What it means to be a ‘Social business’ – Made In Haiti, By Haitians, For Haitians

What it means to be a ‘Social business’ – Made In Haiti, By Haitians, For Haitians 

Social business and social entrepreneurship are ‘buzz words’ that have been dominating the social sector in recent years. Although I had dabbled part-time in social business, I didn’t feel like I fully understood the challenges and differential business decisions that would need to be made, when trying to achieve ‘Profit with Purpose’.

A social business is a business that strives to create positive change in society, by using a business approach that could generate profits, which are used to sustain and expand its social impact. This creates an interesting duality of objectives, where one has to often make trade-offs between maximizing Profit and Social Impact, a challenge especially when social impact is so hard to measure.

So what makes the organization I’m working in today (Meds and Food for Kids http://mfkhaiti.org/) a social business? With a mission of saving the lives of malnourished children and improving livelihoods in Haiti, it has made several ‘SOCIAL’ choices that a traditional profit maximizing business may not have.

Consider a business that produces peanut based medicines needed in Haiti for treating child malnutrition:

1. Where should the product be manufactured?

Ideally, a location with a low cost of doing business, good infrastructure and a stable political and regulatory environment. Apart from low cost labor, Haiti offers none of the mentioned! The infrastructure is poor or lacking, government is volatile with unpredictable changes in law, and energy is expensive. Yet, the decision to locate production in Haiti was made, to create employment for 50+ Haitians, a critical choice in a country that has unemployment rates in the range of 70%

2. Where should Peanuts be sourced, a key ingredient of the medicine?

The lowest cost supplier/country would be the natural way to go, but the organization decided to source as much as possible from Haiti, even though peanut quality is lower, and costs are ~2X the imported variety. Why? To support the  livelihoods of ~500 Haitian farmers, 80% of whom remain below the poverty line.

3. What should business Profits be used for?

Return profits to shareholders or owners would be one option, but the ‘social’ choice was made here too, where profits are reinvested to further the mission by donating medicines to clinics that cannot afford to buy it, increasing purchases of expensive local peanuts to grow farmer incomes, and providing more training/equipment to local farmers.

As you can see from the above, a series of ‘social’ choices were made along the entire value chain of the business. These no doubt come at a cost and create profitability challenges when you need to compete with low cost manufacturers that can easily export into Haiti. Herein lies the challenge of social businesses, an innovative yet robust business model is needed for survival – more on this in a future post.

Why social business and not traditional aid through governments and charities? Sustainability and effectiveness – governments and charities are facing unprecedented funding challenges brought on by the global recession, and in some cases, the interventions just have not worked. Using a business approach to solve social problems provides independence from unpredictable funding from donors and governments, as well as the opportunity to increase social impact when profits are generated.

MFK is fulfilling its mission by creating a Value Chain of ‘SOCIAL’ choices  – made In Haiti, By Haitians, For Haitians






There are 4 comments for this article
  1. Alex Mette at 4:35 am

    Interesting post Julian. The point was well made, especially the way you broke it down. It was quite clear how MFK is addressing the root causes as well as the symptoms of malnutrition and made business decisions based on that.

    It’s an interesting approach towards business in general and I think the lesson of reinvestment in particular has an important role to play in reshaping traditional attitudes towards for-profit business. For example, standards of acceptable levels of profit and salaries are different in different countries so in some places, more money may be put back into the company.

    More on the point, I came across a couple of articles the other day that offer two contradictory perspectives on the same question you’re asking: Should social business prioritize financial goals or impact?


    Keep up the good work!

    • Julian Antony at 12:05 pm

      Thanks Alexander Mette, appreciate the comments and great points, that are well noted. Great to read the interesting articles that go much deeper into the question I touched upon. It is definitely a fine line balancing the 2 goals, and determining what level of additional financial risk you are comfortable taking on, when choosing social goals over impact

      in my opinion, some of this can be solved with a robust business model and the non-profit status can sometimes reduce the pressure of financial targets. For now MFK is able to make these social choices, but things could very well change in the future, so it is a model that requires dynamic adaptation..stay tuned!

  2. Graham Day at 7:45 pm

    Great post Julian and thanks for links Alex!

    I’m facing some of these issues now as I prepare to help some of our accelerator program entrepreneurs. Most interestingly, I’ve found the “what to do with profits” question most challenging, particularly when there are competing interests. There seems to be three directions for free cash flow: 1. Financing (I’m including both interest and dividends here) 2. Internal investment for scale (eg increasing volume through machinery or employees) and 3. External ecosystem improvements (eg. investing in supplier training, donations to other initiatives, etc).

    I’m discovering that there are so many different variations of “social business” definitions that is sometimes challenging to find common ground. For example, I have one entrepreneur that is ideologically opposed to paying dividends, but is fine with taking on debt at market interest rates (Note: MFK may not pay investors, but it does pay loan interest). Others believe fixed percentages of revenues (not even profits) should be donated to other causes. Finally, many believe in scaling first (ie. reinvesting all profits) before any so-called “distractions” can be entertained. All of these value judgments affect the direction of cash.

    I’m still sorting through these points of view… and I’m sure my own view will eventually emerge in a convoluted and nuanced kind of way. Tom Adams of Acumen is right – it would be great if a financial first approach were proven to have the highest long term social impact since “that would make the job of maximizing impact a more straightforward task: a singular maximization problem with finance at his heart.” But that’s a long-shot… and until that relationship is proven, we’ll have to sort through our own values as investors and entrepreneurs to feel comfortable with our own approach to social business. Definitely a work in progress… I will indeed “stay tuned”, Julian!

    • Julian Antony at 8:12 pm

      Thanks for the additional context Graham – in fact, you probably beat me to the topic of my next post on your very interesting question 😉

      I’ve been struggling with exactly that question ‘What to do with Profits’ and have pushed internally for an answer without much luck.

      I think you have captured the 3 broad categories for free cash flow usage nicely, and beyond the first priority of repaying the debt, I have discussed external ecosystem improvements, but this again brings a larger strategic decision on mission for the organization:
      – Does it continue with treatment interventions (donating medicines to clinics that have not secured funding), supporting its mission of ‘Savings malnourished kid’s lives’?
      – Or does it switch focus to prevention, by working with farmers to boost their incomes to eliminate food insecurity in the long-term, supporting its mission of ‘Developing Haiti’?
      My guess would be that apart from malnutrition rates improving in the country, our decisions will be heavily influenced by funding priorities of the govt, institutional NGO’s and development agencies (UNICEF, WHO, IADB etc), which are ever so dynamic.

      Looking forward to hearing other responses to this question, and seeing how our individual points of view are shaped by different organizational experiences over the next few months!

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