Why the ‘everyone knows co-ops are better’ line doesn’t hack it any more

The community impact index report published in the last issue of Co-operative News was a welcome and incisive call for co-operatives to better leverage their community investment activities. It is treated as a given within the movement that co-operatives do more for the community than their competitors, but this index shows that more needs to be done to evidence and communicate this.

It is a pain in the backside drawing together community investment data, but if it really matters to stakeholders then it should be happening. Sustainability accounting and reporting is much like sport in that improvements tend to be incremental. Think of Team Sky’s performance in the Tour de France and their philosophy of incremental gains, or Al Pacino’s ‘inch by inch’ speech in Any Given Sunday. If that’s all a little too much to ask, consider Bill Gates’ annual letter of last year, in which he talks of how innovation needs precise measurement; because, without it, “invention is doomed to be rare and erratic … (but) with it, invention becomes commonplace”. 

Fair play to Co-operatives UK for being ahead of the game and inspiring reporting on a small basket of social, community and environmental indicators way back in 2001. I was part of the working group that developed these (along with the big brains of Ursula Lidbetter and Peter Couchman) and can remember the loud voices who said there was no need for co-operatives to demonstrate that they did this stuff better than PLCs as “everyone knew we were better”. Except that they didn’t know. And they still don’t. The customers of Tesco and Asda certainly think that these businesses do far more for their local communities.

I highly recommend Co-operatives UK’s most recent guidance, which ably tells the why and how. The only point of difference I would venture is the recommendation to use London Benchmarking for the assessment of community investment. I have found this methodology to have a bias against co-operatives, and can remember the leadership group refusing to recognise co-operative support as a form of community giving; they only shifted when a FTSE-listed member demanded that support for social enterprises should be allowable. If benchmarking is sought, what is to stop co-operatives agreeing their own rules on this? How can we capture the support organisations such as Midcounties and Co-operative Energy give to community energy in the UK?

It is interesting to note that social enterprises are wrestling with the same issues and have decided that part of the solution is labelling. To qualify for the Social Enterprise Mark, a business must prove that at least 50% of profits are spent on social purposes. A major driver for a more exact science is the growth of social impact investing – investments that seek to generate measurable social and environmental impact alongside financial return. Globally, the market is worth $36bn (nearly £21.9bn), and a report for the Cabinet Office last year estimated the potential for it to grow to a colossal $400bn-1tn (£243-608bn) by 2020. Never was it truer to say ‘data unlocks capital’. Oh, and there is also the small matter of the EU’s plans to make sustainability impact reporting mandatory for all businesses with 500 or more employees. This may sound far-reaching until one considers that in India, a new Companies Act will require all large businesses to devote 2% of their profit to corporate responsibility activity, or explain why not.

But there is a potential game-changer on the horizon in the pending Fair Tax Mark. What does it matter if a business donates small percentages to the community voluntarily, but it aggressively avoids corporation tax obligations? Starbucks does plenty ‘for the community’ but it reportedly paid just £8.6m in corporation tax in the UK over 14 years and nothing over the four years from 2009-2013 – despite sales of c.£400m per annum. However, in June of last year, following a public outcry, it agreed to “voluntarily” forgo various tax deductions and pay £10m to HMRC as a gesture of goodwill. Which isn’t to say that matters are on the mend. The Financial Times last month exposed how seven US technology giants paid just £54m in UK corporate tax in 2012, on combined sales of $15bn (£9.1bn)!

Recent polling from the Institute for Business Ethics has found that tax avoidance is now the number one concern of the public when it comes to business conduct. It will be interesting to see how many co-operatives are among the Fair Tax Mark pioneers when it launches. If there are a number leading from the front, then we may have the best evidence yet that co-operatives do this community thingamajig better than others.