Governance and the co-operative difference

How does the movement rate against other forms of business models which are pitching to be a force for good?

When the Rochdale Pioneers set up shop in 1844, they laid the foundations for today’s global co-operative movement. The Rochdale Principles set a benchmark which still sets co-operatives apart from competitors in the increasingly crowded arena of ethical business.

Other forms of social enterprise have been inspired by the founding principles of the co-op movement and in recent years corporate business is pitching to be a force for public good. One of the ways they are doing this is through B Corps certification.

The community of B Corps certified in the UK launched at the end of September 2015 with 62 founding members. There are now 150 signed up to B Corps certification, which  requires high standards of verified social and environmental performance, transparency, and legal accountability. Leading UK B Corps brands grew on average 21% in 2017, compared to a national average of 3% across their respective sectors.

The UK community includes household names like Ella’s Kitchen, Pukka Teas, Divine Chocolate and Lily’s Kitchen. Globally, there is now a community of over 2,400 B Corps claiming purpose beyond profit.

Mark Cuddigan, chief executive of Ella’s Kitchen, said recently: “I am excited that the B Corps movement is growing and that UK consumer brands are leading the way in driving positive change and inspiring other businesses to join us on this global mission to redefine the meaning of success in business. Ultimately, the more like-minded businesses who certify as B Corps, the more we can ensure that businesses can come together to inspire change and be a force for good for people and the planet.”

But, however welcome the boom in a more ethical private sector, it is the co-op movement which still offers something unique in terms of collective working and positive impact on the wider community. And its governance is key to making that happen. A co-operative boardroom is very different from those of investor-owned corporations or businesses run for shareholder profit – however ethical they may be.

Linda Barlow is co-operative governance advisor for Co-operatives UK, which offers advice and support to thousands of co-operatives in the UK currently contributing £36bn to the economy.

Linda Barlow of Co-operatives UK

She says: “Co-ops have to operate within the structures available to any other business. It’s what is in their governing documents and articles that makes them different, embracing the principles of co-op values and enshrining them in governance.

“The biggest difference is that when you become involved in a co-op you are on the same democratic level as anyone else. Regardless of how much you put in yourself you still only have one vote.

“Members’ motivations in getting involved are also different than being a shareholder in a commercial entity. There, the main motivation is because you want to see capital grow and get a return on investment, whereas in a co-op you become involved because it meets your cultural, social or economic needs. Some co-ops share a  financial dividend but not all do. The rewards are different, it’s not to make money for yourself. It is more that if your relation to it is as a worker you shape that by being a worker but also an owner.”

Recently, Co-operatives UK set up a Co-operative Governance Expert Reference Panel with representatives from all kinds of UK co-ops, from retail to housing, working with lawyers towards good practice and better governance.

“Co-operatives are businesses and need to be run properly and be accountable to members,” says Ms Barlow. “The elected board has to be able to do its job. So we provide lots of resources, training, guidance notes and toolkits so people know what they are getting themselves into.

“The panel works with people within the different sectors of co-ops to develop good governance and see what it looks like within the co-op context.”

Since the financial crash of 2008, the co-op sector’s impact on wider society has broadened, with many local communities working to save services at risk from austerity cuts.

“Within the co-op sector there has been a lot of growth at community level where people have the opportunity to become members and have a say,  particularly in areas like energy and saving local assets like libraries, shops and pubs. People are waking up, they don’t want to be passive participants any more and they can have a real say in how a service is run collectively.

“The normal commercial enterprise is just there to see investment grow. In a co-op the relationship is different; people know they are entering into it for  different reasons. The reward is collective, you can work alongside people who share the same values.”

For more than 15 years, Social Enterprise UK has worked with government, charities, and the public and private sectors to champion the cause of sustainable businesses with a positive impact on communities.

A major boost to its work was the Social Value Act, which came into force in January 2013, requiring public bodies, including councils, to consider choosing providers based on the social value created in an area and not on cost alone. While social enterprises and co-operatives are not interchangeable, there is much common ground to work on.

Deputy CEO Charlie Wigglesworth says: “There are a lot of different structures, lots of Community Interest Companies (CICs) and a range of others, including industrial and co-op societies, who we work with. What they share is a social purpose written into their governance documents and owned in that way. What we see in terms of demographics is a much stronger diversity and inclusiveness than you would find in
mainstream business.

“The other thing we find is we all take a very holistic approach to being a good business. If you look at the information we have about fair pay, salary ratios are all very strong. We have a lot of data and statistics on those areas which we share with co-ops, for example the importance of structure and governance locking in important aspects of how business operate within  the social enterprise sector.”

At a time when more than 66% of consumers have reported they are willing to spend more for goods and services that are committed to making a positive social impact, Mr Wigglesworth agrees the time has never been better for social enterprises and co-operatives to work together for the common good.

“Every time we have done a survey recently, we have seen a growth in start-up rates. That’s consistent growth and real expansion.

“We know there is a better way of doing business than the mainstream model. A recent state of social enterprise survey compared how we perform against the mainstream sector. 30% of social enterprises are based in more deprived areas, compared to 8% of SMEs; 79% of social enterprises recruit the majority of their workforce locally and 58% the entire workforce.

“They are also much more representative of their communities. 41% of social enterprises are led by women and 12% from BAME communities. The need is great in terms of societal impact. However, what we want to see is social enterprises of different scale and different markets.

“There are a lot of social enterprises that are not co-operatives but their priority is still social purpose and re-investing profits.”

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