The New Capitalism: Business Becomes Social
By Catherine Powell
In recent years, the proliferation of the microfinance business model, pioneered by Muhammad Yunus, has become a standard by which to measure businesses that benefit communities. Recently microfinance has been criticized because many microfinance borrowers, particularly in India, have fallen prey to loan sharks.
Yunus, who also has been accused of predatory lending, explains that commercialization is responsible for destroying the original microfinance mission. The model continues to be sustainable when it is small and focused on individuals. Microfinance alone, however, can't be the world's economic cure-all, and those of us who are passionate about the microfinance revolution are left to wonder what global business reform will look like.
It's looking a lot like social enterprise. One of the most exciting and expanding sectors of 2012, social enterprise is a new way to do business and think about capitalism. Social enterprises are hybrids of various organizational models that intersect profit making with measurable benefits to communities.
To understand the direction of new business and investigate social enterprise, I spoke with Peter Roberts, a professor at Emory's Goizueta Business School; Hilary King, Emory student and co-founder of a direct-trade coffee business; and Katrell Christie, owner of an Atlanta coffee shop and founder of a nonprofit educational program in India.
Roberts has advanced his career by searching for new ways to do and teach business. And social enterprise is a new way to approach capitalism that goes beyond focusing solely on profits and Fortune 500 companies. A social enterprise allows for the coexistence of profit making and social benefits. A sustainable business, after all, requires rigorous standards that ensure accountability to relevant stakeholders.
My passion for this topic stems from living for two years, on and off, in India as a student, tourist, and entrepreneur. I often have contemplated the intersection between nonprofit and for-profit enterprises. As a Rotary Scholar based in Hyderabad, I created a small jewelry business with a group of women in one of the poorest neighborhoods. I got to know Hindu and Muslim women and helped create opportunities for them to generate income that they wouldn't have had otherwise. We learned firsthand about the communication skills, confidence, and risks required to be an entrepreneur. The most challenging conversations were about money, as many of the women asked me for money outside of the business.
I formed the business as a limited liability corporation because I believed that corporations should begin and end with the welfare of underserved populations, women in particular. The money that we generated and could use for future investment, I believed, was more sustainable than one-time handouts from nonprofits. At that time, in 2005, I didn't realize that my ideas were part of a bigger social-enterprise movement.
Five years ago, Katrell Christie lived up the street from a coffee house that was about to close its doors until she decided to buy it in order to continue her morning coffee ritual. Since then, she has expanded the store's size and developed a nonprofit project called The Learning Tea. She sells books, tea, and Indian dinners that benefit an orphanage she has founded in Darjeeling, India. She said, "my product is education," which is "not really a salable product." She has taken 22 Atlantans on trips to build the orphanage, which houses and educates nine girls.
Most of the difficulties Christie has faced are trust issues. She has to trust that the chain of command and the volunteers in India are doing the right thing. She has to trust that the girls are invested in their education. She has to trust that customers will continue purchasing her products. The rewards for Christie are that the "girls really are desperate for education" and that the trips to India for Americans "changed every person in some way or another."
Hilary King has been a student of anthropology, Spanish, and business through college, graduate school, and a Watson fellowship. She is currently working toward a doctoral degree in anthropology at Emory. She applies her studies hands-on through a direct-trade coffee company based in the Dominican Republic called Liga Masiva. Established by King and her college best friend, Liga Masiva is founded, says King, on "building a global farmers market" by "directly connecting small-scale organic farmers in Latin America to consumers in the US." King defines social enterprise as "people trying to use business to meet social needs using varied tools from business and nonprofit [sectors]." As a social enterprise, Liga Masiva employs a "trade model that works better for small-scale farmers by giving them guaranteed prices that are above their cost of production and facilitating access to credit and market information."
King and her colleagues have faced skeptics in the US who doubt the sustainability of the business because there are not many other businesses that compare. King and the growing staff at Liga Masiva are pioneers who demonstrate that social enterprise is possible, profitable, and sustainable. What King describes and what many others are now noticing is that business should not work by exploiting people "traditionally at a disadvantage within the international trade system." The success of Liga Masiva is based on its mission to "decrease the farmer's vulnerability" and to "connect people rather than to distance them." To do this, King also has realized that Liga Masiva must be "flexible enough to innovate and make new decisions and new iterations."
All the organizations mentioned believe that it is just as important to address the common good as it is to generate profit. Today's entrepreneurs are acknowledging the relationship between social equality, sustainability, and profit. Through social enterprise, entrepreneurs are building business models that reflect the needs of vulnerable communities.
Catherine Powell is a former CWE intern and currently contributes written and film content to various publicity projects at the Center for Ethics at Emory.