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While most enterprises are established in an exclusively capitalistic setting with the sole aim of reaping as much profit as possible, there are those that target the neglected poor in society with an aim of uplifting this section of society while others still end up profiting form them.
Some economists say that social entrepreneurship has creative destruction activities since it breaks all the previously set capitalist rules of defining business like conventional methods of production, market and product structures, and consumption patterns. They then replace them with social and environmental products and services that are of superior quality.
This case study is meant to discuss the underlying ethical issues in social entrepreneurship and bottom of the pyramid business enterprises. It investigates these ethical issues in light of particular real life enterprises and their adherence to ethical issues. Business ethics is the philosophical or moral appropriateness of the conduct of individuals running a given organization or the organizations set principles (Prahalada, 2010).
From a normative perspective, it is defined as appropriate corporate practice. This case study seeks to answer three ethical questions in respect to these enterprises, namely:
- Is the enterprise a dependable corporate citizen?
- Does the enterprise conduct any harmful business or unlawful business? This is in regard to both the environment and the society.
- What is the impact of the enterprise to its intended customers?
Social enterprises
A social enterprise is a business venture that employs capitalistic business skills to achieve social and environmental goals. These are some times referred to as philanthropic goals.
They are set up to satisfy a certain social need in a given society. However, this does not mean that social enterprises are not meant to make any profit. Social enterprises are said to be almost similar to non-profit organizations, but are not exclusively non-profit making, Profits from social enterprises are further reinvested to achieve their social objectives.
These social enterprises differ from commercial enterprises in the fact that they are not motivated by any underlying marketing strategy or corporate social responsibility program (Roy, 2010; Nicholls, 2006). The social goals must be based on creation of these enterprises; hence further differing with enterprises that extend charitable gestures. Most social enterprises are geared towards uplifting the poor in society to earn a living that can give them a more decent lifestyle (Prahalad, 2010b)
Bottom of the pyramid business ventures
Economists define Bottom of the Pyramid as the lowest level of the social economic group that is composed of the poorest people in the society. These are people who live on $2.50 or less per day. This accounts for over 2.5 billion people in the world. This term is commonly used by new businesses that want to market their products to this particular market, also referred to as base of the pyramid.
Though most of these people live in developing countries, this does not mean that developed countries whose populations belong to the upper tiers of the pyramid do not have Bottom of the Pyramid business enterprises.
It is also used to describe underdeveloped or underutilized markets. This is from a resource point of view where Bottom of the Pyramid businesses seeks to exploit unused resources in these poor or low income markets. It gives the poor value for their money hence leveraging their small incomes and also increases the market for the ventures. They fill gaps that exist in these poor societies in terms of goods and service delivery.
Entrepreneurs who choose to adopt this type of business strategy recognize the available needs in these neglected communities and, although their products and services are priced fairly to accommodate the poor incomes, they are boosted by the sheer magnitude of these markets which are huge especially in underdeveloped countries.
According to London, Hart and Kacou, (2008), this is a risky venture and it should not be fuelled by the desire to make quick profits. The goods or services produced are sold at subsidized prices and these businesses also employ local communities to produce these goods and services.
The World Commission on Environmental Development describes sustainable development ventures as those that address the needs of current populations without sabotaging those of future generations. This ethical concept is adopted by BoPs to address both inter-generational and intra-generational justice.
Example I
PJs community services
PJs community services were formed in London by Peter and Claudine Reid. They converted an old sign making factory into a community center that houses a daycare center, five music recording studios, teaching rooms, and a meeting hall. They blended their business ideas with models on community service to assist the vulnerable in society that had been ignored by regular government policies.
The center has become a beacon of hope for many people in society with its main target being children who have missed out of the normal education system for whatever reason, and the elderly in society who have been neglected by government policy formulators (Sims, 2002). These are troubled teenagers who result to violence to solve what they perceive as social injustices and pensioners who have lost hope of living for long.
Despite the social connotation of the company, the center has a business model behind it as it has to be self-sufficient. Initially, it started as a delivery service provider to the elderly in its proximate society, but later expanded to other parts of London. This was later followed by personalized services to the elderly. PJs Community Services also offer mentorship and counseling to the troubled teens in society.
The PJs Community Services is basically a Base of the Pyramid business venture since its main customers are the disadvantaged in society. It is an example of a Bottom of the Pyramid business venture in a developed country. However, the company also makes a considerable amount of profit to sustain the founders and the disadvantaged members in terms of income.
Ethical implications
In its effort to alleviate societal problems while still generating a sustainable in come, this venture has turned out to be a dependable part of the society as it is improving societies for the better. The PJs Community Services is a dependable corporate citizen since it complies with the regulations formulated by the authorities within its jurisdiction.
It also teaches its members to be noble citizens and responsible members of the society and this is entrenched in their main organizational mission and vision. PJs Community Services exercises ethics of care as it respects the relationship of people in society and has built a business model to promote this.
The organization applies ethical Kantism as it doesnt apply capitalistic forces to maximize profits, but ensures that the economic improvement of its members in society. The company also has well-defined and managed financial systems that it exploits to achieve its goals. Therefore, the enterprise can be seen as fostering force for inter-generational justice.
The enterprise has always conducted its business law fully without any negative impact to the society and it has had no known environmental violations. Unlike some enterprises in London they do not exploit the poor for profit and their efforts to uplift the neglected in society has borne positive effects to this targeted portion of the society.
According to Zandt, (2008), the company has always complied with regulations and unethical acts such as bribing of regulators have never been known to exist. The organizations programs are also geared towards creating environmental awareness in the society, which fosters intra-generational justice by ensuring future communities are composed of educated, peaceful and conscious individuals who care for the less privileged in society as well as for the environment.
PJs Community Services is good to its customers and though it is a Bottom of the Pyramid enterprise, its products and services are of the highest quality. Martirosyan and Maretti, (2005), states that when they started with delivery services one of their core customers who are the elderly in society, demanded that they also offer personalized care services.
They also have stuck to what they set out to do and although capitalist influence has been great with their numerous financial problems at the initial stages, they managed to stay away from the capitalistic greed and still offer community based services. Hence, there is ethical egoism as the proprietors are not motivated by self-interest, but community interests.
Example II
The Grameen foundation
This not for profit organization was established in 1997 with a mandate to offer assistive services to microfinance enterprises. However, it is an independent institution from the bank. It mainly helps microfinance institutions with more effective models and also helps the poor with simple, but effective and innovative mobile based solutions that can help them increase their income levels so that they can have dignified lives.
The foundation is currently in more than 36 countries and it mainly concentrates in the worlds poor (Gup, 2005). Through microfinance institutions, the worlds poor can access cheaper loans for their businesses. They are also advised on new ways of making money and are given advice on healthy living, food security and financial security. As indicated in the organizations values they respect and collaborate with locals who already run social enterprises or those who are seeking finance to establish a social enterprise.
Due to their international scope they are able to recognize opportunities and threats in different markets and advise these small entrepreneurs. Their programs have helped many of the worlds poor especially women and children.
Through collaborating with local organizations, they have been able to: reach poor communities with technology and micro-finance services; provide the poor in previously neglected areas of these poor economies with microfinance services and cheap technological innovations; measure their impact to ascertain the progress in empowering these poor societies to be financially independent.
Ethical implications
The Grameen foundation has directors with a high ethical standing and they enjoy the support of even Nobel Laureate Muhammad Yunus. In its effort to provide the poor with financial services it has come out as a dependable source of relief in these poor societies.
The group has also been known to collaborate with authorities in their target countries and this has been made easier by their collaboration with local institutions which are already licensed to operate in these 36 countries (Trevino and Nelson, 2010). The organization has strived to ensure that dignity is returned to the poor in societies and they further their campaign against financial and economic injustices in these societies.
They do not exploit the poor and their services are almost free. The foundation does not engage in any unlawful behavior like offering bribes to officials to get operating licenses or any other form of bribery. Their programs are geared towards sustainability of communities and their environment through programs like food security they try to avert the consequences of environmental degradation and also mitigate its effects on these poor communities.
Therefore, the organization promotes inter-generational justice by ensuring that the future of the poor is brighter and future generations do not have to go through the same challenges (Zandt, 2008). They invest in poor and this makes them self-sufficient economically. The organization also creates jobs and generates wealth further boosting the incomes of these poor countries.
The Grameen foundation targets the poor as their customers and they seek to alleviate poverty in these poor societies. Their services are tailored towards uplifting the lives of these poor people and for the greater good of the society.
The foundation applies utilitarian ethics as it takes upon itself the mandate of improving degraded environments and doesnt apply capitalist principles of exploiting its customers. They do not only offer financial services, but also educate communities on sustainable living and how to exploit the resources available in their environment without degrading it.
Reference List
Gup, B., E. 2005. Capital quest scan: markets, globalization, and economic development. Innovations in financial markets and institutions. New York: Springer
London, T., Hart, S, L. and Kacou, E. 2008. Business Strategies for the Bottom of the Pyramid. New York: FT Press.
Martirosyan, T. and Maretti, S. 2005. Scholars guide to Washington, D.C. for Central Asian and Caucasus studies: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan. Washington D.C: M.E. Sharpe
Nicholls, A. 2006. Social entrepreneurship: new models of sustainable social change. OUP: London
Prahalad, 2010a. The fortune at the bottom of the pyramid: eradicating poverty through profits. New York: FT Press
Prahalad, C., K. 2010b. Private Sector and Poverty: Progress at the Bottom of the Pyramid During 2004-2009. Chicago: Pearson.
Roy, A. 2010. Poverty capital: microfinance and the making of development. Chicago: Taylor & Francis.
Sims, R. 2002. Teaching business ethics for effective learning. London. Greenwood Publishing.
Trevino, L., K. and Nelson, K., A. 2010. Managing Business Ethics. New York. John Wiley and Sons.
Zandt, J., D. 2008. Ethical issues in business: a philosophical approach. Chicago: Pearson/Prentice Hall.
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