Social Business : Ethics and Self Sustainability.

This weeks readings give an insight in the emerging innovations targeting the less income groups which not only help the poor segments of the society but also earn some reasonable profit for the companies. The questions that come to my mind after reading all the articles is whether such ventures are ethical and self sustainable. By ethical I mean that by earning certain amount of profit from the new social innovations like the low cost yogurt, shoes etc are we doing philanthropic work or business? And what if in the future the cost of yogurt goes up and some people might be so fond of it that they will still buy it at a higher price. Secondly is such a venture sustainable in the long run? For instance in the case of Danone the income levels of the target population might increase or decrease depending on the economy of the countries hence affecting the demand for the product.

          This reminds me of a venture initiated by the Government of Punjab Province of Pakistan called “cheap Pita Bread”  the aim of this scheme was to provide subsidized flour to the private bread vendors who will produce Pita bread  without earning any profit and in addition they would also produce normal pita breads at the market price and earn some profit. The cost of normal  Pita Bread is around 6 cents and the price of the subsidized bread was 2 cents. The aim of the scheme was to benefit the poor segments of the society who could barely earn two meals a day. The scheme remained in force for almost a year in which the Government had to pay a huge amount as subsidies to the bread vendors and ultimately it had to be discontinued. The main reasons for the failure of this venture were  misuse of the subsidized floor by the vendors and selling pita bread at market price instead of the reduced price. There was lack of accountability of the vendors because of the limited resources of the Government. Moreover, the middle class who could otherwise afford to purchase normal Pita Bread also started purchasing the cheaper bread due to its low cost. This negated the aim of the government to target only the poorer segments of the society. From ethical perspective it might seem that providing cheap bread was helping the poor but contrary to that prices of other related goods like, vegetables, lentils etc were extremely high. Therefore just providing cheap bread was not solving the long term problems of the poor segments of the society.

        Similarly if we look at the Danone project of 10 cent yogurt, it might be providing some form of a snack to the people but in essence it does not solve the real problem of malnutrition and hunger in Africa. Isn’t it just offering them peanuts and making profit by providing a product to a large number of people. Do we have an ethical issue here?