-Oriented Groups doing revenue generating activities 13 Religious groups for example are also key contributors to social development. Faith-based organizations can have revenue-generating activities that contribute to the social mission.

9

Notes (1) Philanthropy is a major driver in promoting social good consisting of the voluntary giving of individuals or organization in order to promote a certain social need (Payton & Moody, 2008).

(2) Brought about by movements like Conscious Capitalism (Mackey & Sisodia, 2014), Benefit Corporation (Honeyman, 2014), and the like, a growing number of businessmen are committing to use their business to significantly address social problems.

(3) There are many definitions of Social Enterprise, but BCYF defines it as “an organization that uses business to help society” and has its social objective integrated in its cost of doing business (Benita and Catalino Yap Foundation, 2015).

(4) Social Development is about the “improvement of every person’s well-being so they can reach their full potential” (Benita and Catalino Yap Foundation, 2015) (5) Wayne Visser, founder of CSR International – a CSR Thought Leader defines CSR as Corporate Sustainability and Social Responsibility. “CSR is the way in which business consistently creates shared value in society through economic development, good governance, stakeholder responsiveness and environmental improvement.” Put in another way “CSR is an integrated, systemic approach by business that builds, rather than erodes or destroys, economic, social, human and natural capital” (Visser, 2011).

10

(6) Creating Shared Value is a concept defined as “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates�. It can be achieved in three key ways: (1) By reconceiving products and markets; (2) By redefining productivity in the value chain; (3) By enabling local cluster development (Porter & Kramer, 2011) (7) Definition is from the (International Cooperative Alliance, 2015). The Republic of the Philippines encourages the formation of cooperatives through the R.A. 9520 – The Philippine Cooperative Code of 2008.

(8) The World Fair Trade Organization is global network of organisations representing the Fair Trade supply chain (World Fair Trade Organization, 2013).

(9) Many organizations seek a hybrid business model to deliver the social value (Battilana , Lee , Walker , & Dorsey, 2012).

(10)The concept of BoP (bottom or base of the pyramid) was catalyzed by C.K. Prahalad and Stuart Hart who argued that there is an opportunity to tap the market potential of the four-billion people at the base of the economic pyramid. BoP customers are defined as those with purchasing power parity of less than USD 1,500 per year (Prahalad, 2009).

(11)Meyerson & Wernick, 2012 (12) Buckland, Hay, & Hehenberger, 2013 (13) Zelekha, Avnimelech, & Sharab, 2013

11

Works Cited Battilana, J., Lee, M., Walker, J., & Dorsey, C. (2012). In Search of the Hybrid Ideal. Retrieved from Stanford Social Innovation Review: https:// ssir.org/articles/entry/in_search_of_the_hybrid_ideal.

Benita and Catalino Yap Foundation. (2015). Defining Social Enterprise. Mabalacat City, Pampanga: SACT Press.

Buckland, L., Hay, M., & Hehenberger, L. (2013). The Growth of European Venture Philanthropy. California: Stanford Social Innovation Review.

Retrieved from NESST: http://www.nesst.org/wp-content/ uploads/2013/07/SSIR-Summer-2013-The-Growth-of-EuropeanVenture-Philanthropy1.pdf.

Honeyman, R. (2014). The B Corp Handbook: How to Use Business as a Force for Good. Oakland, CA: Berret-Koehler Publishers, Inc. International Cooperative Alliance. (2015). What is a Cooperative. Retrieved from International Cooperative Alliance: http://ica.coop/en/whatco-operative Mackey, J., & Sisodia, R. (2013). Conscious Capitalism: Liberating the Heroic Pursuit of Business. Massachussets: Harvard Business Press.

Meyerson, D., & Wernick, L. (2012). Power beyond the purse: Philanthropic institutions as agents of social change. Routledge.

12

Payton, R. L., & Moody, M. P. (2008). Understanding Philanthropy. Indiana: Indiana University Press.

Porter, M. E., & Kramer, M. R. (2011). Creating Shared Value -How to Reinvent Capitalism and unleash a wave of innovation and growth. Harvard Business Review.

Prahalad, C. K. (2006). Fortune at the Bottom of the Pyramid.

New Jersey: Pearson Education.

Republic of the Philippines. (2009). Republic Act 9520: AN ACT AMENDING THE COOPERATIVE CODE OF THE PHILIPPINES TO BE KNOWN AS THE "PHILIPPINE COOPERATIVE CODE OF 2008". Retrieved from Republic of the Philippines: www.gov.ph Visser, W. (2011). The Age of Responsibility: CSR 2.0 and the New DNA of Business. United Kingdom: John Wiley & Sons Ltd. World Fair Trade Organization. (2015). Definition of Fair Trade.

Retrieved from World Fair Trade Organization: http:// wfto.com/ Zelekha, Y., Avnimelech, G., & Sharab, E. (2013). Religious institutions and entrepreneurship. Springer.

13

The Benita & Catalino Yap Foundation , established in 1993 has a Vision to help the Philippines develop on a manner which respects the individual’s dignity and contribution by coming up wit innovative social solutions.

Our mission is to contribute to the development of the country by focusing on the youth and their dreams, which can be achieved through CSR 3.0-based Social Entrepreneurship.

The Institute for Social Enterprise & Development is the BCYF department that implements the Social Emterprise Program to identify, assist, train, convert and develop social entrepreneurs.

www.bcyfoundation.org

14