Should co-ops call themselves social enterprises?

It is often assumed that co-operatives are social enterprises – but this is still subject of fierce debate, which came under the microscope at this year’s conference of the UK Society for Co-operative Studies, in Newcastle.

In their book Understanding Social Enterprises: Theory and practice, Rory Ridley-Duff and Mike Bull describe different approaches to social enterprises. At the conference, Dr Ridley-Duff discussed the evolution of concept, using examples from the book.

According to Freer Spreckley, an enterprise may be called “social” if it is owned by those who work and/or reside in a given locality; is governed by registered social as well as commercial aims; and is run co-operatively.

Another definition, given by Kim Alter, sees social enterprises as businesses created for a social purpose to mitigate or reduce a social problem or market failure, and to generate social value while showing innovation.

And Muhammad Yunus cites the Rochdale Pioneers as a case study of another type of social business – where profit-maximising businesses are owned by the poor or disadvantaged, with the social benefit derived from dividends and equity growth which reduce their poverty.

The authors note that distinctions need to be drawn between the US model of social purpose enterprise and the European one of socialised enterprise.

In the US model, social purpose enterprises have strong links with philanthropy, whereas the European model places the emphasis on the long-term goal of building a solidarity economy.

The book describes a shift in the UK towards American attitudes under the Blair government, which formed the Social Exclusion Unit in 1997 to produce a strategy for neighbourhood renewal. This used the term “social enterprise” to describe community businesses and trading charities oriented towards the needs of socially excluded groups. Following a consultation with charities and voluntary groups, social enterprise discourse became dominated by ideas from the USA, such as “earned income” and “innovation” in charities and public services.

During the session, delegates examined some of the models mentioned in the book and explored the social dimension of co-operatives, beyond mutual benefit.

Dr Ridley-Duff argued that co-operatives and mutuals create social value through the redistribution of wealth and social inclusion. Other social enterprises contribute by helping a specific group or achieving sustainable development.

“Fonterra, for example, uses profits to subsidise farmers,” he said. “In Japan a co-op takes upon itself to create healthy meals for people.”

Vivian Woodell, board member of Midcounties Co-operative and chief executive of the Phone Co-op, added: “It is not unusual for a movement with strong and clear values to have these coalitions.

“In London in the 1990s people believed social enterprises were the Trojan horse to get politicians to work with the co-op movement. We shouldn’t be fighting to be allowed to be called social enterprise.”

Cliff Mills, consultant at Anthony Collins Solicitors, added that legislation had polarised co-ops and community benefit societies. He explained how, under New Labour, social enterprises were created in the community health service, whereas under the Coalition government mutuals were co-opted.

Cliff Mills at the conference

“Where it becomes an important debate,” he warned, “is when people come to me as practitioner and ask to set up a social enterprise when actually they want it for the benefits – not because they mean to make a difference.”

Keynote speaker Prof Anu Puusa, from the University of Eastern Finland, talked about how in her country, co-operatives and social enterprises follow different legal models. By law, Finnish social enterprises must contribute over 50% of their profit to a social cause.

By contrast, in the UK co-ops and social enterprises can use different legal forms.

Nick Matthews, chair of Co-operatives UK and board member of the Heart of England Co-operative, added: “We’ve lost confidence in our own business model.

“Co-ops deliver not just for poor, but for the rich as well. The language of social enterprises is full of vacuums – it comes from the EU and the USA where it means something different and merged together into something where it doesn’t mean anything.”

Dr Ridley-Duff argued that co-operatives were the most valuable social enterprise model.

“Any co-op that delivers on all principles is a social enterprise because it embraces the concern for community,” he said. “It’s about other co-ops benefiting and the community benefiting as well.”

Dan Crowe, vice president of the Co-operative Group’s member council, said co-ops should be allowed to call themselves social enterprises by default.

He added: “The world doesn’t evolve around us. For young entrepreneurs wanting to make a profit and contribute to society, that can only be a good thing.”

But he said there was still a lack of public knowledge about social enterprises and co-ops.