The Doing Co-operative Business report: how can co-ops achieve their full potential?

The first report into ‘Doing Co-operative Business’ has been released at the International Co-operative Alliance’s global conference in Antalya, Turkey. The pilot report looks into how, in order...

The first report into ‘Doing Co-operative Business’ has been released at the International Co-operative Alliance’s global conference in Antalya, Turkey.

The pilot report looks into how, in order to achieve their full potential, co-operatives require an enabling policy and legal environment that creates a level playing field. It also covers what criteria can be used to assess and compare different countries, and what are the main principles of co-operative law that can help co-operatives thrive.

The International Co-operative Alliance commissioned the report to be undertaken by TIAS School for Business and Society at Tilburg University with the intention of laying the groundwork for future Doing Co-operative Business reports.

The findings were presented by Hagen Henrÿ, chair of the Alliance Co-operative Law Committee; Hans Groeneveld, from TiasNimbas University in the Netherlands; Arif Sami Seymenoglu, director-general of the Co-operative Department, Ministry of Customs and Trade, Turkey; and Young-Hwan Cha, director-general of the Ministry of Strategy and Finance, Republic of Korea.

Mr Groeneveld authored the report, which looks in great detail at the concept of creating an ‘enabling environment’ across nations. He describes this as: “the degree to which nations, governments and/or societies support and foster co-operative firms in their establishment and subsequent development in accordance with the seven universal co-operative principles.” That is to say, if the country needs a co-op, is it feasible to set one up there? Can the co-operative principles be followed?

The key trends as to what creates a good enabling environment for co-operatives are defined as:

  • The co-operative sector is generally smaller in societies characterised by large inequalities and power in the hands of just a few people
  • A favourable general business environment (e.g. a higher General Doing Business Indicator according to the World Bank) goes hand in hand with a better co-operative performance
  • Countries with high scores on the Governance Indicators of the World Bank usually have a larger co-operative sector
  • The perceived level of corruption is negatively correlated with co-operative performance
  • Rising income inequality hints at a decline in co-operative conditions
  • In other words, it seems that the more democratic a society, the more fertile the situation for co-operatives will be.

In terms of laws and tax breaks for co-operatives the situation is equally varied. “Contemporary legal frameworks and tax regimes for co-operatives are mostly reflections of these historical cultural and societal characteristics and the political history of individual countries,” the report reads. It goes on to elaborate that legal and tax systems don’t have to necessarily favour co-operatives, but they should at least take into consideration the specific nature of how they are run.

Indeed, the report finds preferential treatment such as free support services, exemptions from competition, labour and competition law, tax benefits etc can even be damaging. It can lead to distortions in market conditions and could encourage misuse by pseudo co-operatives which are founded in order to exploit these subsidies.

Recommendations:

Responding to these findings, four steps were suggested for how best to proceed.

  1. Updating and improving global databases on co-operatives

In order to effectively monitor the evolution of co-operative firms and their economic significance. The report recommends giving priority to regularly updating and improving the Global Census on Co-operatives.

  1. Formation of a pool of country experts

Country-specific insight from national experts would be a valuable resource in understanding the data and improving accuracy. A network of experts would ensure continuity and objectivity. The report suggests the Alliance employ an independent co-ordinator to guard the consistency and quality of the research

  1. Involving members of co-operatives

For all the research and opinions of national experts should not be prioritised at the expense of practical experience from members and/or member representatives of co-ops. Their descriptions of the state of affairs within the co-op movement complete the picture

  1. Conducting uniform and concise country surveys

Surveys for co-operators and country experts would help provide crucial insight into the co-op movement. Sample questions include: Do (newly) established co-operatives need government recognition? and Which measures could be taken to improve the enabling environment for various types of cooperatives considerably?

The report concludes with advice on how to produce the first full Doing Co-operative Business report. It accepts that a high level of manpower would be required to draft a full version, and suggests deploying two PhD students “to improve the availability and quality of data on co-operatives and to carry out practical research connected with the above suggestions.” This research would not only be cost-efficient, but would ensure consistency and would spread knowledge about co-ops into academic journals and place them alongside other mainstream research topics.

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