A report from the Social Market Foundation says there are opportunities to grow the sector as ethical concerns grow among the public and politicians take renewed interest in the model
The cross-party thinktank, which works to “develop evidence-based policies that support a fair society and a strong economy”, said the resilience of mutuals make them “a dependable choice in a rapidly changing, uncertain economy”.
Public perceptions of business are shifting towards sustainability, social responsibility, and ethical sourcing, particularly among younger consumers, it adds, and the sector has gained renewed political attention, with politicians from both major parties expressing their support in recent months.
But the sector also faces some key challenges, the report warns, including limited financial resources and smaller scale, which means “mutuals tend be less commercially aggressive and can struggle to compete on all service expectations”.
Low public awareness also poses a significant obstacle to future business success, it adds.
The report welcomed the Co-operatives, Mutuals and Friendly Societies Bill, passed last month, but said “there is a need to go further to empower the sector with access to capital. The government should introduce better financial regulation that can enable mutuals to access capital without having to sacrifice their principles.“
It suggests the sector launches an information campaign for mutuals, to enhance brand recognition. “This could be achieved through a mutual kitemark scheme, public information campaigns, or mutuality support networks”, it says.
It also calls on the government to create a new capital instrument for mutuals, allowing them to raise more funds and prevent the threat of demutualisation. Australian Mutual Capital Instruments, a form of debt capital that can be converted to equity, is one such option.
And to create a better policy understanding of mutuals, mutual organisations and the government should collaborate on the creation of comprehensive data that monitors UK mutuality, it says.
For the report, the SMF commissioned Opinium to ask a representative sample of 1,500 members of the public (GB, March 2023) what they think about business and society.
The poll found significant public demand for business to put social impact ahead of profit: 44% of respondents think businesses should have responsibility for tackling key social issues including the cost of living, climate change and the state of local communities.
Yet the public think that most businesses are failing in their social obligations: only 17% think business benefits workers; 16% see business as good for communities; and 16% think companies are doing a good job of limiting environmental harms.
By contrast, 48% said companies prioritise profits for shareholders.
The SMF found that, because mutuals do not have traditional shareholders, their structure and operations have strong appeal to the public:
- 63% supported the core mutual principle of members benefitting when business does well
- 57% supported mutuals’ role in ensuring sustainable development in local communities
- 57% also backed mutuals’ fundamental commitment to social objectives
Senior researcher Jake Shepherd said: “The public increasingly want businesses to do better on sustainability, social responsibility, and ethical sourcing, and not just prioritise profits for shareholders. Mutuals are built to satisfy that appetite for a better way of doing business and our research shows that people strongly value the mutual approach.
“Anyone who cares about public faith in the market economy should take an interest in mutuals, which are perfectly placed to satisfy public desire for more responsible, more caring business practice.
“Unfortunately, not enough people are aware of mutuals, and mutuals tend to have less firepower in the market compared with proprietary firms. Meanwhile, financial legislation and regulation makes it difficult for some mutuals to thrive. To capitalise on the opportunities mutuals present to members, the economy, and wider society, these challenges should be addressed.”