International Cooperative Alliance Blueprint February 2013
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International Cooperative Alliance Blueprint February 2013



International Cooperative Alliance Blueprint February 2013 ...

International Cooperative Alliance Blueprint February 2013

Read the Final Blueprint for a Co-operative Decade in English, French, Korean and Spanish and a summary version in Greek.



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International Cooperative Alliance Blueprint February 2013 International Cooperative Alliance Blueprint February 2013 Document Transcript

  • International Co-operative AllianceBlueprint fora Co-operativeDecadeJanuary 2013
  • BLUEPRINT FORA CO-OPERATIVEDECADEThis Paper has been written under the guidance of the Planning Work Group of the International Co-operativeAlliance by Cliff Mills and Will Davies, Centre for Mutual and Employee-owned Business, University of Oxford.The members of the Planning Work Group are:Dame Pauline Green Mark Craig Zhang WangshuChair – President, International Co-operative Group (UK) All China Federation of Supply andCo-operative Alliance Marketing Co-operatives (China) Nelson KuriaStéphane Bertrand CIC Insurance Group (Kenya)Desjardins (Canada)
  • Cliff MillsCliff Mills is a practitioner in the law andgovernance of co-operative, mutual and Contentsmembership-based organisations. He has INTRODUCTIONwritten the constitutions of a number of the ........................................ 01UK’s leading co-operative retail societies, andworked extensively in the development of newco-operative and mutual models for public purpose of thisservices. He has played a significant part in the documentdevelopment of co-operative law in the UK. ........................................ 03As well as being a Senior Research Associate withthe Oxford Centre for Mutual and Employee- summary of theowned Business, Cliff is Principal Associate with blueprint strategyMutuo, and consultant with Capsticks Solicitors ........................................ 04LLP and Cobbetts LLP.Dr Will Davies CHAPTER 1Will is Assistant Professor, Centre for Participation..................... 07 .Interdisciplinary Methodologies, University ofWarwick. His research is in economic sociologyand political economy. He has authored a CHAPTER 2number of policy reports on mutualism, including Sustainability.................... 13 .Reinventing the Firm (Demos, 2009), BringingMutualism Back into Business (Policy Network,2010) and All of Our Business (Employee CHAPTER 3Ownership Association, 2012). He contributes Identity............................. 19regularly to media and policy debates aboutownership and mutualism, and has writtenfor The Financial Times, The New Statesman, CHAPTER 4Prospect, the BBC and The New Left Review. Legal Framework.............. 25Will was the Academic Director of the Centrefor Mutual and Employee-owned Business until CHAPTER 5September 2012. Dr Ruth Yeoman now holds this Capital. ............................ 31 .post and has assisted in the completion of thisBlueprint. CONCLUSION ........................................ 35 references ........................................ 39 Statement on the Co-Operative Identity ........................................ 41
  • In 2009, the General Assemblyof the United Nations 2012 International Year of Co-operativesproclaimed 2012 to be the “Co-operatives are a reminder to the international communityUnited Nations International that it is possible to pursue both economic viability and socialYear of Co-operatives1. responsibility.” Ban Ki-moon, UN Secretary GeneralAt the present time in the second The United Nations’ goals for the International Year ofhalf of 2012, following five Co-operatives are to:years of financial turbulence the • Increase public awareness about co-operatives and theirmore developed economies of contributions to socio-economic development and thethe world remain in a state of achievement of the Millennium Development Goals.crisis from which there is still noapparent exit, and the developing • Promote the formation and growth of co-operatives.economies are being impeded intheir pursuit of the Millennium • Encourage governments to establish policies, laws andDevelopment Goals. In many regulations conducive to the formation, growth and stability ofnations, governments are in co-operatives.retreat, cutting their social andpublic spending, leaving citizenseven more vulnerable to economic control. The co-operative model institutions create long-termturmoil. In others, inequality is a commercially efficient and security; they are long-lasting,continues to increase as economic effective way of doing business sustainable and successful.power is shifting dramaticallywith consequential social impacts.A general movement of global “rarely has the argument in favourpower from West to East may beapparent, but there is still little of co-operatives looked stronger”sense of how political institutionsare to be reformed to cope with that takes account of a wider This is an historic moment ofgrowing social unrest, economic range of human needs, of time opportunity for the co-operativestagnation and future insecurity. horizons and of values in decision- sector. With political institutions making. It is an approach which in many nations struggling toIn the midst of this uncertainty works on a very small, and on a keep up with a rapidly changingand suffering, co-operatives very large scale. The co-operative world, it is essential that citizenscan provide some hope and sector is worldwide, providing become increasingly resourceful,clarity of direction for citizens millions of jobs around the globe. enterprising and co-operative inaround the world. Uniquely Co-operatives develop individual order to face the inevitable socialamongst models of enterprise, participation, can build personal and environmental challenges weco-operatives bring economic self-confidence and resilience, and face as a world community. Rarelyresources under democratic create social capital. Co-operative has the argument in favour of co-operatives looked stronger than it does in 2012. But unless there is • Co-operatives have 1 billion members around the world concerted action over the next few Worldwatch Institute, Vital Signs publication, 22/2/2012 years, the moment will be lost. • In India the consumer needs of 67% of rural households are By 2020, poverty will have covered by co-operatives increased, the plight of young ILO (2011) Co-operatives for people centred rural agriculture people will have deteriorated, and global warming will be having more • 40% of African households belong to a co-operative frequent impacts on everyday life. By 2020, we need to be able to • 300 largest co-operatives had a combined annual turn-over of look back on 2012 as representing $2 trillion in 2010 a turning point for the co-operative World Co-operative Monitor: Exploring the Co-operative idea, and the contribution it Economy 2012 is making to people’s security, well-being and happiness. introduction | 2
  • Purpose of thisdocumentThis document was considered in draft by the General Assembly of the International Co-operativeAlliance (ICA) in Manchester in October 2012. Following comment and discussion (now reflected in thisrevised version) the Blueprint was approved by the General Assembly. It is now issued in its final form.The intention of the GeneralAssembly is that the United “the International Year ofNations International Yearof Co-operatives marks the Co-operatives has provided abeginning of a world-widecampaign to take the co-operative powerful focal point for the sector”way of doing business to a newlevel. The ambitious plan in this since the great financial collapse. • An unstable financial sectorBlueprint - the “2020 Vision” - By pursuing the strategy outlined • Increasing inequalityis for the co-operative form of in this Blueprint, we aim to make • A growing global governancebusiness by 2020 to become: 2011-2020 a Co-operative Decade gap of confident growth. • A seemingly disenfranchised• The acknowledged leader younger generation in economic, social and The International Year of • A loss of trust in political and environmental sustainability Co-operatives has provided a economic organisations• The model preferred by people powerful focal point for the sector.• The fastest growing form of It has heightened its sense of Co-operatives already make a enterprise shared purpose, illustrated by the significant contribution towards range of activities and celebrations alleviating these pressingThe 2020 Vision seeks to build of the International Year, by global problems. But, withon the achievements of the the number of international appropriate support and greaterInternational Year of Co-operatives conferences and summits held understanding and recognition,and the resilience demonstrated around the world with agreed they could contribute muchby the co-operative movement outcome declarations2, as well more. We therefore believe that as the wide-spread take-up of the major priorities are to make the 2012 International Year logo far more people aware of the by co-operatives around the co-operative form of enterprise, to world. It has raised the profile of provide people with the tools and co-operatives beyond the limits back-up to establish, fund and of the sector itself, in civil society develop sustainable co-operatives, and amongst governmental and and to remove barriers that get in inter-governmental bodies. their way These are significant Hence the purpose of this achievements, but they need document is to set out a proposed to be seen in the context of the Blueprint for a Co-operative dominant emerging trends that Decade, and provide a clear are likely to shape our politics, direction for the coming years. societies and economies for the The challenge now is for the foreseeable future3. Some of the ICA, national bodies, sector most crucial Global Trends are: groups, co-operative societies and individual members to • Environmental degradation take this Blueprint forward into and resource depletion implementation.3 | introduction
  • Summary of theBlueprint strategyThe starting point for the strategy for a global co-operative future is the powerful claim whichco-operatives make to the outside world: that they have a way of doing business which is both better, andbrings a more effective balance to the global economy than the dominance of one single model as now.• Co-operatives are better distinctive message to ensure framework. This framework because they give individuals that co-operatives are seen and plays a critical role for the participation4 through understood by everybody from viability and existence of ownership, which makes them policy-makers to the general co-operatives. The Blueprint inherently more engaging, public. So the aim is to build seeks to ensure supportive more productive, and both the co-operative message and legal frameworks for more useful and more secure the co-operative identity. co-operative growth. relevant in the contemporary world. The aim is to With the intrinsic and abiding • Co-operatives need access elevate participation within value of the co-operative model to capital if they are to be membership and governance clearly established, and a established, grow and flourish. to a new level. distinctive co-operative identity The aim is to secure reliable and proposition described, co-operative capital while• Co-operatives are better attention turns in chapters 4 and guaranteeing member control. because their business model 5 to what facilitates or inhibits creates greater economic, co-operatives. These are the five interlinked social and environmental and overlapping themes of the sustainability. • Co-operatives in every Blueprint strategy, which can be jurisdiction sit within a legal illustrated as follows:• Co-operatives are better because they are a business model that puts people at the heart of economic decision- making and bring a greater sense of fair play to the global PARTICIPATION SUSTAINABILITY economy. The objective is to develop our external identity.Chapters 1 (Participation) and2 (Sustainability) explain whyco-operatives offer a better wayof doing business. Chapter 3 then IDENTITYeffectively sets out the co-operativeproposition for today: whatit means to be a co-operativeand what are the definingcharacteristics or “irreducible core”.• This is looked at through the LEGAL lens of identity – which is CAPITAL defined by the core values and FRAMEWORK principles of co-operation, and needs to be communicated through a powerful and introduction | 4
  • 5 | introduction
  • To pursue the 2020 Vision, the Blueprintstrategy therefore involves concentratingon these 5 critical interlinked themes,and establishing implementationstrategies in relation to each of them.The overarching agenda for the ICA, itsmembers and the co-operative sectorgenerally is laid out here:1 Elevate participation within membership and governance to a new level2 Position co-operatives as builders of sustainability3 Build the co-operative message and secure the co-operative identity4 Ensure supportive legal frameworks for co-operative growth5 Secure reliable co-operative capital while guaranteeing member controlEach of these themes represents a priorityarea for the ICA, its members and the widerco-operative sector. Each chapter of thisdocument concludes with some possibleand indicative actions that might be taken,in pursuit of these goals. It is for the ICA,its Board, members, regions, sectoralorganisations and networks to decide onactions they need to take to implement theStrategy, and to regularly assess progressand impact across a wide range of factorsincluding social, environmental andeconomic. Through working together onthese themes the co-operative communitycan collectively drive forward its pursuit ofthe 2020 Vision.Following the International Year ofCo-operatives, it is intended that thisBlueprint will provide the ICA and itsmembers with a clear focal point for futureactivity, underpinned by ambitious goals. introduction | 6
  • “Elevate participation withinmembership and governance to anew level”Democratic member participation is the best-known feature of the co-operative way of doing business,and a major part of what characterises a co-operative in contrast to investor-owned businesses.The individual member has a role to play in a gender equality7. Higher levels of worker engagementco-operative which goes beyond the basic economic and more effective decision-making are achievedrelationship of customer, worker or producer. through worker membership because the distinctivelyCollectively members own their co-operative, and democratic structures fostered by co-operativesthrough democratic arrangements they participate enable individual participation to result in realin its governance. Individually they have a right influence within the enterprise through democraticallyto information, a voice, and representation. In legitimised authority. The co-operative tradition ofthis Blueprint we use the word “participation” as democratic participation in the workplace enablesshorthand to refer to this bundle of rights. individuals to develop the skills and confidence for participation in their communities and societies8.There is good evidence to suggest that providing Co-operatives are sites for learning how to participateconsumers and workers with a voice inside in democratic decision-making, and, as such, theyorganisations produces better, more intelligent and generate a public good which exceeds their economicresponsive forms of business6. Consumer and credit imperative. Thus, democratic participation inco-operatives reduce poverty and make a positive co-operatives supports both better business decisionscontribution in skill development, education and and stronger communities. The seven co-operative principles9 - Applied The co-operative enterprise The co-operative individual People can join – and leave I can find a common interest with others if I am open to their needs and if I behave in a way that enables them to co-operate with me. Your voice will be heard Because I have an equal say in what happens, I listen and I communicate openly and honestly. You control the capital I keep a close eye on what we are trying to do together and the decisions I make are guided by this. Together, you are I help others so that they can help themselves and they help me in the autonomous same way, so that together we are more in control of our future. You can develop yourself I am interested to learn from those and others around me so that I can behave in a more co-operative way. You can be more successful I look for opportunities to co-operate with others in new settings. by co-operating with others who know how to co-operate You can do something for I am aware that I am part of a larger system and I am committed to your community even as doing what I can to make it better. you keep succeeding participation | 8
  • My benefit – our benefitThose social pioneers who The global financial crisis and else to solve the problems noestablished co-operatives over the failure of the developed longer seems to be sensible. Theprevious centuries had a clear economies and their institutions Global Trends analysis alreadyvision: they could see that by to meet the needs of their citizens referred to identifies as the firstgetting people to collaborate have dramatically changed of its three global trends “theand work together, they could today’s landscape. With growing empowerment of individuals,meet both their individual and inequality, and collapsing trust in which contributes to a sense ofcollective needs for access to commercial, governmental and belonging to a single humangoods and services, or to work. even religious institutions, sitting community”.10For them, participation was the back and waiting for somebodymeans to an end, not an endin itself. They became involvedor engaged in order to meettheir needs: it was part of theprocess of establishing theirco-operative and making itperform better.The contemporary consumer-worldof developed economies is verydifferent. Through moderntransport systems, multiplicity ofcompeting suppliers, and morerecently the power of the internet,lack of access has been replacedin many cases by a wide rangeof choices. A consumer cultureprevails. Not only does this removethe need for self-help initiatives atcommunity-level, but at individuallevel it has a tendency to makeus apathetic, complacent, or justplain lazy. It discourages civicparticipation, and encourages thepursuit of personal pleasure andsatisfaction. Drivers of change • The global emergence of the middle class, interconnected by myriad networks. As a result, citizens will want a greater say in their future than previous generations. • Growing awareness that the demands and concerns of people in many different countries converge, with shared aspirations and shared grievances. This will contrast sharply with governments’ capacity to deliver public goods, particularly those relating to improving quality of life, resulting in an expectations gap. • Increased civil society pressure for direct participation in the political arena. Greater participation and knowledge coupled with a growing expectations gap may lead to tensions, revolt and conflict. The youth movements of 2011 – from the ranks of which many members of the power elite of 2030 are likely to emerge – are aware of the problems facing representative democracy.9 | participation
  • This is a very different context. social media and the rise of others work collaboratively to The disenchantment and ‘post-bureaucratic’ governance achieve greater business efficiency. disengagement of younger introduce greater horizontal Collaborative participation people is already apparent, organisation and transparency. involving these and other as they become aware of the important groups in particular institutions and systems they Co-operatives needn’t – and sectors (such as carers, parents, are inheriting, together with the mustn’t – abandon the definition local residents, specialist local immediate economic challenges of their voting membership; but groups) provides a platform they face (the “graduate with no unless they remain open to the for exploring more flexible future”11). From Los Indignados new possibilities for participation and effective mechanisms for of the Spanish cities, to the and engagement and willing to businesses, embedding the idea of worldwide Occupy movement, innovate, they might miss out co-production in the design of the there is what has been described on opportunities to inspire and organisation itself, and giving them by one American philosopher as a involve a new generation of a competitive edge over traditional “democratic awakening”.12 members. Moreover, they risk single-interest businesses.14 looking slower and less responsive, In this context, participation in comparison both to new Grass-roots participation also – including wider democratic network-based movements such has an important role to play in participation – becomes an end as Occupy, and to profit-seeking relation to the ICA itself. One in itself, a way of countering the ventures which engage with facet of the shifting tectonic plates accumulation of power in the audiences and consumers in new of power at governmental level hands of a small elite, and a way interactive ways. is the growing importance of new governance hubs like G20. As the world’s biggest problems“participation is once again cry out for shared solutions, so the importance of multilateral becoming one of the co-operative institutions increases. The ICA is one of these institutions. It sector’s most valuable assets” owes its existence – as well as its legitimacy and authority – to the of challenging the dated ways of The function of participation in grass-roots membership of one previous generations which seem a co-operative is also evolving billion people in their co-operatives to be failing. It enables individuals in some economies with the around the world, and to their to have some level of influence emergence of new types of co-operatives’ participation in over things affecting their lives. co-operative organisation, their national bodies. Nurturing This meets a need for democratic particularly in areas of public participation at grass-roots participation in a whole range of service such as health and social level therefore strengthens institutions from which individuals currently feel excluded and which also seem to lack any real “one facet of the shifting tectonic accountability. So participation is once again becoming one of plates of power at governmental the co-operative sector’s most valuable assets. level is the growing importance of But the possibilities for new governance hubs like G20” participation and the expectations that (especially) younger people care; in new technologies, the legitimacy and authority have for participation have particularly renewable energy both of front-line co-operative changed dramatically in recent and other green technologies; organisations, but also and years.13 Looser, networked and in the creative use of particularly of their representative forms of association have been mobile technology and portable bodies such as the ICA. rising in recent years, in which wi-fi, to bring financial services the division between ‘member’ to remote agricultural and and ‘non-member’ is less clearly other co-operatives. In these defined. The digital revolution, organisations, users, workers and participation | 10
  • The goalThe aim is to elevate participation within membership and governance to a new level, and to do thisby focussing on the practical aspects of participation:• Specifically and directly • Securing support for all • Securing their leadership in focussing on young adults co-operatives to adopt innovation in the context and young people, exploring membership strategies and to of work organisation their mechanisms for forming report on them annually. With including co-production and maintaining relationships, co-operatives serving diverse and human resource and considering whether and extensive communities, management practices. established traditional the co-operative sector has Through the advantages mechanisms for participation an interest in maintaining of employee-member and engagement can and some standards in securing participation in decision- need to be adapted. The representative membership, making and information co-operative sector needs both defensively so as not sharing, co-operatives can and to offer a genuine welcome to be seen as exclusive, must address the competitive to young people, inviting and pro-actively with a pressure from investor-owned them to take a real part and view to meeting human and private companies. to help to shape the future. need as well as building the They should be involved in business. Good practice in • As a separate initiative and planning the implementation membership development linking into the theme of of this Blueprint. This is not just consistent with capital below, investigating a involves considering a range following the 5th Co-operative different more limited form of questions. Are younger Principle (Education, training of participation for providers generations evolving their own and information) and the of capital, which does not mechanisms for collaboration 7th Co-operative Principle undermine or damage which the established (Concern for the community), co-operative nature. co-operative sector can but it is also something on learn from and adopt? Are which co-operatives should This is considered both an co-operatives providing the seek to demonstrate their important and a legitimate most appropriate access points excellence, distinguishing goal for the ICA to pursue, and for young people? Are they themselves from other forms an important part of its role. committed to creating a space of organisation. Individual co-operatives are or platform for them, and enabling them to shape the future? Are they even using “this is considered both an the right language? important and a legitimate goal• Leading innovation in democratic participation, for the ICA to pursue” engagement and involvement, and identifying, • Exploring the parameters focussed on meeting the needs disseminating and upholding of traditional membership, of the people they serve and best practice. This includes considering how other running their business. It is the developing best practice in innovative and traditional role of the national bodies and relation to communication, forms of participation (such as the ICA to undertake activities decision-making, meeting comment, conversation and which will support co-operatives (both physically and virtually), debate, engagement via social in the long-term. They should and openness. It also media) do and could interface be doing things which help to includes exploring ways of with membership, and whether build successful, sustainable encouraging, retaining and different levels of participation co-operatives, and which building participation by (e.g. member, supporter, nourish and nurture individual providing member-benefits follower) are appropriate or not co-operators as they go about and incentives. in this context. their day to day business.11 | participation
  • How might the goal be achieved?As explained further in the conclusions below, responsibility for planning implementation is sharedacross the co-operative sector. However to give an indication of some of the ideas which have alreadyemerged in discussion within the ICA, and to prompt discussion, but without either being prescriptiveor imposing restrictions at this stage, the following ideas are offered.Possible or indicative actions• Finding new ways of ‘joining • Working with young adults • In relation to participation of up’ co-operators within the and young people and the non-user funding members, co-operatives sector to create social media industry to gathering evidence of existing a more connected network of explore the motivation of models and practice (see co-operators. younger generations in relation further below). to collaborative activity and• Gathering and collating affinity; how communication • Engage the Global 300 information about best and the forming of co-operatives to strengthen practice; finding and sharing relationships have changed visibility of co-operative the best ideas, including in and are changing both on-line success and impact and to such areas as age and gender and off-line; examining the amplify the co-operative voice, balance; identifying negative practices which have evolved such as through a Leadership or damaging trends, helping in recent movements. Roundtable. to expose bad practice and developing tools and techniques to improve it. “amplify the co-operative voice,• Gathering and collating such as through a leadership information which demonstrates how such roundtable” examples of best practice are positively linked to strong • Examining and challenging performance across a broad existing practices of range of indicators, including, co-operative democracy, for example, financial success, gathering evidence of employee engagement, innovative practice, social engagement and encouraging trials of alternative environmental sustainability. approaches and collating data. participation | 12
  • “Position co-operatives as buildersof sustainability”Investor-owned business models currently suffer from a crisis of unsustainability, in economic, social andenvironmental terms. The financial crisis has been an epic example of the perils of valuing very short-term gain over longer-term viability. The dominant model of capitalism of the past three decades hasalso been accompanied by increased levels of inequality, translating into lower levels of ‘social capital’and wellbeing.15 Meanwhile, the quest for ‘shareholder value’ by PLCs very often involves sacrificingenvironmental sustainability, as the case of the BP Gulf of Mexico spill revealed (see box below).These crises all derive from a to goods and services withoutbusiness model that puts financial exploitation. This has meantreturn ahead of human need, a trading in accordance with amodel that seeks to privatise gains set of values based on what weand then socialise losses. As the would today call sustainability.Harvard Business School guru, By placing human need at theirMichael Porter, has argued, the centre, co-operatives respondfuture belongs to those businesses to today’s crises of sustainabilitywhich invest in “shared value”, and deliver a distinctive form ofthat is, which account properly “shared value”. Quite simply, afor their impact on customers, co-operative is a collective pursuitenvironment, employees, and the of sustainability. Co-operativesfuture.16 seek to ‘optimise’ outcomes for a range of stakeholders, without“Sustainability in a general seeking to ‘maximise’ the benefitsense is the capacity to support, for any single stakeholder.maintain or endure. Since the Building economic, social and1980s human sustainability has environmental sustainabilitybeen related to the integration should therefore be one of theof environmental, economic, and over-arching motivations andsocial dimensions towards global justifications for a growingstewardship and responsible co-operative sector. It offers anmanagement of resources.”17 answer to the question of why juncture. Put simply, co-operativesCo-operatives have always set out co-operatives are necessary are more efficient thanto enable people to have access and beneficial, at this historical investor-owned businesses, once a more complete range of costs and benefits (present and future) The eleven workers who were killed at the ruptured well, and the is taken into account. 4.9 million barrels of oil that spilled, are slipping out of memory. The short-term environmental damage was not as catastrophic The ICA must take a lead as feared, and the long-term impact — the toll the oil will take as in outlining a vision of the it moves through the food chain of Gulf marine life — is not yet co-operative economy, which known. Yet the reports of the past year and anniversary-themed values long-term outcomes and books on the disaster provide a trove of data that reveals how spill-over costs/benefits. At the the oil and gas industry is as reckless and unaccountable as the same time, it needs to draw on too-big-to-fail banks that brought on the financial crisis of 2008. expertise and best practice from The BP disaster revealed the same problems — lax government outside of the co-operative sector, regulation, corporate profits despite the risks, a fawning press — to articulate and measure the that characterized the financial meltdown. Big banks and big oil forms of value that co-operatives have more in common than their size. produce for society, and which the dominant model of capitalism ‘What happened at Macondo Well’, New York Review of Books, dramatically under-produces. This 29th September 2011 chapter lays out a strategy for how this can be done. sustainability | 14
  • The goalAlthough there are some local exceptions, at present sustainability is not a term that is universallyassociated with co-operatives. This is what needs to change by 2020 – to position co-operatives asbuilders of sustainability. The co-operative sector needs to demonstrate convincingly that sustainabilityis in the intrinsic nature of co-operatives, and that co-operative enterprise makes a positivecontribution to sustainability in three senses:• Economic: There is Co-operatives have a number of problem of short-termism that considerable evidence that positive messages to share here. afflicts all manner of financial a diversity of ownership Firstly, financial co-operatives and non-financial firms. To put forms contributes to a more act in the interests of their this in another way, they do stable financial sector as a members, not shareholders. not suffer from the problem whole.18 The investor-owned They pursue ‘stakeholder value’ of ‘financialisation’ that has company was central to how not ‘shareholder value’, making afflicted capitalism over the past the financial crisis occurred, them intrinsically less risky. There twenty years, in which financial with managers acting in is good evidence to suggest that performance is the central the interests of themselves credit co-operatives contribute indicator of good business. By their and a very small number to greater financial stability and nature and form of ownership, of stakeholders. Outside of sustainability.20 they are less likely to reduce the the financial services sector quality of products or services itself, there has been growing Secondly, by putting human in the pursuit of profit. They concern that the promotion of need and utility at the centre thereby improve the diversity and ‘shareholder value’ undermines of their organisational purpose, overall ecology of business forms, the long-term productive rather than profit, co-operatives introducing real choice as to how potential of companies.19 do not suffer from the same business is done.21 In developing economies, they play a mainstream role in economic development, “We have arrived at a situation in which the ownership and control both directly and indirectly as well of banks is typically vested in agents representing small slivers of the as supporting the introduction of balance sheet, but operating with socially sub-optimal risk-taking new technologies (see text box). incentives. It is clear who the losers have been in the present crisis.” Andy Haldane, Executive Director for Financial Stability, • Social: Amongst the negative Bank of England. externalities generated by doom-loop contemporary capitalism, and which the state is often tasked Co-operatives show a tendency to resist crises over history. This is with addressing, are social true of the present crisis – co-operative banks and credit unions problems associated with have done well over the course of this banking crisis. E.g. Rabobank individualism and inequality. grew to 42% of its market in 2008 and its member institutions Some of these simply involve received 20% increase of deposits. Membership levels of credit unnecessary human suffering, unions has been rising over 2008-09 as increasingly measured by J. Birchall & L. Ketilson (2009) Resilience of the Co-operative Business happiness economists and Model in Times of Crisis. ILO wellbeing surveys. Others bring monetary costs for Canada: 1 in 3 Canadians are members of the credit union system governments, where they are [The Globe and Mail, 15/5/2012] and the credit unions have a manifest as health problems growing share of the retail deposit markets and the residential and crime. The study of mortgages markets, which were at 16% and 19% respectively in ‘social capital’ suggests that 2010. [Moody’s investors service global banking report 123026, societies with higher levels April 2010] As of the first quarter of 2012, Desjardins ranks 16th of membership associations of 7,500 deposit taking financial institutions in North America and also do better economically, is 2nd for its Tier 1 Capital Ratio, which is at 16.0%. [Desjardins in addition to enjoying higher Group Q1 2012 Financial Report]. levels of trust and democratic participation.2215 | sustainability
  • Co-operatives make a very positive contribution here, in two An estimated 250 million farmers in developing nations belong to a ways. First, they deliver social co-operative. services to the needy. The extent World Bank (2007) World Development Report 2008: Agriculture for of ‘social co-operatives’ varies Development from country to country, but is a widespread phenomenon in In Kenya, co-operatives employ 300,000 people and create work some nations such as Italy and indirectly for 2 million via the finance and opportunities they create. Japan.23 Co-operatives aren’t ILO (2012) How women fare in East African co-operatives: the case simply market operators, but of Kenya, Tanzania and Uganda also deliver services that would otherwise come from private A Stanford University study found that new technologies can insurance or the state. Where this improve agricultural sustainability in developing countries, but only happens, there is a very strong with the engagement of local farmers and the social and economic fiscal case for states to support networks they depend on. A study of farmers in the Yaqui Valley, them in doing this, especially in Mexico, found that farmers were far more likely to gain information the context of apparent fiscal on implementing new technologies from their local credit union, crises. Second, membership than from scientists. The researchers argue that efforts to introduce and association are goods in new, more sustainable technologies into agriculture must work via and of themselves, while also participatory institutions, such as co-operatives. acting as important resources on Stanford University (2011) which successful societies – and understanding-farmer-networks-060211.html economies – thrive. Co-operatives contribute to the creation and development of superior environmental record. stock of a nation’s ‘social capital’, co-operatives”.24 This is crucial There are various reasons for in ways that investor-owned to developing nations. It is a this. First, as participatory businesses do not. The United factor which endears them to organisations, concerns Nations recognises this, urging governments and policy-makers, about future environmental Governments to encourage and and enables them to out-perform outcomes can simply be facilitate “the establishment and their profit-maximising rivals in voiced democratically by development of co-operatives, ways which are understood and members, without needing including taking measures appreciated. to be calculated in terms of return on investment. Second, where co-operatives are“co-operatives contribute to the multi-stakeholder, the capacity for businesses to push negative stock of a nation’s ‘social capital’, environmental externalities (i.e waste and pollution) upon in ways that investor-owned particular stakeholders is diminished.25 businesses do not” aimed at enabling people living • Environmental: There in poverty or belonging to is a growing body of vulnerable groups to engage evidence demonstrating on a voluntary basis in the that co-operatives have a sustainability | 16
  • Développement International Desjardins (DID) works with the Canadian International Development Agency and is a leader in microfinance, with 8.8m members and clients globally and an overall loan portfolio of CAN$2.5bn. Recent projects include funding rebuilding in Haiti, a CAN$ 11m loan portfolio in Panama at end of Dec 2011, supporting 1700 entrepreneurs and a loan portfolio of CAN$7m in Zambia, where they account for 35% of the microfinance market. A study of co-operatives in Sri Lanka and Tanzania found that the vast majority of co-operatives reduced poverty. They also make a positive contribution in non-income areas such as skill development, education and gender equality. Birchall & Simmons (2009) Co-operatives & poverty reduction: evidence from Sri Lanka and Tanzania. Co-operative College In China, co-operatives provide 91% of microcredit. [Global to Local] Credit unions allow a remittance system to provide low cost money transfer from people working in developed countries to their families in developing countries, which is especially important in Latin America. [ILO Sustainable Enterprise Programme: Resilience of the co-operative business model in times of crisis, p.26.] Wind-power co-operatives are growing in number: The model – whereby local communities provide funding for a wind farm, allowing them reduced energy costs in the long- term - is popular in Scandinavia but has also spread elsewhere in the last decade: e.g.1 in North Frisia, Germany, 90% of the 60 wind farms are community- owned; e.g.2 National Wind, a Minneapolis company founded in 2003 is a developer of large-scale community based wind power projects, which have an aggregate capacity of over 4,000 MW and seek to revitalise rural economies by promoting investment in domestic renewables.The goal to position between economic, social Lastly, the goal should includeco-operatives as builders of and environmental interests, the ambition for co-operativessustainability should include but through seeking to satisfy globally through the ICA toestablishing a wide public the needs of ordinary citizens, influence the geo-political orderunderstanding of the business co-operatives tend to pursue in this vital area where individualsustainability of co-operatives as a convergence between these governments struggle to make orbusinesses. There are continuing interests. This results in greater stick to commitments.tensions within any business organisational sustainability.17 | sustainability
  • How might these goals be achieved?At the centre of this strategy must be a concerted effort to collect and publicise the right sorts of dataabout co-operatives. This includes the following:Possible or indicative actions• Innovations in accounting: have led (and dominate) the to the language of democratic the co-operative sector needs development of principles and member control. It needs to take the lead. There is standards for financial accounting to be broadened and now already a large number of and audit. needs consistently to include initiatives through which a reference to sustainability, businesses, social enterprises • Case studies: The diversity of so as to attract interest from and charities are being co-operative forms and goals public policy-makers, the encouraged to capture their is under-recognised. Case broader public and young non-financial performance, studies and first-hand stories people. such as ‘triple bottom line showing the contributions of accounting’ (TBL), ‘balance co-operatives to education, • Technology: The co-operative scorecard approach’, ‘social communities, health and other sector should aim to become return on investment’ (SROI), public goals are important leaders in the development ‘social impact reporting’, here and needed. Consumer and use of technologies ‘wellbeing’ measurement.26 energy co-operatives are and social systems which Some of these attempt to making a crucial contribution specifically deliver human convert their various outputs towards the shift to a low benefits, without despoiling back into monetary terms, carbon economy, which the ecosystem. as is the case with SROI; needs recording, studying and governments also do this when highlighting. • Management Practices: seeking to calculate the cost The co-operative sector of environmental degradation. • Evidence gathering: In needs to do more to develop Others (such as TBL) simply order to demonstrate their and promote distinctive present rival forms of valuation contribution to sustainability management practices which side by side. to public policy-makers, reflect the democratic values economic analysis of the and long term horizon of theMany of these forms of ‘positive externalities’ of co-operative business model,accounting are being developed co-operatives is valuable. and which will fully exploitby those working with profit- A number of techniques the potential co-operativeoriented businesses, to get exist (known as ‘contingent advantage.them to expand their reporting valuation’) for capturing thepractices beyond financial data. value of non-market goods, • Strengthen and IntegrateBut co-operatives have much to such as health and a clean the Co-operative Businessgain from seizing this agenda, environment. Consideration Network: The co-operativeas a means of demonstrating should be given to the ICA sector should identifytheir positive impact. There facilitating the establishment and remove barriers toare some attempts to develop of a virtual data bank.28 inter-co-operation, including,specific co-operative performance where possible, integratingmeasurement tools, but these • Public advocacy: The systems, such as procurement,need expanding.27 message about co-operatives using the principle of can no longer be limited only subsidiarity.The use of social auditing isimportant to verify claims aboutperformance. Co-operatives “co-operatives are making a crucialshould be leading the field inthe development of principles contribution towards the shift to aand standards for such audits,as investor-owned businesses low carbon economy” sustainability | 18
  • “Build the co-operative message andsecure the co-operative identity”In a world suffering from a deficit of democratic representation and from short-termism, co-operativesdemonstrate how business can be done not only differently, but better – not only for their ownbenefit, but for the world’s. However, to spread this valuable message, there must be clarity as to howco-operatives are to be defined and distinguished. This is important for the co-operative sector itself, increating a powerful sense of shared identity; but it is also important that an identifiable co-operativemessage or “brand” is projected, which differentiates this form of business.The market-place for ‘social’or ‘ethical’ business is acrowded one. ‘Corporatesocial responsibility’ and ‘socialenterprise’ are two examples ofhow privately owned businessmodels have been re-imaginedor re-branded, for purposesbeyond the pursuit of profitmaximisation. The so-called“ethical corporation” and othermore sincere enterprises arealready using the language andmessages of co-operatives. Howdo co-operatives distinguishthemselves in this context?How do they second guessand outpace investor-ownedcorporations?A great advantage thatco-operatives possess is havingthe Co-operative Principles.Co-operatives don’t simply appeardifferent, thanks to some image the Co-operative Identity as an It also includes the broadermakeover – they fundamentally answer. However, the extent to public of potential members andare different. Their abiding which the Co-operative Principles younger people, who might bevalues of participation and are applied or not varies greatly attracted to a sector that is ethicalsustainability are not just bolted from one jurisdiction and legal and participatory, but whoseon to a conventional business system to another. So there are message sometimes appearsmodel, but structure how they many for whom the Co-operative indistinct in a crowded field, andare owned, governed, managed Principles do not offer adequate uses language which does notand evaluated. With consumers explanation or clarity of definition. always resonate. A sector whichincreasingly cynical about ethical This includes regulators and is fundamentally open source, is‘green-washing’ of corporate policy-makers, a number of disruptive in the market-place,brands, co-operatives have an whom are seeking guidance on and is independent of theauthenticity that no other ethical how to distinguish an ‘authentic’ establishment needs to learnbusiness model can match. co-operative from an ‘inauthentic’ to communicate those features one, and are concerned that strongly to people who might feelThose involved in the co-operative co-operative regulations are instinctively drawn to them.sector may argue that there being ‘gamed’ as a means ofis no question about what seeking market-place advantagesconstitutes a co-operative, by and avoiding transparency orpointing to the ICA Statement on competition. identity | 20
  • The goalThe goal is to build the co-operative message and secure the co-operative identity, to secure moraleconomic authority and “better business” status for co-operatives. It is important to distinguishbetween ‘identity’ and ‘message’. Broadly speaking, ‘identity’ is the meaning of co-operatives for thesector itself and its members, how it recognises itself when looking in the mirror; ‘message” is the wayin which the identity of co-operatives is communicated and projected to the outside world, througheducation, the provision of information, marketing, logos and other forms of engagement withnon-members.The word more commonly used values, and which wishes to through the co-operativeto denote message is “brand”, encourage the wide-spread use message.and within the co-operatives of the co-operative idea which issector people use it as a short- available without charge to those The UN International Yearhand and talk about building the who wish to follow its principles. of Co-operatives and itsco-operative “brand”. However accompanying logo demonstratethe term “brand” is not used with Having said that, the co-operative the positive potential of providingany enthusiasm in this context, sector has a legitimate interest in a single differentiating messagebecause of its association with seeking to protect the integrity for the co-operative sector thatprivate intellectual property of the “co-operative” word so it can be carried across multiplerights which provide a means is not misused. The ability to do spheres. The .coop domain nameto prevent use except where this varies between jurisdictions, also provides an opportunity forappropriate payment is made and for present purposes the clear differentiation the owner of the rights. In a primary focus is on projecting anmore popular sense “brand” is appropriate message of what is Co-operatives need a morerather more to do with superficial denoted by “co-operative” to a sharply articulated message soimage denoting attributes world which is largely ignorant that people are more aware ofattractive to consumers. Neither of what it stands for. As follows what they are choosing whenof these is consistent with a from the two previous chapters, faced with the option betweenco-operative sector that has a the Blueprint seeks to project both a co-operative or an investor orstrong belief in longer-lasting participation and sustainability privately-owned business.21 | identity
  • How can this goal best be pursued?Possible or indicative actions• There is no desire to undermine the Statement on the Co-operative Identity, so the Statement should be celebrated. However, the Co-operative Principles (contained within the Statement on the Co-operative Identity) themselves could usefully be supplemented with Guidance, for the purposes of translation into regulatory frameworks (this links to Theme Four below). Developing Guidance involves establishing the irreducible core – e.g. what is the minimum requirement behind “controlled by their members” in the 2nd Co-operative Principle? Without such guidance, it is difficult or even impossible for regulators to have a basis for accepting or rejecting a proposed constitution. It would also help • Co-operatives also need to • Consider using the allocation to provide a clear basis for think about how they are of .coop domain names the ICA to work with national perceived more widely by only to those which meet the bodies and their governments non-members and expert requirements of the irreducible where there are problems communities. The rise of terms core. Whilst this may take maintaining the irreducible such as ‘social enterprise’, some time to establish, core. ‘corporate social responsibility’, eventually it will provide the ‘employee ownership’, most visible evidence of what• Co-operatives need to ‘social innovation’ adds to is denoted by “co-operative”. think about how they are the confusion surrounding It has the advantage of perceived by, and how they the actual difference that crossing jurisdictional project themselves to and a co-operative makes. boundaries. It would also communicate with young Co-operatives are often not provide the basis for the ICA people. Securing their interest seen as sufficiently distinctive, to approach governments and positive engagement can as to be dealt with separately of states whose legislation only be achieved through on issues such as regulation. prevented compliance with the an understanding of the The message therefore irreducible core, and resulting changing ways in which needs management, if it is to in their exclusion from use they communicate and form function in the longer-term of .coop which might be a relationships with each other interests of co-operatives. competitive disadvantage to using technology and social Following development their economy. media. Human relationships of Guidance, appropriate are at the heart of a phraseology should be co-operative. Young people developed which is designed need to help to shape the from the point of view of identity and the messages. message projection.23 | identity
  • • Identity is also important in securing a co-operative voice in global policy debate. Part “the extent to which of this is concerned with the wide adoption by co-operatives around the world of commonly held the 2012 IYC logo was principles underpinned by a visible sign of their adherence. The extent to which the 2012 IYC adopted by societies logo was adopted by societies has demonstrated the power of identifying with shared values across has demonstrated the national boundaries. Consideration should be given, separate from the potential use of .coop, power of identifying to the development of a common symbol which would attract similar take-up to 2012 IYC. with shared values across• Learning about co-operative ideas and traditions national boundaries” needs to be included within the curriculum at all stages of education. Co-operative education • Solidarity amongst co-operatives needs to be is the best way to build an understanding of strengthened by encouraging larger co-operatives co-operative identity and messages by the widest to put aside some of their profits to support the possible range of individuals. development of new and small co-operatives• Training programmes are needed to explain • As put forward in the previous two chapters, this the co-operative identity to future leaders. This Blueprint proposes that in the coming years the needs to be part of a much broader promotion of co-operative sector should aim for co-operatives co-operative identity amongst business schools to become identified with both participation and professional bodies. Research and the and sustainability. This includes recognition development of theories, knowledge and ideas of the financial security of co-operative financial should be promoted and extended, building institutions, and the contribution co-operatives collaboration between managers, practitioners and make to global security, academics. • Consider the creation of a World Co-operative• It is important to monitor the public reception Heritage list, to raise visibility of co-operative of co-operative messaging through market surveys impact throughout modern history. and focus groups in different countries identity | 24
  • “Ensure supportive legalframeworks for co-operativegrowth”If an argument can be convincingly made for why co-operatives are better for the long-term interestsof the world, and if the public better understands what a co-operative is, it would stand to reasonthat momentum would gather for growth. But this is more likely to occur, and in some cases canonly occur if existing barriers to growth are removed. One aspect of this is the process by whichco-operative enterprises are started up within different jurisdictions, and this process is generally partof national law.But there is more to it than that. which are profit-oriented, option when operating withinThe view that co-operatives are shareholder-owned businesses, infra-structure designed fora marginal form of enterprise is but are inappropriate for investor-owned businesses, butnot uncommon. There is often co-operatives in certain important unless co-operatives resist anda failure to understand precisely respects. Few countries have good fight for appropriate recognitionhow they work or the benefits legislation for co-operatives. and treatment they risk losingthey deliver (exacerbated by their distinctiveness andthe general lack of coverage of It is important for co-operatives commercial advantages throughco-operative in the education and themselves to resist any tendency isomorphic behaviour. Managerstraining of those going into the to mimic investor-owned need to be supported andbusiness world). These factors enterprises in operational, encouraged in this.contribute to financial, legal and management and governanceregulatory infrastructures that practices which do not reflect the The Final Declaration of the recentare essentially designed for the distinctiveness of co-operatives. conference in Venice29 called forgreater majority of businesses This can often be the easier a “regulatory framework and support policies that are coherent with the co-operative form and favour its development”. This important demand has some pedigree, including United Nations Resolution 56/11430 urging governments (amongst other things) to encourage and facilitate the establishment of co-operatives, and to take appropriate measures to create a supportive and enabling environment for the development of co-operatives; and ILO Recommendation 193.31 An important aspect of supportive legal frameworks involves ensuring that co-operative legislation underpins and protects the co-operative identity. Each jurisdiction needs to frame its legislation in a way that incorporates co-operative principles into the local context, in a way which appropriately reflects the distinctive identity of co-operatives. legal framework | 26
  • International Labour Organization In its Promotion of Co-operatives Recommendation, 2002 (ILO Recommendation 193), the International Labour Organization recommends (amongst other things) • Governments should provide a supportive policy and legal framework consistent with the nature and function of co-operatives and guided by the co-operative values and principles • The adoption of measures to promote the potential of co-operatives in all countries, irrespective of their level of development, for a range of purposes including the creation of income-generating activities and employment, the development of human resource capacities and knowledge of co-operation, the development of business potential, the increase of savings and investment, and the improvement of social and economic well-being • The promotion of co-operatives as one of the pillars of national and international economic and social development • That Governments should facilitate access of co-operatives to support services, investment finance and credit.27 | legal framework
  • One of the great successes of the 2012 International Year is thatpolicy-makers and regulators are finally waking up to the difference thatco-operatives make and the benefits they deliver. There is much alreadyto celebrate here. However, assistance must be provided to law-makersand regulators, if the growing enthusiasm for the co-operative formof enterprise is to be translated into the types of supportive legalframeworks that will unleash the co-operative growth from whicheveryone will benefit.We must stress at the outset that pursuing this agenda does not meanpleading for special treatment, subsidies or favours. Co-operatives areno more dependent on government assistance than any other businessform. But no business exists in a regulatory vacuum, and business growthalways depends on an infrastructure of rules and policies. For much oftheir history, co-operatives have succeeded in spite of legal frameworksthat tend to be designed with limited companies in mind. Theco-operative sector does not now expect or ask to tip the balance in itsfavour. It seeks a proper understanding by governments and law-makersof the economic and social benefits which the co-operative form canbring,32 and an appropriate legal framework which takes account of thesebenefits and speaks to a broader diversity of ownership forms than iscurrently the case.33In 2009, the Indian government amended its constitution through itsConstitution (111th) Bill, which made the right to form co-operativesocieties a fundamental right. The House also accorded the right to set upa specialised agency on the lines of the Election Commission which canconduct election of the co-operative societies. legal framework | 28
  • The goalThere can be no one-size-fits-all, optimal regulatory or legal framework for co-operatives. Legislationboth about the registration of co-operatives and about how they are treated in comparison withother entities is part of and specific to national jurisdictions and must be analysed as such. Thereforespecific improvements must be identified and lobbied for at the level of nations, building directlyon UN recommendations. However, good national registration and regulatory environments can becelebrated and highlighted, and national bodies supported by the ICA can engage with bad ones topromote change.In addition to assessing the been introduced in many been established by communitiesrespective qualities of jurisdictional jurisdictions primarily to prevent to secure their own access toframeworks for registration, private businesses trading for goods and services, is a matter forthere is a role for the ICA in private benefit from exploiting a separate consideration. Anotherproducing evidence for the public/ dominant or monopoly position example is procurement lawssocial value and sustainability of and damaging the community’s applying to the outsourcing ofco-operatives (see Sustainability interest by controlling access to public services: rules designed toabove), which will strengthen the goods and services. But whether promote open and transparentcase for government reform to it is appropriate that such laws competition for providing suchsupport co-operatives, especially should be applied in the same services should take account of allat a time of fiscal crisis when way to co-operatives, which have relevant factors.many states are looking for newforms of social security andpublic provision. A convincingcase can be developed thatco-operatives are more efficientthan investor-owned businesses,once ‘social’ value is accountedfor, and contribute significantly topublic good.Making this argument thenprovides a basis for consideringhow current national laws applyto co-operatives in a numberof areas, and whether thecontribution made to the nationalpublic good justify a differenttreatment for co-operatives.For example, this might justifydifferent treatment in tax law34,or in competition and anti-trustlaw. It might also affect regulatorylaw applying, for example tothe raising of capital, and thelaws that cover contracting withgovernments.The significance of this areashould not be overlooked,because currently co-operativescan be disadvantaged as againstother business entities. To providea simple example, competitionand anti-trust laws have gradually29 | legal framework
  • How might these goals be achieved?Possible or indicative actions• Assistance can be provided to registrars and • Evidence could be published for the social and regulators through public benefit of co-operatives. This evidence and a body of literature should be built up to support · the creation of an International Network for arguments for the appropriate treatment of registrars and regulators35 co-operatives in law in different jurisdictions and different stages of economic development. · the development of Guidelines on how to apply the Principles • As referred to above under Identity, there is a need to establish an “irreducible core”• Assistance can be provided to national of what it means to be a co-operative. This is parliamentarians, legislators and clearly important as a basis for securing different policy-makers through the comparative study of treatment of co-operatives within national legal the way laws apply to co-operatives in different systems, because there needs to be a robust jurisdictions. connection between the evidence of social and public benefit and the minimum criteria for being · For example, in 2009 ICA Americas treated as a co-operative. This will be essential published a document setting out a where, for example, different fiscal or regulatory Framework Law for Latin American treatment is afforded to co-operatives, because countries, updating a previous version otherwise there will be false claims to entitlement. dating back to 1988.36 The Framework This is a particularly difficult area to address, as Law is not intended to be a model to copy is highlighted in a recently published paper by by the lawmakers of other countries. Its Antonio Fici.38 purpose is to provide guidance on key aspects of co-operative legislation as derived from jurisprudence, academic studies, and “a body of literature comparative law. should be built up to · A further illustration is a recent initiative to establish a Study Group on European support arguments Co-operative Law (SGECOL), which will be looking at Principles of European for the appropriate Co-operative Law (PECOL) as its first research project.37 SGECOL’s general objective treatment of is to conduct comparative research on co-operative law in Europe, thus promoting co-operatives” increased awareness and understanding of co-operative law within the legal, academic • A mechanism or tool should be developed to and governmental communities at national, evaluate national legal frameworks and the European and international level. SGECOL extent to which they are enabling and supportive intends to achieve this objective through of co-operatives. A league table of jurisdictions various research initiatives on co-operative could be compiled to highlight the stronger and law, beginning with the drafting of PECOL. weaker ones, which would be a good way to highlight the poorer performers and provide an• Integrate the co-operative agenda into global opportunity to engage with them in political development institutions, such as the World advocacy based on demonstrable factors Bank, and with intergovernmental policy-setting bodies, such as G8 and G20. • Establish a co-operative knowledge databank to measure and demonstrate impact and facilitate• Develop the capacity to respond to co-operative knowledge transfer. opportunities created by global and regional political events and changes. legal framework | 30
  • 5. CAPITAL
  • “Secure reliable co-operativecapital while guaranteeing membercontrol”Businesses cannot function without capital, and co-operatives are no exception. Whilst they havethe ability to borrow (loan capital), as well as meeting working-capital requirements they need tofund their long-term business for which purpose they generally need some form of long-term risk orloss-absorbing capital. Co-operative capital generally comes from either members by way of sharecapital, or retained earnings (reserves).39 By definition, retained earnings take time to build up, andare obviously not available at start-up. Historically, co-operatives were funded by cash depositedby members, at a time before high street banks met this need. Members kept their savings at theco-operative, and could withdraw them as and when needed.Withdrawable share capital, withlimited exceptions, no longer “We need capital that is socially constructive rather than destructiveprovides the capital needed. The and more stabilising rather than destabilizing. We need capitalwide-spread availability of financial that is restrained, limited and controlled and directed to meetinginstitutions and services means human need rather than human greed. Co-operative capital isthat people no longer need their constructive, stabilising and restrained. The world needs moreco-operative to be a safe-haven co-operative capital and ways of diverting savings from becomingfor their cash. Capital that can be investor to becoming co-operative capital.”withdrawn at will in the modern Webb and others (2010) Co-operative Capital: What it is and Whycontext will not usually provide a our World Needs itsufficiently stable basis for fundinga business. Co-operatives inmany jurisdictions therefore face in underlying value. Second, whilsta problem in terms of access to co-operatives can pay interest oncapital.40 capital, under the 3rd Co-operative Principle members receive “limitedInvestor-owned businesses raise compensation, if any, on capitalcapital from those who are subscribed as a condition oflooking for a financial return. This membership”. To the extent thatmay be in terms of income from profits or surplus is distributed todividends, or capital growth in members, that distribution is inthe value of the business over a proportion to the members’ tradeperiod of time, or a combination with the society.of the two. Traditional “equitycapital” provides these benefits, When compared with companyand is based on the principle that equity capital, co-operativeownership of a share entitles the capital does not offer to investorsinvestor to a proportionate share comparable economic benefits. Asof the underlying capital value of a result, it is not as economicallythe company, and a proportionate attractive, and of little interest toshare of any profits distributed by investors.way of dividend. But what co-operatives have toCo-operative capital is different in offer society at large (rather thanrelation to both of these principles.41 just to profit-seeking investors)First, a member is generally only clearly is attractive, whenentitled to receive back from the compared to the wider impacts ofsociety the amount of money investor-owned businesses, for alldeposited or subscribed for shares. the reasons set out above. HowSo there is no entitlement to a share do we bridge this gap? capital | 32
  • What is the goal?It is easy to make this subject complex, technical, even somewhat mysterious – a search for the HolyGrail. Essentially, it involves matching our needs as citizens for a safe place to keep the money wedon’t need right now but which we will need in the future, with the needs of businesses which requirecapital to develop and to meet our changing needs.The history of the last 150 years or From the Giving Pledge of Bill Instruments are needed, whichso has been one of turning people Gates and 30 other US billionaires provide the facility for moneyinto investors. “Invest” generally to give away at least 50% of their to be put into and paid out ofmeans placing money somewhere wealth to charity, to the response co-operatives, and whichwhere it seeks to get the best of ordinary people to the tsunamireturn. It is the word generally in 2004, the earthquake and • Provide a stable basisused in relation to putting money tsunami in Japan in 2011 and for the business of theinto company shares. Most other major disasters. From the co-operativepeople in developed economies outrage in the financial pageshave become investors, whether of leading newspapers at the • Provide an appropriateintentionally or not, through behaviour and remuneration of “exit” for the provider oftheir retirement savings and bankers, to the Move Your Money funds, in a context whereother financial products such campaign,42 and the Occupy a market in shares is notas insurance provided by the movement. We are living through really appropriate, andinvestor-ownership model. a time of great change, whereMaximising profits with our popular attitudes and motivation • Do not impair orsavings has become the norm, are changing. undermine theand we are addicted to it. But co-operative nature ofover the last four years, economic Capital instruments need to be the entity, includingvolatility has revealed the in tune with the attitudes and control by membersweakness of this model – there is motivations of the day. So the goal and commitment to thenow a clear need for something is to provide a credible proposition co-operative identity.better. for a co-operative future which people can recognise, understandFinding a successful model and believe in (see Chapter 3means not just changing above), and then provide the righthow businesses operate, by mechanism through which theyestablishing businesses which, like can use their funds to secure thatco-operatives, are more likely in future. This means a financialthe longer-term to meet human proposition which provides aneeds; it also means changing return, but without destroyinghow people behave. We all need co-operative identity; and whichto stop behaving as investors enables people to access theirlooking to maximise gain; if we funds when they need them.want a better world, we need to It also means exploring widerplace our funds where they are options for access to capitalmore likely to build a better world. outside traditional membership,They won’t do that if we invest but without compromising onthem in equity shares. member control.If it was not for the fact that there This is the context in whichis powerful evidence that people appropriate financial instruments,are already changing what they through which people can funddo with their money, this might co-operatives, are essential. Thisseem to be a hopelessly idealistic is territory already much exploredproposition. But attitudes to by companies, but similar timewealth, money and where people and energy has not been appliedkeep it are changing dramatically. in the co-operative sphere.33 | capital
  • How might these goals be achieved?Possible or indicative actions• Promoting and encouraging • Identifying institutions which • Building the case for generally the funding of co- can act as aggregators or co-operative capital as operatives by existing members intermediaries for businesses an inspirational model, (large and small) needing compared with debt and• Ensuring that co-operatives capital profit-seeking capital have a clear proposition to make to providers of funds • Utilising the Global • Creating a co-operative specific Development Co-operative index to measure growth and• Promoting the inter-change Fund to demonstrate performance of ideas and experiences establishment of the between jurisdictions in co-operative as an asset class • Advocating for accounting relation to capital and financial standards that recognise instruments • Undertaking research on the unique attributes of the changing attitudes and co-operative model.• Developing a modern generic motivation for funding, and financial instrument which for new financial instruments • Accelerating global trade is classed as risk capital between co-operatives and meets the needs of • Reviewing risks and through broker arrangements co-operative businesses and opportunities created by the and shared service structures co-operative funders use of subsidiary corporate entities, and other group• Developing a range of variations structure arrangements, and to the generic model to suit the creation of co-operative different sizes of co-operative groups or clusters to address and sectors capital accumulation capital | 34
  • 2020 Vision: Blueprint for aCo-operative Decade is unashamedlyambitious.When the co-operative pioneers first implemented their new ideas, those ideas provided a way forpeople to meet their needs where investor-owned businesses were failing them.Today, those ideas are needed But for this Blueprint to be of doing business. Co-operativesby all people. It is the global meaningful and effective, it needs must lead the way by co-operatingcommunity which has been to be taken up and endorsed amongst themselves.failed by the traditional way of by national bodies, by individualdoing business, where profits societies, and by all people who All of us now have a role toand growth are more important believe in the co-operative way play to secure the 2020 Vision.than sustainability, and theprivate interest of some is moreimportant than the public interestof everyone.Co-operative ideas work; butmost people do not know thattoday. That is why this Blueprintis an ambitious plan to clarifythe co-operative message andbroadcast it to a world communitywhich currently cannot imaginewhat it can achieve.But it is also an ambitious plan toequip people with the means todo what their imagination will tellthem is possible; and a plan toenable all people – women andmen, older and younger people –to overcome the obstacles whichmight hinder them from realisingwhat they know is possible.The International Year ofCo-operatives was a catalyst forco-operatives and for people whobelieve in the idea of co-operation.It became the platform to launcha Co-operative Decade. Thetime and the situation call foran ambitious plan, and that iswhy the ICA is adopting such achallenging Blueprint.This is a document which the ICAcannot take forward on its own.The ICA certainly has its own roleto play, and has every intention ofrising to the challenges presented. conclusion | 36
  • InternationalCo-operativeAlliance
  • The International Co-operative Alliance (ICA) is an independent, non-governmental organisation established in1895 to unite, represent and serve co-operatives worldwide. It provides a global voice and forum for knowledge,expertise and co-ordinated action for and about co-operatives.ICA’s members are international and national co-operative organisations from all sectors of the economy,including agriculture, banking, consumer, fisheries, health, housing, insurance, and workers. ICA has membersfrom one hundred countries, representing one billion individuals worldwide. One hundred million people workfor a co-operative locally. The Centre for Mutual and Employee-owned BusinessThe Centre is based at Kellogg, one of the University of Oxford’s largest and most international graduatecolleges. Kellogg College supports the lifelong learning work of the University, giving opportunities forthe continuing education and professional development of mature and part-time students.Policy makers, academics and citizens more generally sectors. With a commitment to applied knowledgeare showing increasing interest in the participatory and dissemination, the Centre runs conferences,approach to stakeholder involvement created by seminars and guest lectures and promotes networkingco-operative and mutual enterprise. Sea changes in and partnering within and beyond Oxford. The aimsthe UK and global economies have reinforced the of the Centre are to:importance of the co-operative and mutual businesssectors, with their high standards of corporate • Provide research into the performance of theethics and community responsibility and long-term co-operative and mutual sectorssustainable strategies. This changed environmentoffers an unprecedented opportunity for thought • Deliver a curriculum that is closely matched to theleadership, provided it is empirically based, grounded needs of relevant businesses and the developmentin world-class research and analysis, and validated of their current and future leadersthrough a rigorous curriculum reflective of the sectors’performance needs. • Encourage debate and advance new thinking about co-operation and mutualityThe principal activities of the Oxford Centre forMutual and Employee-owned Business are thus • Work with existing co-operative and mutual sectorresearch and professional development via tailored experts to create a global network of academics,short courses and educational programmes focused practitioners and policy makerson the business needs of the co-operative and mutual International Co-operative Alliance | 38
  • references1. Resolution A/RES/64/1362. These include: the conference ‘Promoting the Understanding of Co-operatives for a Better World’, co-organized by Euricse and the ICA in Venice (; the Dunsany Declaration for Rural Co-operatives ( Rural_Co-operative_Development_FINAL.pdf); the Resolution of the International Cooperative Banking Association (; the Declaration from the International Summit of Co-operatives in Quebec ( communication/declaration/en); the declaration from Imagine 2012 International Conference on Co-operative Economics (; and the Declaration from the International Health Co-operatives Forum ( See ESPAS (2011) Global Trends 2030: Citizens in an Interconnected and Polycentric World ( As explained in chapter 3 below, we use “participation” as a short-hand for the unique co-operative approach through which individuals own their co-operative, and participate in its democratic governance5. See the Statement on the Co-operative Identity on page 76. Cook, J., S. Deakin, J. Michie and D. Nash (2003), Trust Rewards: realising the mutual advantage, Mutuo, London; J. Michie and C. Oughton (2002), Employee Participation and Ownership Rights’, Journal of Corporate Law Studies, Vol. 2, No. 1, pp. 143-159; J. Michie and C. Oughton (2003), HRM, Employee Share Ownership and Corporate Performance’, Research & Practice in HRM, Vol. 11, Issue 1, pp. 15-36; J. Michie and M. Sheehan (1999), No Innovation without Representation? An analysis of participation, representation, R&D and innovation, Economic Analysis, Vol. 2, No. 2, pp. 85-97; and J. Michie and M. Sheehan (2005), Business Strategy, Human Resources, Labour Market Flexibility, and Competitive Advantage, International Journal of Human Resource Management, Vol. 16, No. 3, pp. 448-468; International Joint Project on Cooperative Democracy (1995) Making Membership Meaningful: Participatory Democracy in Cooperatives. Centre for the Study of Co-operatives, University of Saskatchean; Kurimoto, A. (2010) Changing Patterns of Member Participation. In Hasumi et al (eds.) Consumer Co-ops in Japan: Challenges and Prospects in Transitional Stage. Consumer Co-operative Institute of Japan, Tokyo.7. J. Birchall &R Simmons (2009) Co-operatives and poverty reduction: evidence from Sri Lanka and Tanzania8. Pateman, C. (1970) Participation and Democratic Theory, Cambridge: Cambridge University Press9. Co-operatives UK: The UK’s Co-operative Economy 2011 ( ESPAS (2011) Global Trends 2030: Citizens in an Interconnected and Polycentric World ( Paul Mason (2012) Why it’s kicking off everywhere: the new global revolutions12. Cornel West, philosopher, academic and activist ( wall_street_its_the_makings_of_a_us_autumn_responding_to_the_arab_spring)13. See R. Murray (2010) Co-operation in the Age of Google, P. Skinner (2012) Open Co-operation: Towards a Blueprint for a Co-operative Decade. R. Murray (2010) Co-operation in the Age of Google ( Pestoff, V.A.(1998) Beyond the Market and State: Social Enterprises and Civil Democracy in a Welfare Society; Aldershot, UK & Brookfield, NJ: Ashgate15. R. Wilkinson & K. P. Pickett (2010) The Spirit Level; London & NY: Penguin16. M. Porter & M. Kramer (2011) Creating Shared Value. Harvard Business Review, Jan-Feb 201117. The opening words of the definition in Wikipedia at J. Michie (2011), Promoting Corporate Diversity in the Financial Services Sector, Policy Studies, Vol. 32, Issue 4, pp. 309-2319. See W. Lazonick & M. O’Sullivan (2000) Maximizing shareholder value: a new ideology for corporate governance. Economy & Society, Vol. 29, No. 1, pp. 13-3520. See H. Hesse & M. Chihak (2007) Co-operative Banks and Financial Stability, IMF; G. Ferri (2012) Credit Co-operatives: Challenges and opportunities in the new global scenario. EURICSE Working Paper No. 032/12. See H. Hesse & M. Chihak (2007) Co-operative Banks and Financial Stability, IMF ; G. Ferri (2012) Credit Co-operatives: Challenges and opportunities in the new global scenario. EURICSE Working Paper No. 032/12 See Ownership Commission (2012) Stewardship, Diversity & Plurality. ( See R. Putnam (2000) Bowling Alone; London & NY: Simon & Schuster39 | references
  • 23. For Italian cases, see, For Japanese cases, see Pestoff V.A. (2008) A Democratic Architecture for the Welfare State, Chapter 7, Routledge; Kurimoto, A. (2003) ‘Co-operation in Health and Social Care: Its Role in Building Communities’, Mark Lyons and Samiul Hasan (Eds.) Social Capital in Asian Sustainable Development Management, Nova Science Publishers Inc, New York.24. UN Resolution 56/114 adopted in December 2001 ( ILO Co-operative Branch (2012) Sustainable Energy Co-operatives (draft), Geneva26. For reviews of some of these see G. Mulgan (2010) ‘Measuring Social Value’. Stanford Social Innovation Review; New Philanthropy Capital (2012) Principles into Practice: How charities and social enterprises communicate impact.27. See for example L. Saisset et al (2011) A Co-operative Performance Measurement Proposal, Working Paper Moisa 2011-328. J. Quarter et al. (2007) What Counts: Social Accounting for Nonprofits and Co-operatives, London: Sigel; Bouchard, M. J (2009) (ed.) The Worth of the Social Economy: An International Perspective. Brussels: Peter Lang.29. Promoting the Understanding of Co-operatives for a Better World (March 2012)30. Resolution adopted by the General Assembly on 19th December 2001, Co-operatives in social development, A/RES/56/114 following the Secretary-General’s report on Co-operatives in social development distributed in May 200131. The ILO subsequently published revised Guidelines for the Co-operative Legislation by Hagen Henrÿ 2nd revised edition 2005 ( It is also the basis of UN Resolution 56/114 urging governments and other relevant bodies to utilise and fully develop “the potential and contribution of co-operatives for the attainment of social development goals, in particular the eradication of poverty, the generation of full and productive employment and the enhancement of social integration.33. This is the argument that has been made recently in the UK context by the Ownership Commission. See Ownership Commission (2012) Plurality, Stewardship & Engagement.34. The example of the Norwegian government’s successful case to the European Commission, that Aid to co-operatives was compatible with European State Aid legislation, provides a precedent for how the benefits of co-operatives can be explained to regulators.35. Similar to the Competition Network for anti-trust regulators36. ACI Americas (2009) Framework Law for the Co-operatives in Latin America ( EURICSE Working Paper N. 024/12 New Study Group on European Co-operative Law: Principles Project ( EURICSE Working Paper N.023/12 Co-operative Identity and the Law, Antonio Fici ( Funding is also provided by Co-operative funding institutions including banks40. See for example NCBA (2011) National Co-operative Investment Capital Fund Information Memorandum For Pre-Fund Working Capital41. Webb and others (2010) Co-operative Capital: What it is and Why our World Needs it ( Whilst 10m bank accounts have left the largest US banks since 2010, following the Move Your Money campaign, US Credit Unions have enjoyed a surge in business as a result, so that 30% of the now population belong to co-operatively owned credit unions (increased from 89m in 2008 to 94m currently). [ ‘Co-operative businesses provide a new-old model for job growth’ 02/04/2012] ( Cooperative-businesses-provide-a-new-old-model-for-job-growth)PhotosFront cover and pages 1, 21: Coop ItaliaPages 3, 14: Co-operative Group, UKPages 5-6, 19: Coop SwedenPage 12: IFFCO (Indian Farmers Fertiliser Co-operative): Phulpur, Uttar Pradesh, IndiaPage 16: Midlands Co-operative, UKPage 20: Eroski, SpainPages 23, 27, 33-34: Coop NederlandPage 31: Desjardins, CanadaPages 9, 35: Mondragon, Spain (@Lydie Nesvadba for CECOP - CICOPA Europe) references | 40
  • Statement on the Co-operativeIdentityDefinitionA co-operative is an autonomous association of persons united voluntarily to meet their commoneconomic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.ValuesCo-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity andsolidarity. In the tradition of their founders, co-operative members believe in the ethical values ofhonesty, openness, social responsibility and caring for others.PrinciplesThe co-operative principles are guidelines by which co-operatives put their values into practice.1. Voluntary and Open MembershipCo-operatives are voluntary organisations, open to all persons able to use their services and willing toaccept the responsibilities of membership, without gender, social, racial, political or religious discrimination.2. Democratic Member ControlCo-operatives are democratic organisations controlled by their members, who actively participate insetting their policies and making decisions. Men and women serving as elected representatives areaccountable to the membership. In primary co-operatives members have equal voting rights (onemember, one vote) and co-operatives at other levels are also organised in a democratic manner.3. Member Economic ParticipationMembers contribute equitably to, and democratically control, the capital of their co-operative. At leastpart of that capital is usually the common property of the co-operative. Members usually receive limitedcompensation, if any, on capital subscribed as a condition of membership. Members allocate surplusesfor any or all of the following purposes: developing their co-operative, possibly by setting up reserves,part of which at least would be indivisible; benefiting members in proportion to their transactions withthe co-operative; and supporting other activities approved by the membership.4. Autonomy and IndependenceCo-operatives are autonomous, self-help organisations controlled by their members. If they enter intoagreements with other organisations, including governments, or raise capital from external sources, they doso on terms that ensure democratic control by their members and maintain their co-operative autonomy.5. Education, Training and InformationCo-operatives provide education and training for their members, elected representatives, managers,and employees so they can contribute effectively to the development of their co-operatives. Theyinform the general public - particularly young people and opinion leaders - about the nature andbenefits of co-operation.6. Co-operation among Co-operativesCo-operatives serve their members most effectively and strengthen the co-operative movement byworking together through local, national, regional and international structures.7. Concern for CommunityCo-operatives work for the sustainable development of their communities through policies approved bytheir members.