The Co-operative Advantage

Over the past three years, co-operative business experts have been analysing the growth of sectors where co-operatives have a natural fit. This has been brought together into The Co-operative Advantage, a book outlining 55 opportunities for innovation facing the co-operative sector. Here, Co-operative News summarises 15 initiatives …

Agriculture: Sustainable, distributed food and farming

As industrial farming takes a hold of agriculture and inner-city micro-farms develop, the number of small- and medium-sized farms is declining.

One of the key strategic questions is whether there is a co-operative model for those farms which is economically sustainable.

Co-ops can help in a number of ways: product differentiation and branding; the promotion of ‘green agriculture’; and the capacity of food entrepreneurs for new product development in partnership with retailers and online platforms.

The revival of local food economies could be another key point for co-operatives, as well as the use of farms as a community resource (for leisure and tourism, forestry, education, health and renewable energy) and not just food.

What type of food economy will emerge in the UK? Whether niche or the next mainstream, there is evidence that community-based models of food will be part of the landscape. Trends include organics, online and food box distribution, models of self-help and mutual aid such as Landshare, product differentiation (from farm to retailer) by small farmers, and local sourcing.

Community energy

Co-ops are a model to deliver renewable energy projects, but there are limits in terms of scale and growing the model fast may require a wider set of partnerships, for example with local authorities.

It also seems inevitable that innovation in this field, a regulated activity, is closely related to the policy framework, including: financial incentives, primarily feed-in tariffs; grid connection; planning permission; and the possibility of local supply licences.

Opportunities for community energy growth could come from a growth in solar-power installations on public buildings such as schools, hospitals and community facilities. Another could be the creation of projects to invest in offshore wind projects, using the Energy4All model of creating a co-operative to take a partial ownership of a larger scheme.

Agricultural co-ops and their members have an interest in renewable energy and there are emerging opportunities to harness the potential for generating energy from waste in the food chain, such as through anaerobic digestion.

Housing projects are well placed to promote energy saving and to link into the supply of renewable energy. There will be opportunities, too, to work with local authorities on renewable energy. This could include sharing best practice and combining facilities and assets.

Community food: Collaborative networks for scale and viability

The most promising pathways for growing community food relate to the idea of joining up community food enterprises into a more effective food system, through collaborative networks.

The UK’s major food retailers have all developed policies on domestic sourcing of food and explored the sourcing of ‘local food’ in particular. Their constraints, of course, are that local food runs counter to the national scale of purchasing and distribution that is core to their business model.

Local food tends to be positioned in the value-added, higher price range, which may also limit uptake or dissuade retailers from stocking it, given other concerns around availability and the fit or non-fit with existing distribution chains.

The co-operative retail sector faces the same challenges, having a national Co-operative Retail Trading Group to supply all of the independent societies. However, there is room for some flexibility with rule changes that allow for the potential to obtain local produce. East of England Co-operative Society established its ‘Sourced Locally’ range in 2007. The initiative has grown from a few suppliers to more than 130, who provide more than 2,000 different local products for the society’s stores.

This trend may link to the growth of the convenience store within retail and the potential to adapt individual stores and their stock to local needs and demand, turning back the ‘clone town’ syndrome driven by retail centralisation. A digital hybrid model would be to promote local co-operative producers and their markets to the retailers’ membership, even if the retailer did not stock the products themselves. In the digital age, they can act as a shop window without necessarily having the products in the shops.

The vision for this perhaps would be of a co-operative store as the physical place to connect local consumers and producers.

Retail: Consumer control of data

It is clear that ‘big data’ and the new information possibilities associated with the use and reuse of personal information is central to the future of retailing, as indeed it is for a wide range of other sectors.

As business and social networks have moved online, there is a footprint of data that has now become big business. According to the Direct Marketing Association, data mining generated $156bn of revenue in the USA alone in 2012. But whose data is it, and how should the gains of data sharing in turn be shared?

In Switzerland, the Swiss Health Bank has developed as a co-operative model for pooling personal health data. There are no co-operative models in the UK as yet, in health or more widely, that are genuine market leaders in this field. But there is a fledgling enterprise founded with a co-operative ethos that may offer learning about the potential for a particularly co- operative variant on the model.

Mydex was founded by a successful entrepreneur, William Heath, with a big idea that rather than businesses collecting, analysing, warehousing and using personal information on consumers, consumers could own their personal information. The benefit, using data that can be passported across service providers, was conceived to be that the results could be more accepted, more revealing or intimate and more likely to be accurate.

Sport: Supporter-owned professional sports clubs

For professional sports clubs, future growth in gate receipts may be a challenge as the more successful clubs are already at or near capacity for their stadiums.

In terms of broadcasting and advertising, sport provides two  products: a stream of content for pay TV; and a unique live sport event, which can be sold to advertisers.

In the future there is the potential for a broadcast-friendly European Super League. If this freed up the Football League from the incentives currently in play, this would be a significant structural change that could be allied productively with a shift to mutuality.

As before, it would be innovation in the broadcasting of football that would drive changes in the ownership and culture of clubs, rather than the other way round.

In the meantime, a step forward at a more local level would be for clubs to ensure that, where supporters’ trusts have been established, they have a direct say in the running of the club through being able to elect a member of the club’s board.

In other leagues, supporter ownership should be seen as a viable means of bringing stability to a sector dogged by financial failure.

There is a crowd-funding market developing to attract investment in sport. In some cases this is used to support budding individuals in progressing in their sport. It can also be used to help clubs to maintain or acquire assets.

Insurance: Discretionary mutuals

Although little publicised, the past few years have seen the creation of a number of new insurance mutuals in Britain to provide their members with an alternative.

These are the so-called discretionary mutuals. One example is the NFRN Mutual, set up in 1999 as an offshoot of the newsagents’ and independent retailers’ federation, the NFRN. The NFRN Mutual, which now has over 3,800 members, offers commercial, household and liability cover to independent retailers. It has recently collaborated with the Plunkett Foundation and a number of co-operatively run community shops now participate.

A similar initiative is the Activities Industry Mutual, which provides protection for adventure activities providers.

At the other end of the scale is the Livery Companies’ Mutual, set up by the Livery Companies in the City to provide shared protection for their assets and activities.

All are managed by independent company Regis Mutual Management, which has developed a niche service in helping to create and administer new mutuals. Regis is now launching The Military Mutual for Armed Forces personnel and has met with networks such as the Confederation of Co-operative Housing.

Banking: Mutual guarantee co-operatives

In many other countries in Europe there are consortia co-operatives of SMEs for finance, operating through the use of guarantees.

These are created by SMEs, which provide the capital and apply for a loan guarantee in the form of mutual or co-operative shares.

Working together, SMEs can then negotiate a better deal from banks, while for the banks the underpinning of the co-operative guarantee provides partial security. The risk is lower, so the price of money is lower.

The deal flow is greater, and underpinned by peer review from SME members, so access to capital is easier. On one estimate, around 8% of all SMEs in the European Union have benefited from co-operative guarantee societies.

A previous attempt to introduce co-operative guarantee societies in the UK foundered in 1997 because the regulatory context was uncertain or unfavourable. Co-operatives UK has been working in a collaborative way with the Financial Conduct Authority to attempt to clarify the regulatory interpretation. Alongside this is the potential of technology platforms for peer-to-peer finance, which serve to reduce the barriers to participation.

Tourism: Consumer-owned tourism platforms

It is easy to paint the tourist as a passive, albeit well-informed, consumer. This misses the opportunity of their having an active role in creating their own leisure or holiday activity.

There are instances where groups of individuals have come together to purchase canal boats, and block-booked and shared holiday cottages or estates to create a shared benefit for each other that they could not have achieved alone. A co-operative approach offers some assurance in terms of fair treatment. After all, the principle of sharing underpinned the success of the concept of time- share apartments in tourism, but it was the mis-selling by unscrupulous operators that brought the model into disrepute.

The innovation potential, building on the wider ‘sharing economy’, would be for a co-operative model based on harnessing technology platforms to enable such tourists collectively to bargain or procure their common leisure and holiday experiences.

Transport: Train operating co-ops

Many people working in transport policy and beyond are looking for alternative models for train operators. Co-ops and mutuals may provide the answer.

There are several ways in which mutual train-operating companies could obtain the right to run services.

First, an existing operator might hand a franchise to the operator of last resort, the Department for Transport. This happened most recently with the East Coast Mainline.

There may be a case for further nationalisation or alternative ownership structures that embrace co-operative principles. This could lead to a mixed-stakeholder model, including employees, communities and, critically, passengers.

During the past 20 years of rail privatisation, only a relatively small number of operators have even bid for, let alone actually won, franchises. To encourage competition, the Department for Transport has wanted five or six main operators in the market for franchise services.

This has created an oligopoly that has deterred other operators. In addition, the government has given weight to industry experience when awarding franchise contracts. It is unlikely that a new co-op or mutual could win a rail franchise opportunity through open tender.

But a new co-operative or mutual could partner with an existing private operator to win a franchise. This could act as a means for the new venture to gain experience and credibility before bidding alone for future opportunities.

Criminal justice: Employment and resettlement social co-operatives

There are opportunities for social co-ops to create a model in getting prisoners back to employment and resettlement support.

Another model is to establish the ‘new mutual’ model seen in other public services for the management of prisons and community rehabilitation services.

Specific innovations might include mutual employment agencies, co-owned by ex-offender user workers and providing access to employment on more favourable terms than most agencies are currently able to offer.

Mutual prison industries could be developed by co-operative development bodies, which can replicate the AIR model from Milan. And offenders and ex-offenders could be helped to become collaborative entrepreneurs with a co-operative variant of the New Enterprise Allowance.

Creative industries: Open co-operatives

The idea of open co-operatives looks to combine the power of digital models of peer production with the analogue experience of co-operatives around business form and ownership.

Open communities of peer producers still tend to be oriented towards the start-up model and, if they grow, as in the case of the hugely successful game Minecraft, the growth or succession strategy is locked into the investor model.

Conversely, co-operatives may have addressed some of the issues of scale and capital, but remain typically closed in terms of their approach to knowledge, relying on closed intellectual property and focused on exchange outside of the digital sphere.

The idea of open co-ops can be relevant to any economic activity where there is value in collaboration. The principle of openness can also, as Indy Johar argues, become an organising model for a very different approach to enterprise.

Being open is one of the original co-operative values, and an integral part of the Statement of Co-operative Identity of the International Co-operative Alliance. The idea of open co-operatives takes this further by asking what it is of an enterprise that does not need to be open.

Turning the tables in this way, Johar envisages co-ops that are open about rewards, resources, finance, ownership, tax, contracts, political donations, software and data.

This is a radical potential transformation of the business model – recognising that business can be best when it is an intermediary for people to come together to create value, rather than an entity owned by a few for which the many create value.

Education: Co-operative higher education

With the rise in student tuition fees and marketisation in recent years, an increasing number of academics have started to explore alternative models for universities and the potential for the free delivery of higher education.

These include the development of massive open online courses (MOOCs) either through collaboration between groups of universities or outside traditional university frameworks, but these do not provide full university qualifications.

Other academics have looked at more radical models, such as the Occupy University set up as part of the Occupy Movement, or the Social Science Centre in Lincoln which is now offering ‘free co-operative higher education’, organised on the basis of democratic non-hierarchical principles, “with all members having an equal involvement in the life and work of the SC”.

The Synergia project is a scoping project designed to test how an online course, using a MOOC model, can make co-operative know-how much more readily available.

Perhaps more significant is the growing number of academics now engaging with the co-operative sector and raising debate on structural forms within their own institutions. A group of 16 universities has formed a consortium promoting teaching and learning on social enterprise.

Other universities have worked with the Co-operative College to develop modules based on co-operative values for masters programmes for serving teachers, together with research programmes and a joint PhD studentship to help build the evidence base.

Housing: Buy to co-operate

It is easy to focus on social housing and new build when looking at housing policy, but what could be more transformative is the emergence of co-operation as a grassroots response.

UK policy supports the problems that the market now faces, with weak enforcement of empty-homes regulations, a permissive approach to the ownership of multiple homes and the lack of recognition of co-op models in housing benefit rules.

With the right policy or support framework, it might be possible to encourage a bottom-up movement along the lines of a market for buy to co-operate. Examples would be:

• Tenants willing to come together, possibly with matching assets from other co-ops.

• Owner-occupiers close to retirement who are open to selling their property in exchange for becoming members of a housing mutual that can serve and support them over their later years, offering them a capital stake alongside their participation as a resident.

• There are many leaseholder companies for small blocks of flats that are established as share companies and often run by ex-professionals who bring private-sector behaviours. Co-operative principles could be introduced to these, empowering all the leaseholders and providing the social benefits a co-operative brings.

• There may be an opportunity for new models of finance for housing co- operatives, reflecting the extent to which this is a barrier.

Social care: Integrated health and social-care co-operatives

It has long been recognised that there must be opportunities in developing an integrated model for health and social care for improving outcomes for people and reducing the costs of delivery.

The Circle is a model – which is not a co-operative – that sees people supporting themselves collectively in many different ways, within a wider web of support. The potential is to move towards a system of distributed and personalised support that can replace residential care.

It does not replace residential care but seeks to make it more punctuated. In policy terms, residential care becomes merely one part of a wider system that includes GPs and other primary-care services, all of which would ideally be included in a single budget so savings in one area could be fed through to others and to support the social network.

With a similarly circular metaphor, the Oxfordshire Wheel is a path-finding multi-stakeholder care co-operative with a mission to develop a broad range of services provision for and with disabled people and their carers.

At the heart of its vision is the development of ways to help disabled people into paid work. The challenges are formidable, as many of their members with learning disabilities or severe injuries have been out of work for 15 to 20 years.

It may turn out that pioneers such as these demonstrate not that all health and social care can or needs to be integrated, but that there may be a specific group of users with a demand for both, around whom new, more responsive co-operative models of delivery can be built.

Health: Patient-led approaches and enterprises

Many observers of the NHS argue that one of the answers to financial challenges bearing down on the system is to develop a greater role for patients in meeting their own health needs.

This includes models of self-care, co-production, talk of ‘expert patient’ approaches or user-led models. Nesta describes how co-production means not ‘doing public services to people’ but ‘organising public services with people’. This means seeing patients as potential assets who can contribute rather than liabilities or a drain on the system.

Foundation Trust structures have not gone as far as they might in genuinely giving ownership to communities. Yet co-operative and mutual models, through their very structures, can help create mechanisms for deeper and more meaningful service user engagement.

These can be genuinely patient-led enterprises which embed models of co-production in ownership and not just in culture. As staff ownership can offer a greater voice to employees, user ownership can help patients realise the increasing opportunities they have to shape services to their need and expectations.

In terms of new-start enterprises, one interesting innovative model is the Rochdale Circle. This is a membership-based service open to anyone over the age of 50, based on the premise that people can be each other’s solution, and which “backs it up every day, week and month by helping each other out with life’s practical bits and pieces”.

This is real health enterprise, with a particular promise to support citizens’ mental health, which has grown from ideals of participation and trust, companionship and meaningful relationships. Members learn new things, enjoy hobbies and interests with each other, connect with each other to go for a meal, to a car-boot sale, or shopping, and benefit from the support of a real social network.

For more detail on these ideas and on 40 other innovations, Co-operative News readers can take advantage of a 20% discount on The Co-operative Advantage.  

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The Co–operative Advantage has been edited by Ed Mayo and jointly written by the following authors:

• Andrew Bibby (Insurance) is a writer and journalist, who writes for a range of clients, including the International Labour Organization and the International Co–operative and Mutual Insurance Federation on co–operative business issues. He blogs on bibbyoncooperatives.org and is the author of a forthcoming book on an early British experiment in worker co-operation.
• Pat Conaty (Social care) is a researcher and innovator in co–operative economics. He is a Fellow of the New Economics Foundation and an Associate of Co-operatives UK. He is co-author with Mike Lewis of the book The Resilience Imperative: Co–operative Transitions to a Steady-state Economy.
• Joe Fortune (Transport) is Political and Parliamentary Officer at the Co–operative Party, managing strategic political relationships with elected representatives and delivering activity in Westminster. Joe has been an Executive Committee member of SERA since 2008 and is a specialist in transport policy.
• Dan Gregory (Health) has worked for the Treasury and the Cabinet Office and now acts as senior adviser to a range of organisations, including Social Enterprise UK and the Social Economy Alliance. He is author of The Right to Run, a practical guide for public-sector staff thinking about setting up a mutual or social enterprise.
• Ed Mayo (agriculture, community food, retail, banking) is Secretary General of Co-operatives UK and Vice-President of Co-operatives Europe. He is chair of the participation charity, Involve, and former Chief Executive of the National Consumer Council and New Economics Foundation. He is co-author with Agnes Nairn of the book Consumer Kids.
• Claire McCarthy (Transport) is Head of External and Political Affairs at The Co–operative. She has previously held a series of policy, campaigning and communicating roles in the voluntary and public sectors. She was a government Special Adviser between 2005 and 2009 and a member of Labour’s National Executive Committee and National Policy Forum.
• Cliff Mills (Criminal justice) is a leading practitioner in the law and governance of co–operative and mutual organisations. He is Principal Associate of Mutuo and is a consultant with Anthony Collins Solicitors. He has acted as legal advisor to Co-operatives UK and worked extensively with key partners in the legislative process of modernising mutual-society law.
• Andy Mullineux (Banking) is Professor of Financial Economics and Deputy Dean for Research at Bournemouth University Business School. He was Professor of Money, Banking and Finance at the University of Birmingham from 1997 to 2013.
• Robin Murray (Taking stock, looking forward) is an industrial and environmental economist. He is visiting research fellow at the London School of Economics and an associate of Cooperatives UK. He was co-founder of Twin Trading and is author of Co-operatives in the Age of Google.
• Dave Nicholson (Criminal justice) is Director of Ex-Cell Solutions Ltd, the only Co–operative Development Agency in the UK working exclusively with offenders, ex-offenders, prisons and community-justice organisations. His background is in Probation and Local Economic Development. Dave is a Fellow of the Royal Society of Arts.
• Chris Norwood (Community food, Renewable energy, Retail, Creative industries, Sport, Tourism, Housing) worked as Project Officer at Co-operatives UK from 2011 to 2014, following work on business development at Innovation Manchester.
• John Restakis (contributions to international co-operation across a range of chapters) is past Executive Director of the British Columbia Co–operative Association in Vancouver, a position he has held since 1998. He is author of The Great Train Robbery, Tax Justice & Civil Economy and Humanizing the Economy – Co-operatives in the Age of Capital.
• Mervyn Wilson (Education) is outgoing Chief Executive and Principal of the Co–operative College and has led the development of co–operative schools in the UK. He is an expert member of the International Co–operative Alliance Principles Committee and a Trustee of the Co–operativeHeritage Trust.
• James Wright (Co-operation policy) is Policy Officer at Co-operatives UK. He is author of Co–operative Call to Action 2015: strengthening the economy through self-help and mutual aid.