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May 5, 2021

Business with a purpose

Business

May 5, 2021

LAHORE: Rising prices and record corporate profits point towards the greedy mindset of most of our businessmen. Their contributions towards general wellbeing of common men are negligible.

The best most of them do is provide funds to the non-government (NGO) and non-profit organisations (NPO) for social work. We do have some NGOs that are doing an excellent job in the health and a few in education sectors. But they fail to make a dent in the number of persons deprived of treatment and children out of school. Those spending millions on providing meals at streets and outside hospitals are doing a disservice to the nation by making the recipients parasites that spend the whole day in queues to get lunch and then dinner (for one person) which means the entire family has to be in the queue.

We need enterprises in Pakistan that combine business principles with social objectives with the aim to align social objectives with profit objectives; facilitating the needy while continuing to generate the revenues to remain commercially viable. Social businesses are different from non-profit non-government organizations in the sense that they serve the poor by providing them services or products at minimum possible rates to improve the quality of their life.

These enterprises operate at minimum profit but operate at optimal capacity to achieve economies of scale. In some cases they could earn more than high priced producers through higher turnover. The corporate social responsibility shown by many companies is an eye wash. Those that plant trees to improve the environment are regularly polluting the atmosphere through their manufacturing processes.

The NGOs are not the solution as they depend on donations and mostly provide free services which usually mitigate only immediate needs of the poor. Some NGOs also provide micro loans to the poor usually at a higher mark-up than charged by commercial banks. Even then NGOs look for donations to continue their operations.

Social-minded operators function like normal businesses with an aim to generate revenue that is enough to cover their expenses and earn enough profit to sustain business growth. Their business models bridge the social and private sectors. At the same time, they operate like businesses but keep their margins lower for social good. Social businesses definitely have a leaning towards the business side but they try to weigh profit and social objectives equally.

In Pakistan for install where anaemic population is in majority fortification of wheat flour with iron could eliminate this major health issue. The cost of fortification is hardly 0.5 paisa per kg. It would add Rs10 in the cost of a 20 kg wheat flour bag. Successive governments have proved their incompetence by failing to provide fortifying substance to the millers or incorporating its cost in the wheat flour rate. But the amount required for fortification is negligible and the flourmills could bear it as well as Rs10/20 kg is not even 0.5 percent of the price of a 20 kg bag. Some mills, may be three or four, are fortifying their flour with iron without increasing the retail price. Their sales have enhanced. Unfortunately there are some popular brands that are charging a premium on fortified wheat flour.

Social businesses operate with a different mind-set as their basic objective is to deliver value to the society rather than enhance the financial value of their shareholders. Social entrepreneurship is more popular among the youngsters that deliver some vital services to the poorer segments of the society at heavy discount. Some of them for instance conduct Hepatitis C and some blood tests at 1/3rd, the rates charged in the market by clinical laboratories. They convince the factory owners to get their workers screened at least for Hepatitis C and collect blood samples of the workers from the factory or mill to save the hassle of going to the laboratories. These entrepreneurs are still earning a decent profit. Because of contracts with factories they conduct more tests that reduce their cost. Prudence demands that health authorities regulate the clinical laboratories to bring down testing charges to reasonable limits.

Companies involved in social businesses use their skills, expertise, and business network to address a particular social problem. In this way, social business actions can thus be associated with the core commercial business. Moreover employees involved in a social business feel a sense of purpose and gets new personal and professional-development opportunities. Employees working for social good become more involved in the business and feel satisfied with the job they perform which strengthens the company business. Social entrepreneurs design a business model that ensures them to achieve the social objective without undermining the viability of the business venture.