Posted on 02/25/2007 5:07:31 PM PST by sociotard
Danone, one of the largest dairy food and water producers in the world, is forming a joint venture with Muhammad Yunus' Grameen Bank to form what Yunus calls a "social business enterprise." By truly marrying the interests of corporations with economic development, the model calls for corporations to "draw on microcredit-funded businesses to incorporate nonprofit models into their bottom-line operations, seeking not just revenue but social returns, and returning the profits to the communities where they operate." Essentially, it is about creating a world where a companies performance is not only measured in terms of revenue and profitability, but also on their social returns. For instance, how many children did a food company rescue from malnutrition or how many lives did a pharmaceutical company's drug save in a given quarter?
It sounds like an ideal world, but one that could be turning into a reality with the project with Danone in Bangladesh. In this venture, Danone's yogurt will be fortified to help curb malnutrition and sold at a price that is affordable, while the revenue generated will be reinvested, with Danone only taking out its initial cost of capital after three years. The factory being built in Bangladesh will rely on Grameen microvendors selling yogurt door-to-door as well as its 6.6 million members who will purchase the yogurt for their families. They intend to build another 50 of these factories if the initiative is successful.
Marc Van Ameringen, executive director of the Global Alliance for Improved Nutrition, says, "The new wave in business is, forget corporate social responsibility and philanthropy - how do you integrate this into your core business?...The idea Danone has of creating a social dividend for shareholders - that's cutting-edge. No one else has come up with this interesting a model. It supports your brand, returns your capital, you're not going to lose money and you give your shareholders a vision of doing something good." Mr. Van Ameringen also says that ideas such this are also being discussed within companies such as GE, Unilever, Coca-Cola, PepsiCo, and Cargill.
It reminds me of the Michael Porter and Mark Kramer article in the Harvard Business Review last December, which talked about how companies can invest in CSR in ways that not only improve their numbers but also have a strong social impact. To read more on the Danone/Grameen joint-venture in Fortune magazine...click here.
Is this the future of business? Will companies that neglect their social responsibility be left behind?
Yunus understands grassroots capitalism and his Grameen Bank gives small loans to people in the poorest villages in Bangladesh to start small businesses.
It sounds as though "social dividend" is a euphemism for "loss." If the shareholders want to be charitable with their money, they can do so out of dividends. There's no need for a phony "social dividend."
This is really nothing new. Under Marxist president Salvador Allende, the Chilean government tried a similar scheme. In addition to "capitalist" profit, nationalized firms were credited with all kinds of other "social benefits," to make it look as though they were doing something besides losing money.
Unless some way is found to subsidize the firms crediting themselves with a "social dividend," they'll eventually eat up all their capital and go broke.
"For instance, how many children did a food company rescue from malnutrition or how many lives did a pharmaceutical company's drug save in a given quarter?"
Both of those are impossible metrics to determine.
Not every kid who doesn't eat your yogurt would have starved to death. If that were the case, that country wouldn't be be overpopulated.
Not everyone who doesn't take your drug, dies. Ditto.
What a load of caca!
People will take the cheap yogurt and sell it door to door, at market price, well past it's expiration date I'm sure.
It will also put all the poor mom n pop yogurt shops out of business. He's going to be the walmart of yogurt! ;)
I hate socialism more and more each day.
Thanks to this article, I have a new tagline.
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