Yunus describes the role of a Social Business by looking at two organizational forms: a regular business and a non-profit. A Social Business seeks to combine the strengths of these different organizations.
A (financially healthy) regular business can operate economically independently, making it self-sufficient. In economic terms, it is self-reliant. This self-sufficiency is a powerful asset that a non-profit doesn't possess. A non-profit depends on donors or other forms of external funding and will always remain so for as long as it exists.
This financial independence, while being a strength, can also be a weakness. Often, we see that profit orientation becomes a goal that overshadows everything else. "The business of business is business" is a quote by economist Milton Friedman, emphasizing that a company's primary responsibility is to make a profit to deliver value to its shareholders.
The excesses resulting from such a singular focus are numerous and well-known. It can lead to the neglect of social and environmental issues, a focus on short-term gains, ethical compromises, worsening working conditions, or result in (extreme) forms of inequality.
New Weave does not see a traditional business approach as the right model for an organization focusing on a long-term objective, such as reducing waste or promoting circular design. However, the aspect of financial independence can significantly enhance effectiveness.
Looking at a traditional form of a non-profit, we see essentially an opposite profile. These organizations are not financially self-reliant but do strive for a good cause.
The idea behind a Social Business is essentially straightforward; it combines the strengths of a commercial business and a non-profit. An organization that is financially self-reliant and thereby aims to be more effective. And at the same time, it also works towards a social issue. This objective is embedded in the foundation of the organization, making such organizations often referred to as 'impact first' entities. A Social Business, as described by Muhammad Yunus, must adhere to the following seven principles.