Social Ventures Founded Under Corporate Auspices Have the Advantage. We Need More Grameens

This week, we read about the social venture, Grameen Danone foods, started jointly by Danone, the French food company, and the Grameen bank, a microfinance bank that extends loans to individuals and organizations looking to start new social ventures. This week’s piece on the three different business models social enterprises tend to follow allowed me to classify Grameen Danone Foods as a social business venture—a for-profit entity with a social mission. Both the Wall Street Journal article we read for this week and a recent article from the U.K. publication, the Guardian, chronicle some of the roadblocks the company hit when it tried to develop and market a low-priced, nutritious yogurt that South Asia’s poor could enjoy. These roadblocks included a rapid, unforeseen spike in the price of milk and difficulty engineering a product that the children of Bangladesh’s rural villages found tasty. All fledgling social ventures undoubtedly encounter these types of setbacks. However, the question arises: Are the ventures created under the auspices of multinational companies such as Danone best equipped to weather these setbacks? If so, can we conclude that the Social Business Venture is the more effective model?

Without question, social ventures founded by financially strapped idealists out of moral outrage over the conditions facing those without access to essential life-sustaining resources and life-improving technologies are laudable. Banks such as Yunus’s Grameen Bank make sure such ventures are able to get off the ground, and thank goodness such institutions exist. I am not sure it can be effectively argued, however, that these sorts of ventures are as likely to eventually fulfill their respective missions as are ones that have the full weight of multinational corporations behind them. Grameen Danone Foods cannot fail. As was mentioned in the WSJ article for this week, both Danone and Grameen have too much invested in the subsidiary company—both in terms of money and public relations—to allow it to fold. Therefore, when the company encounters setbacks, it can count on the resources it needs to overcome them. Upstart social ventures can often be killed by the types of hiccups Grameen Danone have already had, and will most likely continue to have. They are unquestionably less resilient than their corporate supported counterparts due to monetary concerns.

Obviously, a large corporation or corporate partnership with vast monetary resources cannot found every social venture. Yunus would probably say that, even if they all could be, they should not be. If we accept this argument, an important question becomes how to motivate the establishment of more microfinance institutions, such as Yunus’s, that are founded on trust.