Breeds of a Kind
The world of commerce has units that differ significantly to encompass both economic and social organizations. Further these could be either for-profit or not-for-profit organizations. Given this spectrum, we have four distinct breeds, with economic for-profit organizations at one end and social not-for-profit organizations at the other end. In between, are the two hybrids of economic not-for-profit organizations, and the social for-profit organizations to meet our material needs.
The most common of the four is business organizations, i.e. economic, for-profit units. Organized as sole-proprietor, partnerships and companies, they are driven by profits serving human needs. Providing goods and services they are essential for human survival, for we cannot think of a world without them. One shortcoming with this breed is that they only serve the better offs of the world, leaving the worse off on their own.
The response to serve the needs of worse off sections in our societies was primarily taken by individuals and families. The early social, not–for–profit institutions that emerged to cater to their needs were of religious denominations like temples, Buddhist Sanghas, Church and Islamic waqf. It was only around 1850s with the advent of industrial revolution and rapid urbanization that social not-for-profit organizations came up to meet this unmet need initially addressing the challenge of education, healthcare and housing. Despite their large numbers today, 3.1 million unregistered NGOs in India alone, their size is small and inadequate to meet the acute need of this section.
Cooperatives were an interesting answer to the growing need of the worse-off sections of our society as their lack of resources made them unattractive to business units to serve them. Evolution of human society since inception has seen cooperative ventures where individuals have pooled their scare resources to meet the needs of a group. Early farming practices of shared water, equipment, and animals to plough the fields are all well documented. However, it was the rapid urbanization in 1800s that led to the advent of cooperative ventures, which are economic not-for-profit organizations. In India, The Societies Registration Act, 1860 marks the recognition for economic not-for-profit organizations, visible in urban India today as cooperative banks and cooperatives directly selling farm produce to consumers.
Social for-profit enterprises are the youngest kids on the block emerging only in l970s and 80s. The rise of free market proponents like Regan in the US and Thatcher in England saw not-for-profits struggle to survive as funds dried up even as the enthusiasm of people to serve the worse-off did not. Social for-profit enterprises by self-imposed mandate limit their profit margins and cap their returns to investors are driven by ethical consumers, purpose driven workers, socially conscious investor, and supported by governments that found themselves short on meeting the growing needs of the worse off in societies.
Despite the variety, and the rare exception of AMUL in India, it is only the economic for-profit breed that thrives. The other three despite their lofty goals are struggling. The recent push for mandating CSR by getting large corporates to invest 2% of their profits has seen little impact on this front. How do you think we can address this challenge?
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