Co-operatives - introduction
“Founded on the principles of private initiative, entrepreneurship and self-employment, underpinned by the values of democracy, equality and solidarity, the co-operative movement can help pave the way to a more just and inclusive economic order.” – Kofi Annan
What are co-operatives?
A co-operative (often shortened to co-op or coop) is a business owned and run by and for its members. The definition, principles and values of co-operatives are laid out by the International Co-operative Alliance (ICA).
Definition
A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.
Values
Self-help, self-responsibility, democracy, equality, equity and solidarity.
Principles
In 1844 in England, the Rochdale Pioneers founded a consumer co-op that started the modern co-operative movement. They produced a set of co-operative principles that have been amended over time, and now form the basis of the ICA’s ‘Statement of Co-operative Identity’. The seven principles are:
- voluntary and open membership
- democratic member control
- member economic participation
- autonomy and independence
- education, training and information
- co-operation among co-operatives
- concern for community
There are three main categories of co-operative, with various sub-groups:
- worker co-ops: owned by employees
- consumer co-ops: owned by customers (housing co-ops, credit unions, food purchasing co-ops and social centres/clubs are sub-categories of consumer co-op)
- producer (or marketing) co-ops: owned by independent producers (farmers, for example) to market their produce
‘Multi-stakeholder co-ops’ are hybrids that can bind together different interest groups in one co-op – such as workers, consumers, investors etc. Often, different stakeholders in a co-op have different objectives. A good example is a credit union, where borrowers want low interest rates and savers want higher interest rates. A multi-stakeholder co-op can ensure that different viewpoints are taken into consideration. The Ecological Land Co-op is a multi-stakeholder co-op in which 50% of voting rights are held by ecological land managers, 25% by investors and 25% by staff and volunteers.
Platform co-ops are online marketplaces that are owned and controlled by their members, and are formalised into co-operatives.
Inspiring
Worker co-ops are not just employee-owned businesses – they are democratically managed by their workers. The John Lewis Partnership (including Waitrose) is a well-known employee-owned business. Employees either own shares in the company, or in a trust of some kind, which owns shares in the company (maybe all of them), and shares are not publicly traded. When the company does well, employees benefit financially. Workers have much more control in co-ops – they either make decisions directly, or decide who’s going to make them. Employee-owned businesses are fellow-travellers, however, along with mutual societies, although neither are true co-ops, which subscribe to the principles and values above.
Structures of co-ops can vary enormously. In the UK, there is no one legal structure that co-ops have to adhere to. If an organisation’s constitution matches the above definition, values and principles, and the members consider themselves part of the co-operative movement, then they are. Elsewhere (e.g. Germany), there are much more specific definitions and legal structures.
What is a co-operative?
Co-ops are run democratically – i.e. one member / one vote; some raise capital by asking members to invest by buying shares; some choose to distribute profits to members, and some are in ‘common ownership’, and don’t.
There are over 2.6 million co-ops worldwide, with over 1 billion members and employing 250 million people.
What are the benefits of co-operatives?
Democracy for workers and consumers: members can influence the affairs of the co-op, and the decisions that are made. The smaller the co-op, the more influence an individual member has.
They can also provide more interesting work, as workers are involved (although they don’t have to be) in the business decisions affecting their jobs.
Consumer co-ops can allow people to access things (or more of things) more easily or more cheaply than they could alone. However, consumer co-ops vary enormously in their adherence to co-operative principles and values.
Some people hear the word co-operation and think that it represents the opposite of competition and a free market. This isn’t the case. Co-operatives are not about eliminating competition. A co-operative restaurant will be in competition with other restaurants, even other co-operative restaurants. Competition keeps standards high and prices reasonable. The opposite of competition is not co-operation, it’s monopoly. Currently, the economy is tending towards monopoly – multinational corporations dominate most sectors, destroying both the free market and competition.
And here are a few other things they don’t do: suck money out of our communities to pay shareholders; concentrate wealth in very few hands; avoid taxes, so that the rest of us have to pay more; or employ sweatshop labour.
Unicorn Grocery in Manchester. Worker co-op; everyone gets paid the same; they own 21 acres of land just outside Manchester on which they grow a lot of the food they sell; fantastic produce and information boards; creche; they have no intention of having more than one shop, but they provide a ‘Grow a Grocery’ guide to help others set up a similar co-op grocery in their own town.
What can I do?
Support co-ops
Use your local co-ops. See here. There are different consumer societies, of which the Co-op Group is the largest. With the Co-op Group and a lot of the larger co-ops, dividends paid to members are in direct proportion to the amount of money spent. This tends to benefit those with the most money, and is therefore not ideal. Also, co-operative principles are often forgotten in large co-ops. A good guide is to ask the staff. Are they members? Do they know much about the co-op, or about co-operative principles and values?
Switch to a credit union for local savings and loans.
Switch to the Phone Co-op for your broadband, landlines and mobile (it’s not possible to get phones themselves from a co-op, but they’re coming).
At the moment, there’s no way to get your electricity and gas directly from a co-op, but although Co-op Energy is no longer a co-op, they purchase their energy directly from community energy groups. At some point, it may be possible to purchase electricity directly from a local community energy scheme, but it’s not possible yet. However, Co-op Energy purchases electricity from community energy schemes, and you can choose the type of renewable energy you want (wind, solar, hydro etc.) and from where. Switching couldn’t be simpler – just sign up online or by phone. You’ll receive a welcome letter, and then after a ‘cooling off’ period to give you time to change your mind, Co-op Energy will contact your current (no pun intended) supplier and do everything for you. They arrange a switchover date – usually 4-6 weeks from signing up. You provide a meter reading on that date, receive a final bill from your previous supplier, and you’re switched to co-operative energy. Sign up here.
Plus, closely related to co-ops, you can shop with John Lewis / Waitrose, and switch your mortgage and savings account (and current account, in some cases) to a building society.
You can also join the Worker Co-op Solidarity Fund. Individuals can join for a pound a week, and a fund builds up to promote the co-operative movement.
Loomio is a tool developed by the Enspiral co-operative, that helps groups make decisions collectively.
Set up a co-op
If you’d like to set up a co-op, there are various places you can go for help. Co-operatives UK have lots of resources, including their business support service, the Hive.
There’s a step-by-step guide to starting a co-op, which is the best place to start.
There are co-op development agencies all over the country – search online. They have advisors to help you set up. They charge, but there’s usually a free first consultation, and they often look for funding to pay for their time. The Hive have a fund that pays for co-op development advice. You can apply if your business idea is reasonably well-developed.
If you have a local, high-profile co-op, it might be worth contacting them to let them know that you have an idea for a co-op, and to ask if there might be anyone you can go along and chat with. Most people in the co-op movement would like there to be more co-ops, so you might find someone happy to help.
Platform 6 have produced a huge list of useful co-operative development resources.
Convert to to a co-op
Existing businesses can become co-ops. The organisations mentioned above can help you with this too. The process has to be open and voluntary – i.e. no-one should suddenly find themselves part of a co-op that they weren’t consulted about forming.
A co-op in which all workers or consumers are members is called a fully-mutual co-op. However, co-ops can have workers or consumers who are not members. Some people may not want the responsibility of co-running a co-op, but if the business converts, they can keep their job without being a member. In that case, they won’t have a say in the decisions that affect their job.
Further resources
Thanks to Cath Muller of Radical Routes for information.
The specialist(s) below will respond to queries on this topic. Please comment in the box at the bottom of the page.
Mark Simmonds works at Co-op Culture, offering advice and support for co-operatives and co-op start-ups. He’s a a founder member of the Fox and Goose Co-operative Pub, Pennine Community Power, Platform 6 Development Co-operative and currently occupies the co-operative development seat on the board of Co-operatives UK.
The views expressed here are those of the author and not necessarily lowimpact.org's
12 Comments
What is the situation now with Co-op Energy being bought out (or in a partnership?) by Octopus? I gather they will still be buying community energy, but I guess the co-operative structure will disappear?
This is the announcement in Co-op News https://www.thenews.coop/141999/sector/energy/octopus-and-co-op-energy-agree-takeover-deal/. I don’t know any more than that I’m afraid.
Very worrying, although it seems as though Co-op Energy’s members will stay part of Midcounties Co-op. So it’s a consumer coop rather than a worker coop I guess. Octopus will obviously be extracting value to pay shareholders, or they wouldn’t be doing this. I guess that means slashing jobs. They also say that they will increase the amount of energy they get from community energy schemes, which for me is the most important thing.
Jon Halle from Sharenergy will comment here soon, when he knows a bit more.
Thanks for this information Dave.
Dave asked me to comment as I work with a lot of energy coops who sell to Co-operative Energy. In the past Co-operative Energy have been a pretty good partner for community energy – they buy energy but they also support in other ways, via innovative pilot projects like Energy Local or by sponsoring events, notably our annual conference which would really struggle to happen without them. As I understand it, this strand of their work will continue, which is great. Co-op Energy and Octopus have a joint venture to push this forward and I can vouch for the fact that their team is talented and dedicated so I expect good things there.
The downside is that technically Co-op Energy customers are really becoming Octopus customers. Co-op Energy will continue to market a ‘Co-op Energy’ offering whereby members become members of Midcounties Coop, but the core activities – customer service, energy trading, regulatory stuff – will be with Octopus. Arguably this is a bit like the Co-op Bank deal where the real economic core of things becomes demutualised but retains the ‘Co-op’ title, something I personally have a problem with. ‘Co-op’ is not a marketing slogan, it means something very specific and internationally agreed. https://www.ica.coop/en/cooperatives/cooperative-identity
It’s a bit depressing when mutuals are unable to make things work themselves. Midcounties are pretty competent so it’s probably a safe bet that others would have done no better. The underlying reason is simple and one which I don’t think is widely known: Energy suppliers don’t make money! Pretty much all the suppliers struggle to even break even on the supply market. That includes the Big Six (who make their cash elsewhere) – and something like 17 smaller suppliers have gone bust over the last 3 years. So why do newish entrants like Octopus get involved? My take is that they have realised that whoever supplies your electricity will also supply lots of other things in a few years time – notably your car. Octopus have some really interesting tariffs for EV owners, linked with an EV lease business, etc.
So yes, a bit of a blow for co-op purists like me. But on the other hand I think that with the climate crisis upon us we can’t stand around crying over it. Actually energy supply to households and businesses is not the really broken part of the energy system. Our energy prices are some of the lowest in Europe. The fact we have so many people in energy poverty is largely due to our crap housing – something that an initiative like the Labour manifesto Green New Deal would directly address (all the parties ought to have a version of this). And the even bigger issue is decarbonising our electricity supply while electrifying all our transport and our heating! That’s why the community energy movement puts so much store on actually building new community-owned generation – and why we work hard to make sure that the co-ops we set up can’t be bought up by commercial actors in future.
Great that Co-op Energy will continue to support community energy co-ops, but tragic that it will no longer be a co-op (agree, if not a co-op, surely a business shouldn’t be able to use co-op in it’s name. Co-op bank is a good example – once a co-op, but no longer).
If community energy schemes could somehow federate – a network of small providers – then if one of them falls over, it doesn’t mean a gaping hole in the co-op sector, as when the co-op bank or co-op energy fall over and get swallowed by the capitalist sector.
Don’t know how feasible this is though.
Amazing that energy companies don’t make money!
Yes I heard a comment on Out of Doors re housing along the lines of: we build holes and try to fill them in whereas in Scandinavia they build a sealed box and then try to ventilate it!
You mention projects like Energy Local, Jon, so is this likely to be a way forward for the co-operative energy sector? Community groups forming co-operatives and then buying and selling energy, so suppliers get a better income and consumers pay less. Also energy has to travel less far and consumers are more proactive – using electricity when it is being generated from renewables.
I didn’t know about Energy Local (or I did but I’ve forgotten). Looks like they could solve the problem of community energy groups not being allowed to provide their members with electricity locally (without having a prohibitively expensive suppliers licence), so that they have to sell to the national grid at around 4p per unit, then members have to buy it back at around 18p per unit.
Have you looked into the Ripple energy co-op (linked to Octopus and Co-op energy at the moment). They actually score a rating of 15.5/20 with the Ethical Consumer if you invest enough to cover all of your electricity usage. They are currently raising money to build their first wind turbine in South Wales. https://www.ethicalconsumer.org/energy/shopping-guide/energy-suppliers. You can see most of the article, including a section about Ripple at the bottom, but not the full score table unless you are a subscriber.
How would a co-op reinvest profits to grow or expand or is it just to distribute
I think that co-ops can provide perfect decentralized centralization. Right now we are on an…unfortunate path. Assuming we solve the ecological problem technology is still getting stronger. AI, bioengineering, big data and biometric monitoring could create 1984 like scenarios. The rich will dominate and control the algorithms that may control us. They may (for the first time in history) be genetically superior to common folk with bio-enhancement. Because of these disruptive technologies it is more crucial than ever that we share the bounty equally. Nobody can stop these technologies and in many fields (medicine, software development and therapy) centralized data could be very helpful for quality of life. Instead of monopolies giant co-op federations. Big co-ops whos members are small co-ops whos members are people (each co-op gets a vote) could possibly keep things fair(ish) and also create jobs. Just a thought but co-ops would do this better than small traders because of their inherent democratic systems. While sole traders may be better for cottage industries (butchers, bakers and candlestick makers) co-ops could run “public” industries like medicine, energy and infastructure.
6degrees, I like your thinking along the lines of scalabale co-operation – federations of member-owned traders. Much more resilient. Times have been and are tough for small businesses. I read this the other day: “The Co-operative Economy 2018 report states that 80% of co-operative businesses survive the notoriously challenging first five years, compared to 44% of other businesses.” Better hardwired to succeed.