The importance of co-operatives in value chains

Co-ops have an important role to play throughout value chains, not just at the production point

Integrated supply chains account for more than half of manufactured imports and over 70% of service imports, according to the International Monetary Fund (IMF). The role of co-ops within these supply chains is complex and innovative – but delegates at a plenary session at the 2019 ICA International Conference in Kigali, Rwanda, heard how they could be doing more.

“Cooperatives demonstrate the delivery of more than just profit within a supply chain,” said Peter Westall of the UK’s Midcounties Co-op, who was chairing the session. He said co-ops are present in every stage of supply chains, from producers, through secondary co-ops to consumer co-ops. He believes the co-operative approach can make a difference to each of the Sustainable Development Goals (SDGs), but particularly SDG12 (ensuring sustainable consumption and production patterns).

“Co-operatives need to encourage commitment to the SDGs,” he said. “They are core to all co-operatives, whatever type of business we represent.”

In the UK, Midcounties has taken a lead in responsible consumption through the launch of an app called Happerley, he added. This allows consumers to check produce provenance.

Mr Westall also highligthted the importance of co-operatives to Fairtrade, which celebrates its 25th anniversary this year. 

Fairtrade Africa has four networks across the continent. Chris Oluoch, of the Eastern-Central Network, said 70% of the 1.6 million Fairtrade workers and producers across the globe are in Africa. 

Fairtrade certification has been positive, he said, but looking at producer co-operatives’ place in the value chain, ICA Africa knows there is still a lot more that needs to be done in terms of trying to create fair value. 

“There is a rallying call to go beyond the Fairtrade certification,” he said, particularly by creating partnerships and claiming ownership over the value chain. 

“Producer co-operatives are at a crossroads. They are facing the challenges of climate change, low prices, volatility of markets, ageing producers, low youth and women involvement and more. To address this, Fairtrade Africa is partnering with like-minded organisations to strengthen the value chain, and is piloting an inclusive farmer service business model to create greater value for producers and build capacity throughout the system.”

Pachamama Co-operative is at the other end of the production chain. Founded in 2001, it is the only coffee roaster in the USA that is 100% owned and governed by co-operative farmers. 

“Coffee may be the world’s most important agricultural product for economic development and environmental sustainability,” said CEO Thaleon Tremain. “In the USA, lattes can sell for $5 – but often less than 10 cents of that can make it back to the coffee farmers.”

To combat this, Pachamama sells directly from producers to consumers (through two cafes in California) to capture more value for coffee farmers. The cooperative provides a full intermediary service, from roasting, brewing and packaging to marketing and distribution.

“It is imperative that producing nations continue to invest downstream,” said Mr Tremain, adding that this model can be applied to lots of other industries such as honey, tea and rice, where produce is created at a low value and sold at high value. But he acknowledged that to scale up, there was a need for institutional support for these kinds of models.

In Rwanda, co-operatives are active throughout the value chain. During the session, Jean Bosco Harelimana, from Rwanda Cooperative Agency, said co-operatives are developing in response to the needs of the market. There are more than 9,000 co-operatives in Rwanda, he said.

“Three or more co-operatives can join together to form a co-operative union, and three or more co-operative unions can join together to form a cooperative federation at national level.”

There can only be one federation for each value chain (eg coffee production or rice production).

“Business development here focuses on co-operatives,” he added. “The Rwanda Cooperative Agency works with local people to promote the participation of members [which] helps to create strong, well managed, well governed coops throughout the value chain.” 

Also speaking at the session was Iñigo Albizuri Landazabal, of Mondragon Corporation (Spain), who has recently been elected president of CICOPA (the branch of the ICA that promotes worker, social and producers’ cooperatives in industry and services).

Mondragon, an industrial co-operative, was born 75 years ago “out of need, not choice” after Spain’s civil war. “The war made us realise that we needed to unite ourselves for a better way of working,” he said, acknowledging the role of co-operatives in rebuilding peace in countries around the world, including Rwanda. 

“The values of industrial co-operatives in Spain are not different to those of agricultural cooperatives in Rwanda,” he said. While each one may be embedded in its own environment, the values are universal.

He described how Mondragon today represents a global project, with businesses in 150 countries, and a continued emphasis on education. The Mondragon University was founded in 1997 and today plays an important role in research. “Education, business and research are the three pillars of the Mondragon virtuous triangle,” said Mr Landazabal. “You cannot understand one without the other.”

He added: “Without co-operators there are no co-operatives. Legislation and funding is important but we tend to forget the cooperators themselves. The education of co-operative values within the value chain is very important.”

Education is also an integral part of Happy Bridge, a federation of worker cooperatives in South Korea, which works in partnership with Mondragon to deliver Happy Bridge Mondragon (HBM), a co-operative management institute.

Happy Bridge is a successful restaurant franchise, which 600 eateries and 2,500 workers and turnover of US$300m, said Kangtae Park. “The restaurant has to take care of different parts of the value chain, taking into account partnerships, contributions to local communities and the development of cooperative models throughout its value chain.”

Today Happy Bridge has expanded and now also runs an eco-friendly food delivery service and Happy Coop Tour travel agency.