What if… Co-operatives UK had £70m a year?

by Josef Davies-Coates (reposted from Stir to Action)

The first in a four-part series looking at 1) the scale and success of co-ops funding co-ops internationally, 2) existing examples and recent developments in the UK, 3) how platform co-ops empowered by open source tools could rapidly scale these models, and 4) how to spend £70 million a year.

Co-ops in the UK turnover £34 billion a year but rely on £333k a year from the Co-operative Bank to fund co-op development. This needs change if we’re to navigate the perfect storm of climate, energy and economic uncertainty and accelerate the transition to a fair economy that thrives within planetary boundaries. Justice demands it. Our shared future depends on it. How might we do it?

This year The Co-operative Group are “Back to Being Co-op” and Co-op Congress explored three themes:

  • Embracing co-operative excellence
  • Practicing co-operation among co-operatives
  • Being open to innovation

To me, “Back to Being Co-op” starts with rediscovering the practical solidarity and bold ambitions of the Rochdale Pioneers. These 28 weavers, cloggers, shoemakers, joiners and cabinet makers each pooled 2 pence a week (about 50p a week today) and built up enough capital to open a shop. But it was way more than just a shop. Their 1844 rules state:

“That as soon as practicable the Society shall proceed to arrange the powers of production, distribution, education and government”

They also encoded cooperative best practice into a set of principles that evolved to become the internationally recognised guidelines by which co-operatives put their values into practice.

The 5th principle is: Education, Training and Information

“Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”

This is surely where “embracing co-operative excellence” must begin. But how to finance it? Enter principle 6: “co-operation among co-operatives”. This has been a co-op principle since at least 1966, but large networks of co-ops systematically pooling resources are virtually non-existent in the UK. As a result the UK’s 7000 co-ops and 17.5 million members are punching massively below their weight.

What could be achieved in the UK if this changed?

In 1991 Italy passed Law 381/91 which created two types of multi-stakeholder “social co-operative”: 1) social, health and educational co-ops, and 2) co-ops who employ disadvantaged people. Today 14,000 social co-ops serve over 5m people, employ more than 400k and turnover €9 billion a year. Social co-ops invest 3% of their annual income in the “Marconi Fund” to finance new co-ops. I’ve not yet found any detailed info about the size and operation of the Marconi Fund, but 3% of €9 billion is €270,000,000.

Spain’s Mondragón Corporación Cooperativa (MCC) is probably the best known cooperative network in the world. Starting life as a small vocational school in 1943 the first Mondragon Co-op made up of five of its students was founded in 1956. It is now complex network of 289 business (of which 110 are co-ops), has a turnover of over €14 billion and provides a livelihood for over 80,000 people (at present just under one third of these are owner-members but this is due to rise to over 75% in the next 3 years). They have their own bank, 15 technology centres and a university. Wages ratios between the highest and lowest paid members are democratically agreed upon and average 5:1 with low paid workers earning on average 13% more than they would elsewhere. Individual co-ops are federated into four sector-wide co-ops: Industry, Knowledge, Finance and Retail. Member co-ops contribute between 15-40% of their profits to these sector co-ops in order to fund joint marketing, branding, and research projects etc. These contributions also help smooth out and share the losses and gains made by individual co-ops – losses made by one co-op can be partially offset (up to 40%) against profits from another. 10% of sector profits are paid to MCC Investments to fund co-operative development. In addition to this, individual co-ops contribute 10% of their profits to the MCC Foundation, 2% into an education fund and 2% into a solidarity fund. About £20 million a year is invested in educational and social projects alone.

Japan’s Seikatsu Club Consumers’ Co-operative Union began in 1965 when a group of housewives organised a collective buying club to purchase quality milk at affordable prices, one of the earliest examples of Community Supported Agriculture. Seikatsu is now an association of 30 consumer co-ops, employs about 1300 people and has over 300,000 members organised into 200 independently managed branches across Japan. Members contribute 1000 yen (about £7.50) a month, and also invest substantial sums in the association. In 2010 the accumulated contributions of the members was roughly £220 million, an average investment of about £750 per member.

The Arizmendi Association of Cooperatives is a Californian cooperative network made up of seven member businesses: six cooperative bakeries and a co-op development and support collective. The first business The Cheese Board opened as a small cheese store in 1967. In 1971, the two original owners sold their business to their employees and created a 100% worker owned business of which they remained a part. In 1995 the Cheese Board funded the Association’s part-time staff who then helped to create 5 more bakeries all named “Arizmendi” after Arizmendiarrieta (the founder of Mondragon). Together they have about 100 worker owners. The co-ops share a common mission, share ongoing accounting, legal, educational and other support services, and support the development of new member cooperatives by the Association by pooling the lower of 4% revenue or 25% of profit. Older more established co-ops pay the equivalent of 1 full time wage per 20 full time equivalent members.

Founded in 2005, The Valley Alliance of Worker Co-operatives (VAWC) is dedicated to building a sustainable local economy by facilitating the growth and development of worker cooperatives in the Connecticut River Valley of Western Massachusetts and Southern Vermont. Their 9 member co-ops include 6 businesses who converted into co-ops, have a combined annual revenue of $7.2 million.  Members pay dues of 1/8 of 1% (i.e. 0.00125%) of their revenue to cover the association’s operating expenses and pool 5% of their profits into a co-operative development fund. If the UK’s 7000 co-ops pooled the same amount of revenue and profit as VAWC members it’d generate about £70 million a year.

Josef Davies-Coates is the Founder of United Diversity, an Associate of the P2P Foundation and Co-founder of The Open Co-op who are organsing a big 2 day conference on Platform Co-ops in London http://conference.open.coop

The potential for co-operative CICs

John Mulkerrin argues that co-operative CICs present a largely  undiscovered opportunity.

It is still widely unknown that CICs can already be Co-operative and I suggest investment into fully understanding the relevance and potential of a suite of Co-operative CICs worthy of inclusion in that development.

Much like the wider Co-operative movement, CIC harnesses within it a number of different legal structures. The two meet at the little known or understood Co-operative CIC.

My own knowledge of Co-operatives is limited to being a member of four and an increasing understanding picked up along the way conducting my role at the CIC Association CIC, so please forgive my naivete about the finer details and context within which these discussions will take place.

That being said, I feel the ‘future proofing’ elements of what a Co-operative CIC might give the wider movement should be discussed rigorously as I believe it offers much of what is being sought, and would be a new engine of growth for the Co-operative movement.

The first part is easy

There are already over 12000 CICs on the public register, of which (approximately) 9000 are Limited By Guarantee, 1650 Not for Profit Limited by Share (schedule 2) and 1450 For Profit Limited by Share (schedule 3). We don’t have an official figure but it is safe to say that relatively there are only a handful of Co-operative CICs.

We feel that there could and should be more growth within the traditional Co-operative CIC Limited by Guarantee legal structure, such as is described in the Co-operative UK templates already available.

A great example of such an organisation is Barford Village Shop CIC. After losing the village shop in 2006 the community set about bringing it back to life. Over 500 shareholders joined and between them raised £370,000 (debt finance) to make the dream a reality. It also set up a Charity to donate any surplus profit to community projects. It has over 80 volunteers, 1400 people use the shop every week and it has donated £80,000 to community projects so far.

barford

Barford village shop (image from http://www.barfordvillageshop.org.uk/)

Easy, more awareness needed! This is a fantastic case of Co-operative action and very familiar to all as a Co-operative. But this discussion is WhatIf

The Co-operative CIC also has an asset lock, what if it is a useful ingredient in the discussion whether there should be a voluntary asset lock for the IPS?

The Co-operative CIC is also registered with Companies House rather than with the FCA. What if that is the most suitable ‘for profit’ co-operative strategy moving forward?

What if we develop a schedule 3 Co-operative CIC?

(A schedule 2 CIC Limited by Share does not permit any dividend to be paid to shareholders, unless they are asset locked bodies. A schedule 3 CIC Limited by Shares allows for payment of dividend to be paid to all external investors)

No doubt there is a discussion to be had on a Schedule 2 Co-operative CIC model, for example we already have 1650 CIC Share companies that do not issue dividends and it could be that many would already describe themselves as Co-operative.

But we are here to innovate and to an extent that work would happen under a wider umbrella, that which includes defining an acceptable (to Co-ops UK?) form of Schedule 3 Co-operative CIC.

A Co-operative that have can have different classes of share. A simple example is the CIC Association itself. We are strongly considering becoming a Co-operative and have been for a long time, we have grown to over 5000 online network members now and we think it time to progress to the next stage of development. At the moment it’s a few volunteers and some shoestring trying to make an impact and we now want to harness our own ‘crowd’ to help shape our common future.

We want to offer every CIC a single member share which carries the voting/election rights, and to also offer a second class of share without voting/election rights which enables external investment into the Co-operative. This will allow us to seek investment from our community or externally whilst maintaining the dignity of democratic control. It would also allow us to reward those investors who support any initiative with a share of profits. Under CIC legislation, we can pay up to a maximum of 35% of distributable profit.

Would this be regarded as a Co-operative?

WhatIf this helps reduce the domination of private providers?

If it would, then it quickly follows that this has the potential to be a very dynamic structure around which new types of co-operation could organise, and particularly new ways of attracting external investment could be sought. Cultural, social, technical and economic change are altering how individuals gather around a common cause and we must be here to enable it, not to judge it.

What if investors gathered around themes, foodies investing in farmers etc etc. It is perhaps stretching many peoples ideas of what a Co-operative is, but is that so bad?

Would it be so bad if there was an investment fund that allowed you to co-invest with a group of patients who ‘spin out’ their mental health service? You can do it with a private company, why not a Co-operative?

Surely these would be regarded as co-operative aims? Surely we should give social investors the chance to further help transformation and innovation?

The village shop mentioned above could have perhaps raised the £370k in equity instead of loans? Wouldn’t that have been better for the cashflow?

One of the originators of CIC was the late, great Stephen Lloyd, often referred to as the father of CIC and he once said that debt and equity are morally equal. Is that the case with Co-operatives?

The Co-operative movement started after steam engines and before airplanes whereas CIC came into being after google and before twitter so it is perhaps too new a twist for some, but I contend that the investor could be (subject to appropriate controls and measures being put in place) seen as vital part of some Co-operatives. Why not let those who have an empathy for your work support it?

WhatIf we disrupt the system positively?

Many have discussed these ideas before and elsewhere, but with the Co-operative CIC included as an ingredient I contend this idea carries the biggest potential bang for the collective co-operative buck.

In the Co-operative Party publication Taking Care we can see that social care is in permanent crisis, with a massive funding gap that will hit at least £2.8 billion by 2020 . It says part of the solution is to reduce the domination of private providers in the market and encourage smaller social and co-operative providers to deliver the care.

These ideas could help underpin strategies for meeting these key objectives, it is clear whatever we do the future has many challenges in maintaining a fair and decent society for all. That’s politics, and there are plenty better at it than me.

Govt standardising reliefs such as the SITR to Charity, Co-ops and CIC mean that any further development in these areas should be harmonised to deliver solutions for all, we have ourselves gone some way to developing the theory for social investment more widely and would welcome collaborating.

WhatIf the Co-operative CIC could be designed to make a new millennial Co-operative fit for the next 150 years?

Oh WhatIf indeed!

John Mulkerrin is founder and managing director of the CIC Association CIC. 

 

Videos of platform co-ops talks from New York event

There’s a series of videos available from the 13-14 Nov Platform Co-operativism event in New York.

https://livestream.com/internetsociety/platformcoop2016

They don’t seem to be embedding properly (human error this end perhaps) but they’re all on this page here – https://livestream.com/internetsociety/platformcoop2016/videos/141710602

This looks to have been a state of the art exposition of the topic. We’ve seen no direct feedback from the event yet; we need some full perusal and proper analysis of it.

In times of social crises – let’s build movements of solidarity

by Ieva Padagaite

With the wide spread inequality, division, disconnect and anti-establishment feelings rising here in UK and globally, we need to come together as a social movement speaking the language of the people wishing for change and articulate a positive vision of the cooperative future.

Let’s stop justifying ourselves as viable businesses, we are so much more.

Let’s change the image and language of the co-op movement to build a solidarity economy together.

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Contribute to the whatif.coop blog for the development of the cooperative movement

Platform co-ops: what’s really there for the movement?

A forward-thinking strategy about the future of co-ops has to take a position on what co-ops can do in the online economy. Next week in New York there’s a key event on this agenda culminating in an unconference Platform Cooperativism: Building the Cooperative Internet.  

Civic Hall has a preview article with thought leader Trebor Scholz.

Two years ago, I proposed to bring the cooperative business model to bear on the digital economy because the Web had hit rock bottom. And the situation today isn’t any better, frankly: data tracking is pervasive, siren servers hold our data in perpetuity, privacy has become a privilege of the rich, and the online platforms that we depend on most, are owned by a number of people so small that you could fit them into a Google bus.

One thing is clear: today’s network of networks has hardly any resemblance of what the creators of the Internet or Tim Berners-Lee had in mind when designing the Internet and consequently the World Wide Web. It is no longer the “vendor neutral and altruistic contribution to society,” that Berners-Lee had imagined. So, when I look at today’s centralized Internet, this isn’t only about cloud computing and surveillance.

The whole thing is worth a read. The challenge for the UK co-op movement is to take this agenda on board, digest it, and discern what’s really there for us. There’s possibly a huge wave of social tech we can surf sustainably. But remember the e-commerce disasters: as well as the straight dotcom flops like Pets.com or Boo.com there were the elephants that tried to dance such as GEC Marconi. We can’t say we haven’t been warned.

Eclipse and re-emergence of the coop movement

by Siôn Whellens

In his recently republished Cooperative Manifesto, Tim Huet explains why he came to the conclusion that ‘There Is No More Important Social Change Work You Can Do Than Cooperative Development’. Huet was one of the first organisers of the Arizmendi Assocation of Cooperatives, which Ed Mayo describes as a great example of coop replication.

For Huet, coops become relevant when they are part of a wider movement against capitalism. They provide answers to ‘the military question’: while closures, crises, strikes, protests and occupations can create the possibility and space for change, how do people self-organise to consolidate that space and expand it, by developing bases of economic and social power?

The difficult question of times

When cooperatives take a great leap forward, it’s usually in times of social crisis. This is when the relevance, necessity and potential of cooperation become clearest to people. In the ‘hungry 1840s’, the Rochdale cooperators’ fifth object was to ‘arrange the powers of production, distribution, education and government’. Providing decent food,  building houses, providing decent work and acquiring land were immediate tasks and also steps towards a hegemonic cooperative commonwealth, to be established ‘as soon as practicable’. Expressed in different language in different times, this is the invariant programme of cooperatives as a movement. So when is ‘practicable’, and what is practical now? These are strategic questions, throwing up yet more questions. What are the possibilities in these times? What resources, self-help and solidarity can we mobilise in this situation?
image1
The political shell

Cooperatives seek to be self-reliant, therefore independent of lobbies and parties that seek to influence through private corporations or state action. The instinct of governments and sectional interests is to enrol, recuperate or suppress autonomous movements, including cooperatives. Coop organisations, therefore, have a strategic defence and propaganda role. In the present time of political turmoil, when parties make policy blandishments towards mutuals and coops, the principle of autonomy guides strategy and tactics. Cooperative movements exercise political ‘neutrality’ in order to maintain strategic freedom to resolve the real questions of social and economic power in favour of people.

Necessity, the mother of cooperation

We cooperate because there is no better or no other way. Meeting peoples’ self-defined needs and aspirations is the relevance test. We know that the movement is re-invented and grows fast in times of widespread social and economic conflict, if people have the means and opportunity to adapt the technology of cooperation. Lancashire in the 1840s, Ireland in the 1890s, post war Italy, Spain in the 1950s, Argentina in the present century.

Change was in the air in the 1970s. A wave of coop formations in the UK and US was inspired by a mix of libertarian socialism, anarchism, anti racism, the rising ecology movement, second wave feminism, community organising and other currents. Cooperatives gave people new infrastructure and tools in a period of social contestation. That wave fell back in the times of reaction which followed, particularly in the 1990s. In that phase, any strategy to rapidly expand coops had its work cut out. So, is now our time?

Of course, we don’t know yet. We know there is social conflict and political disintegration; we know people are in need; that people want change. But are they moving towards self-organised ways and means to get it? Do they have the time, social capital and savings to invest? Are they confident enough? Hindsight is easy, yet experience suggests that productive strategy won’t be a matter of helicoptering legacy coop models onto disparate people and situations, so much as directing solidarity to those expressing a desire to change their situation by acting together, and who feel that change is realistic, possible and necessary, even if they haven’t heard about coops. Where the human and material resources – cooperative capital – come from is another strategic challenge, especially in a country whose coops squandered their assets and failed to invest in the movement for decades.

Strategy has to aim at developing a framework in which cooperators can respond quickly and intelligently to what’s going on around them. Coop advocacy needs to work close to the heat, designing and disseminating relevant information about ‘why’ as well as proposals for ‘how’. Whatever language we use towards governments, policy makers and ‘influencers’, we need authentic language to speak to people. The effort to develop a real, uncompromised cooperative politics is especially urgent in times of cultural dissonance and rampant ideological cretinism.

workslow

Not all cooperation is good for you

Not all modes of cooperation are in themselves positive. We can understand the complex cooperation of workers that enables private firms to extract profit, the cooperation of prisoners with their captors, or the enthusiastic collaboration of consumers with extractive platforms, without justifying them as behaviours that meet peoples’ mutually defined needs and aspirations. Cooperative messages have to inspire, but they can’t just be feel good platitudes. They need to express what we cooperate against, as well as for. Our language should be sensitised to the fact that few would-be cooperators want to self-identify as ‘business’ people, for instance. Jargon words like ‘innovation’ and ‘entrepreneurialism’ mask mechanisms for increasing inequality and intensifying exploitation. The more we scramble our messages by trying to reclaim alienated vocabulary – perhaps to appear progressive, mainstream or unfrightening – the more we obscure the potential of cooperation as part of a movement for social change and the less relevant coops will seem to people. Good communication is strategic.

Show us the money

If the purpose of the coop movement is to create new cooperators, we can’t be defensive or patronising when they articulate a radical coop vision literally, even bluntly; or when they challenge the coop establishment. They’re correct, if not always polite. Years of work, negotiation and experience may yield useful knowledge and resources, but they don’t confer superior wisdom, ownership of the movement, or special insight into the goals and methods of coop strategy.

In a sense, any new wave of coops and cooperators begins to fail at the point it stops growing and starts consolidating. In movement terms, a coop that disappears is not necessarily a failure, and coops that go on forever are not all successes. Whether they go back 20 or 150 years, established coops tend to make their peace. They mutate from radical groups, to incorporated bodies, to businesses; move from meeting needs and aspirations, to hitting commercial targets; from self-help to charity. This is predictable. You can create coops, but you can’t make a commonwealth one coop at a time. Raising the game of intercooperation is strategic.

Strategy should to seek to update and adapt the coop development repertoire in response to times and situations. We should be open to the new, the unfamiliar, and the alarming. Strengthening established coops should be an object of strategy, where those coops are able to renew themselves and contribute to the renewal of the movement. In this wider renewal, younger generations often do the heavy lifting. They articulate new needs and aspirations, or old needs and aspirations in a new context. They put in the sweat equity. Many new coops are proposed or advised by old hands, and helping new cooperators make the right alliances and avoid old traps is vital. Yet we should not be in the business of judging whether there is a ‘market’ for their ideas and approaches. Coop renewal often means attempting things that are impossible, according to received wisdom. This is part of coop realism.

the_commons

We will need to engage with many projects that don’t develop, to find the ones that could change everything. New cooperators are often our most passionate and connected advocates. In the recent uptick of formations in London and in the tech community, for instance, coop methods are being used by social activists contesting the use and ownership of new technologies; looking for new ways to combat exploitation; defending the commons; combatting fuel poverty; resisting landlords; radicalising food culture and politicising cultural work. Their views about the utility of what worked for people five, thirty or a hundred years ago are respectful and open, but critical. They look beyond the formal movement, and beyond the UK, for ideas and inspiration. The dimensions of the social crisis are global and local, rather than national. Deepening cooperative internationalism, and looking beyond the existing legal and national frameworks, are strategic for local development.

The places to look for the next wave of cooperators are all around us, if we’re willing to engage. The next game-changing coops may be on the verge of coming into existence.

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Take part in the first ever census of co-operatives.
As part of Co-operatives UK efforts to understand what co-operatives in the UK need to develop and grow, we’d like to encourage as many co-operatives as possible to take part in the co-operative census. Find out more and add your voice.[link uk.coop/census] The deadline to complete the census is Monday 31 October.

Join SolidFund: http://solidfund.coop
Follow @Scumboni and @Calverts on Twitter.
Visit Siôn’s blog http://bethnalbling.blogspot.com for more

Four models of innovation

by Ed Mayo

How do we innovate?

A study of co-operatives and innovation was launched at the recent Quebec International Co-operative Business Summit, which offers a useful framework for thinking about how we do this.

The report was based on a survey of co-operatives, including some of the largest financial co-operatives in the world. The four ‘logics’ they explore are:four-innovation-logics

Four models of co-operative innovation 

– reinvention: adapting current businesses to new market opportunities and new channels

– extension: developing new aligned services and offers on the back of the existing business model

– seeding: partnering and supporting new co-operative ventures

– open innovation: exploring new models in a collaborative and open way.

 

The report points to plenty of examples in each of these categories. If I had to offer a sense of how the UK co-op sector lined up against these, I would suggest that:

– the larger consumer and farmer co-operatives are focusing largely on reinvention

– there are good examples of extension, such as for consumer retail co-operatives around energy and childcare

– the sector has a great track record over time of support for new co-operative ventures, but these are rarely tied into an innovation strategy so they tend to develop and grow, or fail, on their own rather than the learning feeding back into the co-operatives that may have been a source of support.

– It is the smallest and least resourced of the co-operatives, particularly in the digital space, that are focusing on the opportunities of open innovation.

The work was led by the Alphonse and Dorimène Desjardins International Institute for Cooperatives. The authors are asking for input and comment now to shape the areas for their further work on innovation.

How do we innovate? You can add your views here.