Co-operatives: a genuine alternative to broken business?

14th February, 2012 by Anonymous

Once dismissed as a little too worthy for their own good, says Simon Birch, co-operatives have emerged as one of the more resilient sectors in a battered economy.

Matt Lane is a revolutionary. He says he wants “to challenge the corporate status quo which currently puts shareholders and greed first”. Fighting, if familiar, talk. But you won’t find Matt camped out by St Paul’s. His revolution happens in the office.

Lane works for the Phone Co-op – a consumer co-operative which is owned entirely by its customers and run solely for their benefit. Providing line rental, broadband and mobile services to homes and businesses, it’s the UK’s first and only telecoms co-op. Lane is convinced that it’s simply “a better way of doing business, one in which everyone can benefit”.

Lane isn’t alone in wanting to change the world. Once considered marginal and irrelevant, co-ops long ago ditched their cloth cap image – and they mean business.

Since the start of the credit crunch in 2008, the co-operative sector has outperformed the UK economy as a whole, growing by an impressive 21%. There are over 5,000 registered co-ops in the UK alone, working in everything from farming to funeral care, wind farms to web design, and just under one and a half million worldwide. And it’s growing in scale, too, both in Britain and across the world.

But what exactly is a co-op?

“A co-op is a business owned and run by and for their members, whether they are customers, staff, suppliers or residents”, explains Ed Mayo, Secretary General of Co-operatives UK, the sector’s trade body. “Members have an equal say and share of the profits.”

Common to all co-ops, he adds, is the underlying idea that there are things that you can do better together. As Mark Kerrigan of Australia’s automotive co-op, Capricorn puts it: “The collective size and strength of our membership base [means we can] negotiate better trading and credit terms with a vast number of suppliers across Australia, New Zealand, and South Africa.”

“I’ve been a member of Capricorn for well over 15 years”, says Jon from Jonlin Automotive in Queensland. “It means I can ring up a supplier, whether in Brisbane or around the country, and instantly I’ve got an account. They will send me the goods without worrying about cheques or Visa cards or anything like that. As soon as you mention Capricorn, everyone seems to know what’s going on.”

Larry Martin from Ocean Spray Cranberries, a co-operative of over 600 family farms from across the USA, agrees that there is strength in numbers. “From delivery of product to market, investing in product innovation and business expansion, the co-operative model has allowed Ocean Spray to be highly competitive, winning access to markets that would be difficult or impossible to access by individual farmers.” Ocean Spray cranberry juice is now stocked in a range of UK retailers – exposure which an average American fruit grower could never hope to obtain on his or her own.

But it’s not just about leverage, says Paul Flowers, Chair of The Co-operative Banking Group (part of the Co-operative Group). Co-ops also share a common set of values of democracy, equality and self-help: “They create businesses that serve and deliver for the greater good, as opposed to ones predicated on maximising profit for a chosen few.”

None of these points, however, explains just why co-ops are enjoying such a renaissance during a global recession. Mayo believes it’s because, at times like these, people turn to businesses they can trust. “Recent research shows that people see co-operatives as fair, honest businesses, whereas conventional [companies] are viewed as greedy and cut-throat.” Vivian Woodell, Chief Executive at the Phone Co-op, agrees. “Issues such as the increasing levels of executive pay and the scandals around mis-selling financial products” have dented people’s faith in the mainstream, he says.

Of course, as with any business, adds Mayo, “co-operatives aim to trade successfully and exist to generate profits. But the big difference is that rather than rewarding outside investors and shareholders, they share their profits amongst their members.”

And those profits are important. “We shouldn’t kid ourselves that values alone are what’s going to make us successful”, asserts Tim Southam of the Mountain Equipment Co-op in Vancouver, one of the biggest outdoor gear retailers in Canada. “Being a co-op in itself is not enough. For us it’s all about ensuring that we’re running a smart and efficient business, and that we continue to evolve and respond to the market. Offering a quality product at a fair price – this is where we compete head to head.”

Others, though, believe that the co-operative model itself offers key commercial benefits. Capricorn’s Mark Kerrigan explains: “As we have no third-party shareholders seeking a return on the use of their capital, our decision-making is based entirely on deriving maximum benefit for our members. It isn’t distracted by having to maintain share prices.”

Ed Mayo agrees. “The co-op ownership model allows you to make business decisions that aren’t focused purely on short-term financial returns. Instead you can take a long-term view, which can be very advantageous.”

So do co-ops offer a genuine alternative business model for the 21st century – one which might be both more effective and resilient in the face of economic uncertainty?

“Absolutely”, believes Kerrigan. “When your customers own the business, as ours do, you only have one requirement: to deliver maximum benefit back to them. And because the co-op is more inclined to be focused on its core business, rather than seeking new ways to generate a return on investment, the business itself tends to be more robust and steady than would otherwise be the case.”

Despite all these advantages, says Mayo, co-ops are in danger of remaining the world’s biggest secret. “All our narratives about business, such as the way business news is reported, assume a shareholder model. This is what’s taught in business schools and reported in stock exchanges.”

Yet, as new research by Co-operatives UK reveals, there are three times as many member owners of co-operatives as individual shareholders worldwide. “Despite the focus always being on stock markets, it is co-operative enterprises that touch the lives of more people as business owners.”

With the co-operative sector one of the few areas of the UK economy that’s actually growing, it’s encouraging to see that the Government is finally getting behind it. Prime Minister David Cameron has portrayed co-ops as practical examples of the ‘Big Society’, in which communities take over the running of everything from the local pub to local schools. Now, he has promised to introduce a new Co-operatives Bill to encourage the formation of co-ops, as part of a drive to encourage ‘socially responsible capitalism’.

“It is a basic truth that if people have a stake in business, they will support its growth and share in its success”, he said, pointing out that “there are over 12 million co-op members in the UK. That’s more people than there are shareholders in the economy.”

If all this is followed through, it would be a welcome change, says Mayo: “Co-ops have been overlooked by successive governments.”

But relying on help from outside has never been part of the co-operative tradition. From the days of the Rochdale Pioneers, 150 years ago, self-help has been at the heart of the movement. And as long as the sector can keep attracting workers as passionate as Matt Lane at the Phone Co-op, then its future looks assured. “Knowing that you’re a pioneer and part of something that’s changing things for the better is very special”, says Lane. “Having worked in a co-op, there’ll be no going back for me.”

Strength in numbers
UK
  • Number of co-ops: 5,450
  • Worth: £33 billion
  • Membership: 13 million
  • Employees: 250,000

 

Worldwide
  • Number of co-ops: 1.4 million
  • Worth (top 300 alone): $1.1 trillion (equivalent to the world’s 9th largest economy)
  • Membership: 1 billion
  • Employees: 100 million

Simon Birch is a freelance journalist and a columnist for Ethical Consumer. He specialises in environment and ethics.

Interested in what you've read here? Want to find out more? Then come to The Co-operative, Forum for the Future and Co-operatives UK's event 'The Co-operative Opportunity: how to reboot a sustainable economy' in London on Wednesday 15th February. For more information and to apply for a place, click here.

Photos: Hemera/thinkstock

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