Hiroshi Hoshino: Solving Social Issues Through Business

2020/02/21

There is a concept called "social business" that addresses social issues through business operations. While traditional business primarily aims to maximize profits, social business can be described as a business model that balances two objectives: the social aspect of social significance and the business aspect of commercial viability.

On one hand, social issues include those related to basic survival, such as extreme poverty and hunger, the spread of primary education, gender equality and the status of women, infant mortality, maternal health, the spread of HIV/AIDS and other diseases, and access to water resources, as previously outlined in the United Nations Millennium Development Goals (MDGs). On the other hand, in a developed country like Japan, there are various problems even if we limit the scope to the declining birthrate and aging population, such as a decrease in the working-age population, soaring medical costs and financial burdens, depopulation, and a shortage of caregiving personnel. Approaches from new perspectives are required for these many unresolved issues.

This is not merely social contribution. As Professor C.K. Prahalad demonstrated, the BOP (Base of the Pyramid), which accounts for about 70% of the world's population, represents an untapped potential market that traditional businesses have not approached. It can be considered that new businesses can be developed precisely because there are still unresolved issues and pain points.

Furthermore, the Ministry of Economy, Trade and Industry's Social Business Study Group lists three elements of social business: sociality, business viability, and innovativeness. Specifically, these are: making the resolution of social issues the mission of business activities, continuously pursuing business activities toward that achievement, and developing new products, services, or mechanisms necessary for problem-solving as a method.

In addition, Dr. Muhammad Yunus, a Nobel Peace Prize laureate and one of the proponents of social business, distinguishes the difference between traditional business and social business through the difference in motivation: selfishness versus selflessness. Dr. Yunus has proposed seven principles for social business, including the resolution of social issues, economic sustainability, and consideration for the environment and employees. Under these principles, social businesses are being born all over the world.

In recent years, I feel that corporate interest in social business is clearly increasing.

Two major tailwinds can be considered as reasons for this. The first is the Sustainable Development Goals (SDGs) proposed by the United Nations as the successor to the MDGs. Toward 2030, 17 goals and 169 targets have been presented. Achieving these goals, which aim to "leave no one behind," is difficult through the efforts of UN agencies and national governments alone; it assumes initiatives through a wide range of partnerships, including companies and citizens. In fact, an increasing number of companies are incorporating the concept of SDGs into their corporate visions and CSR reports, and many business people can be seen wearing colorful SDG pin badges representing the 17 goals in 17 colors.

The second is that ESG investment has become emphasized as an indicator for selecting investment targets. This refers to investment that considers not only traditional financial information but also the extent to which a company focuses on the three elements of Environment, Social, and Governance. According to a statistical report by the GSIA (Global Sustainable Investment Alliance), global ESG investment reached 30.683 trillion USD in 2018, an increase of 34% in just the two years since 2016.

In Japan as well, the Government Pension Investment Fund (GPIF) incorporated ESG into its investment principles in 2017, and the total amount of ESG investment in 2018 reached 2.2 trillion dollars. In the future, for companies to be selected as investment targets by the market, it will be essential to consider social elements along with the environment and governance.

As awareness of social business deepens, the concept of corporate CSR is also expanding from traditional legal compliance and social contribution activities to the development of products and services that address social issues. CSV (Creating Shared Value), proposed by Professor Michael Porter in 2011, aims to balance the improvement of corporate competitiveness with the resolution of social problems through the creation of shared value, which overlaps exactly with social business.

Now, my involvement with social business dates back to the Great Hanshin-Awaji Earthquake I encountered in Kobe in 1995. I experienced the earthquake in my first month after taking up a post at Kobe University on January 17, 1995. While busy with the university's response, I joined a local earthquake volunteer group immediately afterward. On weekdays, I was in charge of planning activities and totaling activity results after working at the university, and on weekends, I was involved in support activities for the victims.

In June of that year, temporary housing was opened in several locations within the local Higashinada Ward of Kobe City, and many elderly people and victims moved in. As local reconstruction progressed, I visited the temporary housing to provide local information, confirm safety, and create places for interaction. That winter, I saw several households where the standard-issue air conditioners in the temporary housing were not being used, and windows were sealed with newspapers to prevent drafts. When I asked the reason from people I had become quite close with by then, they said they didn't have enough money to pay the electricity bill and couldn't use the air conditioner. I was poignantly reminded of the difficulty of reconstruction support.

At that time, volunteering was based on the principle of being "unpaid," and among the students who rushed to help after the earthquake, receiving money was seen as a taboo. We felt the limits of the framework of volunteer activities there and, in October 1996, launched "Community Support Center Kobe (CS Kobe)," what would now be called an NPO, in Higashinada Ward. CS Kobe received the first NPO corporate status in Kobe in April 1999 and is now the largest NPO in Kobe.

Early activities included the launch of "Atafuta Cooking," a meal delivery service centered on local housewives and the elderly; "Nuno Net Haru" for clothing repair and remodeling; and "Ten," a bicycle puncture repair service by middle-aged and older men. Although these were small-scale businesses, they were all much-needed services in Kobe, where many people lived alone due to the earthquake, there was a need to utilize remaining clothing, and punctures occurred frequently due to poor road conditions. Furthermore, it became a system where participants could earn a small income of about 2,000 yen in a limited amount of time.

Even now, as an intermediary support organization, activities to support business planning and launches continue. These are called "community businesses," but they can be described as social businesses rooted in the region. On January 11 of this year, marking the 25th anniversary of the earthquake, the regional base "Asu Park" was opened using a park in Nada Ward, with the expectation that it would serve as a base for civic activities and community business, and a place for collaboration between citizens, companies, and organizations. I look forward to its expansion as a social business.

In April 2003, I moved to Kyushu University to launch the first business school in Kyushu. My local area of Fukuoka is the only one among five cities including Osaka, Tokyo, Yokohama, and Kawasaki that does not have a flophouse district where laborers gather. Despite this, there was a period when the homeless population reached 969, second only to Osaka. Is the comfort and livability that every citizen acknowledges only for us? About 10 people who had a great sense of problem awareness regarding this and had no prior acquaintance with each other happened to individually approach an Osaka company that publishes the Japanese version of "Big Issue," a magazine originating in the UK that supports the independence of homeless people through magazine sales.

At that time, selling a magazine for 300 yen resulted in 160 yen of income for the individual. From those sales, they could purchase the next magazines, eat meals with their own money, and stay in places like internet cafes. If they could then move into an apartment, they would have their own address, which could lead to employment. This is a business model intended for independence support in such a form.

Having seen homeless vendors standing on the streets with magazines in the Tokyo metropolitan area and Kansai region during business trips and travels, members who wanted to introduce this to Fukuoka launched the "Big Issue Fukuoka Supporters" and invited this activity. Then, on May 7, 2007, we began selling the "Big Issue Japan Version" in the busy Tenjin district.

Standing on the street together, I was surprised by the change in the vendors' consciousness, as much as their economic independence. Seeing them keep their appearance clean and make efforts to sell with their voices felt like they were returning to the society they had once turned their backs on. Now that welfare benefits have become easier to receive, this activity is unfortunately suspended, but at one point, up to 11 people were selling around Hakata Station and Tenjin, which actually led to employment.

I felt great power not in relief through welfare or charity, but in making efforts toward independence oneself and in resolving social issues through business.

Currently, I serve as the Director of the Yunus & Shiiki Social Business Research Center at Kyushu University. While collaborating with the Grameen Foundation in Bangladesh, we conduct research, education, awareness-raising, and promotional activities for social business within Japan. As one of those activities, we have hosted the Social Business Design Contest every year since 2012. This is a business plan contest aimed at creating innovative social businesses. Targeting many teams of working professionals and students from across the country, excellent plans are refined through workshops and professional advice from mentors toward the Grand Champion competition held in Tokyo. More than 40 social business companies have been born from this contest.

Additionally, as research, I conduct interviews with multinational corporations in Asia and Africa to find models for social business. In Bangladesh, very interesting models can be seen, such as a joint venture between Grameen and Euglena, a Japanese company that produces mung beans, the raw material for bean sprouts.

Social business appears to have a high hurdle because it is required to satisfy both contributing to the resolution of social issues and business viability. On the other hand, considering that many unresolved issues and pain points still exist, the target fields are broad, and business possibilities at various scales can be considered. From solving regional issues to companies entering new businesses and Japanese companies entering developing country markets, I feel that the concept of social business suggests a business approach from a new perspective.