Thursday, February 7, 2008

Grameen and Danone Yogurt

Dear Colleagues

Grameen and Dr. Yunus are well known because of the success of microcredit ... but they go way beyond microcredit in their initiatives to create a socio-economic framework for progress that serves all of society.

Social business has been identified as a key missing link in the market oriented capital market economic system. Social business seeks to recover costs and to maximize social benefit in contrast to a profit maximizing business that seeks to recover costs and the maximize corporate profit and stockholder value.

Social business and profit maximizing business have an interest in cost effectiveness, efficiency and productivity. This is the basis for their sustainability and their performance.

Grameen is cooperating with the Danone company in France to produce and distribute a yogurt product in Bangladesh. The business has been optimized in Bangladesh to serve social objectives, including being sustainable and improving child nutrition. It is progressing well.

Meanwhile the Danone management in France have addressed the conflictingf requirements of profit maximizing stockholders with the social objectives of the Danone operations in Bangladesh. The solution has been to make the Danone social business activities a separate company, and have that company quoted separately on the Paris stock exchange. Investors have a choice ... profit maximizing, or social benefit maximizing.

Is this working? Will it work in a broader context.

The jury is still out. But there is no question that the basic ideas are a step in the right direction. There are missing links, notably a framework for social accounting that captures the ides of social benefit in a manner that is reliable and verifiable. But this is a start, and some of this is very positive.

Stay tuned

Peter Burgess