Access to energy for the disadvantaged, particularly those in rural areas, has been given a non-negligible boost thanks to a blend of the innovatory ideas of a Bangladeshi economist and the revolutionary technology in the photovoltaic (PV) solar lamp.
Social Business in a Nutshell
Social business was first theorized by economist and 2006 Nobel Prize winner Muhammad Yunus, who was himself from one of the poorest countries in the world, Bangladesh. It has since been taken up and applied by a number of companies and non-governmental organizations (NGOs) around the world.
Social business is based on three principles:
- The project should have a social objective, like overcoming poverty, improving access to education, healthcare or technology, or protecting the environment.
- The project should be profitable to ensure its viability over the long term. Its ability to be self-funding clearly separates it from the dominant 'Third World' aid model of assistance and subventions in previous decades.
- The project should not seek to maximize profits but rather to reinvest them back into the project, with the aim of achieving the set social objective. While Yunus excluded paying investors dividends, other economists consider that this is key to attracting more investments and attaining even more ambitious social objectives.
Social Business Applied to the Energy Sector
Social business was first theorized by Muhammad Yunus, a Bangladeshi economist and 2006 Nobel Prize winner.
Big energy firms have a long history of funding social initiatives. Often with a strong presence in developing countries, they contributed aid as it was generally conceived in the past by financing schools or local football stadiums, for example.
As time went by, they began to consider the idea of using energy, their core business, as a source of aid. This involved trying to support projects with a sustainable – if not profitable – business model.
One of the biggest drivers for this in the early 2010s was, paradoxically, quite a small device: the solar lamp. Simple yet hard-wearing, the lamp owes its widespread success to the increased affordability of the PV panel that powers it, and improvements to lithium-ion batteries. Underprivileged communities in remote rural parts of poor countries in Asia, Africa and Latin America fast emerged as the target market.
The concept was a breakthrough. By taking the focus off electrons and on to the product that freed them, the solar lamp offered a model for wide-scale energy distribution that was soon extended to other devices like fans and televisions. The Total Group's Awango by Total range was one of the forerunners.1
A Coherent Value Chain
When embarking on a social business project, the Group sets out to achieve profitability by streamlining the value chain. This begins by sourcing the most competitive suppliers, often based in Asia. Then, the Group and its affiliates ship the products to the target regions. Lastly, a dense distribution network ensures the complex task of getting the products to – by definition – poor users in isolated regions. For a range like Awango by Total, this network is made up of independently run service stations, social entrepreneurs, solar resellers and NGOs. Other sectors require different approaches, like when highly social business-minded Danone completely rethought its distribution methods by delivering tiny quantities of yogurt to thousands of resellers. But regardless of the means used, the goal is always to ensure that each segment is profitable.
Putting Product Quality First
All social business stakeholders agree that the products have to be reliable and of good quality. Despite the low price, they still represent a considerable investment in poor communities, and so they have to be made to last. Projects should also ideally be scalable, i.e. able to be reproduced in other regions of the world while at the same time reducing costs.
From a financial perspective, the revenue generated by this kind of operation pales in comparison with that from other projects by major groups, reaching at most a few million dollars in each target country. But, to cite an oft-used expression, "big things come in small packages".