Saving the world with a cup of yogurt (cont.)

By Sheridan Prasso, Fortune

So why isn't it working? Why do three billion people - almost half the world's population - still live in poverty? The answer can't be blamed entirely on inefficient markets, corruption and dictatorships: Even the U.S., the wealthiest country in the world, has 36 million people living below the poverty line. Yunus invites anybody who is listening to think bigger about the concept of capitalism itself.

While Yunus didn't invent the notion of nonprofit enterprise or of doing business for social good - Harvard Business School added a course called Social Factors in Business Enterprise back in 1915 - it is a concept, like climate change before Al Gore, in need of a frontman. Yunus is becoming that person, articulating his vision in ways CEOs understand.

"Many of the problems in the world remain unresolved because we continue to interpret capitalism too narrowly," Yunus told an audience at Oxford University last year. "We have remained so mesmerized by the success of the free market that we never dared to express any doubt about it."

Well, actually, Karl Marx once did, and that didn't end well. But Yunus isn't calling for capitalism's abolition; he's calling for its enlightenment.

What if we lived in a world where companies didn't measure their performance only in terms of revenue and profitability? What if pharmaceutical companies reported on their bottom lines, along with those familiar figures, the number of lives saved by their drugs every quarter, and food companies reported the number of children rescued from malnutrition?

What if companies issued separate stock based on social returns, and people could buy the shares of those that saved more lives than others, or sell the shares of energy companies that polluted more than their competitors? What if, by raising "social capital" and investing it in sustainable businesses without a profit motive, companies could reach into new markets, expanding their core businesses at the same time they improved lives?

That's the world Yunus envisages. "It could be a very big idea," says a fellow Nobel laureate, the economist Joseph Stiglitz, who has been hearing Yunus talk about his new endeavor for years. The question, he says, is how to implement it.

The yogurt experiment

At a lunch in Paris, in the fall of 2005, Yunus invited Danone CEO Franck Riboud to come to Bangladesh and build his first social business enterprise. Riboud listened, then agreed. The yogurt Danone would make would be fortified to help curb malnutrition and priced (at 7 cents a cup) to be affordable. All revenue from the joint venture with Grameen would be reinvested, with Danone (Charts) taking out only its initial cost of capital, about $500,000, after three years.

The factory - and ultimately 50 more, if it works - will rely on Grameen microborrowers buying cows to sell it milk on the front end, Grameen microvendors selling the yogurt door to door and Grameen's 6.6 million members purchasing it for their kids. It will employ 15 to 20 women.

And Danone estimates that it will provide income for 1,600 people within a 20-mile radius of the plant. Biodegradable cups made from cornstarch, solar panels for electricity generation and rainwater collection vats make the enterprise environmentally friendly.

International organizations such as Unicef believe it may be such a revolutionary means of improving nutrition through a sustainable business model that it is watching closely - and may seek to replicate around the world.

For Riboud the enterprise is about expanding into new markets with nutrition-enhancing products. "It's really a growth strategy for our company," he says over a bowl of onion soup in a Dhaka hotel. "We are convinced that in this world, when you are a consumer-goods company and the country is a developing country, it would be crazy to think only about the peak of the pyramid."

But it's clear also that Riboud agrees to a large extent with Yunus's worldview. "Is the classic economic model working?" he asks. "No! But I told him, 'I don't want to make charity.' The strength is that it is a business, and if it is a business, it is sustainable. Your shareholders are happy."