Capital for co-operatives

Money talks – and so do people.

The co-op model of business is one where the voices that matter are not those of distant investors, but members – the people who are up close and involved in the business. That makes a difference. But every business needs finance and capital, so how do co-ops cope with the trade-off between access to capital and ownership based on participation?

13-arnold-kuijpers-600x685The relationship, says Arnold Kuipers, Director of Rabobank in Europe, is ‘a tense one’. Arnold was the opening speaker at an outstanding roundtable that we organised this week in London, along with our sisters, Building Societies Association and Association for Financial Mutuals (which has just merged with the British Health Care Association, which is good news).

The experience of Rabobank itself ranges from member capital and guarantees at the outset to a point at which there was no need for external capital. More recently, it developed a model for member shares, as a minority of their capital base built on retained earnings – which, through the sweepstake of regulatory policy, is now sold to institutions outside.

The headline conclusion was that there is no avoiding the trade offs if you need capital. But there is a lot of room for manoeuvre in terms of designing the approach you take to avoid the risks, and in structuring your business around a true understanding of the full costs and opportunities of external capital.

We will be working with our members on models for member capital raising, building on the success story of the last decade around community shares. Pioneered, or rather renewed, by Co-operatives UK, working with Locality and with the support of the Department for Communities and Local Government, since 2009, around 400 community businesses have raised around £120 million in member capital. That is real social investment.

Arnold Kuiper’s presentation is here: arnolds-presentation-co-operatives-uk

Simon says …in a complex world, we need deeper democracy

One of the great UK thinker and architects of democracy systems, Simon Burall at Involve is making a change today and it is one that might affect us all.

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Simon’s achievements at Involve have been numerous. They include his leadership and innovation on open government. Under his leadership Involve has championed the cause of open government as a worldwide movement. He oversaw the development of the UK Open Government Network, and ensured the UK’s Open Government Partnership process was established as a widely recognised model of good practice.

Simon’s tenure has also seen Involve lead the push for deliberative public engagement on complex and controversial science and technology innovations. Finally, Simon has played a critical role in the thought leadership provided by Involve. He has made the case for deliberation and engagement across a raft of policy areas, developed Involve’s theory on deliberative systems, and innovated new models of citizen engagement on public services.

As Chair of Involve (not the day job, I know) I am delighted that Simon will continue to work with Involve as Senior Associate. That gives him the space to work further around the concept of deeper democracy, including how society responds to complexity and the emerging challenges and opportunities of science, technology and data.

We have appointed Tim Hughes as Involve’s new Director. Tim’s vision, expertise and dedication to Involve’s cause make his the strongest possible pair of hands to guide Involve into its next phase.

As Tim writes today, “If Involve didn’t exist, now would be the time to invent it”. Overcoming the triple threat of disillusionment, polarisation and disconnection will be one of the defining challenges of the decade to come. With our skills and expertise in citizen participation, open government, deliberation and facilitation, we believe that Involve is uniquely placed to take a leading role in facing that challenge.

It is time to speak up on democracy and Involve has something precious to offer, which is a vision of a deeper democracy. John Dewey described democracy as conversation, and Simon’s tireless work in favour of a more deliberative democracy is a cause that is worth fighting for. Co-operatives talk about everyday democracy – and indeed are written into the Italian constitution on exactly that basis. In a more complex world, we need to upgrade our democratic systems and culture.

A lot depends on it. Thank you, Simon.

 

 

 

Co-operation is the hope of 2017

The co-operative sector story in 2016 was one of patient and practical action.

north_coop_000_logo-crsiteAt the top end, the Co-op is coming back into health as the leading convenience retailer, with positive sales and an investment in ‘being co-op’ that has had a wonderful response from staff across the business.

At the small end, Co-operatives UK has supported 121 new co-operatives come into existence, all focused on direct needs and new opportunities. The backing of the Co-operative Bank, creating a new business support programme open to any co-operative, The Hive, has been central to this work.

One example is the new GlenWyvis Whisky Distillery, which will be built on a farm above the town of Dingwall, 100% powered by green energy and 100% supplied by barley from a local farmer co-operative.

awhitephoto_glenwyvistshirts-1It is ninety years since the town had a distillery. Another, Ferintosh – one of the oldest distilleries recorded in Scotland, closed in 1785 to the consternation of Rabbie Burns, who lamented: “Thee, Ferintosh! O sadly lost! Scotland lament frae coast to coast!”

With an equity issue for members advised by Community Shares Scotland (spreading our pioneering work for co-operatives on this with Locality to all parts of the UK), work on the distillery started in 2016. The first product, on sale for Christmas, was gin and the first run of whisky, the last I heard, is planned for Burns Night 25 January 2017.

Alongside this, the society has appointed a curator, Cait Gillespie, to build the links with history for visitors, with the hope of a full visitor centre to come, possibly served by an electric powered bus and elevator from the town centre.

As Co-ops UK’s member impact report, Together, showed, our own ntogetheretwork has also grown stronger in 2016, with almost 1,000 people attending events and training and some of the UK’s largest agricultural co-ops entering into membership.

The year 2017 and beyond will be a time for Britain to think differently – and a time to prove that co-operation offers a compelling solution to Britain’s challenges.

In line with the ideas and encouragement of many members, in 2017 we will launch a long-term strategy to strengthen and grow the UK’s co-operative and mutual sector. Based on dialogue and data across the sector and beyond, I believe that it will help shape the foundations of a different kind of economy.

Co-operation is the hope of 2017 – so, with whisky or without, it is a good time to make your own participation a new year resolution.

The story of a big heart

I have been involved over the last fifteen years in a project to recognise and support culture in Mozambique and to make links with Deptford, here in South East London. I have blogged before on some of the uplifting outcomes of this collaboration, and some of the local co-ops involved.

Peter Llewellyn was one of the other trustees of the Merry Trust (Mozambiquan Educational and Recreational Resources for the Young – one for my acronym hall of fame, alongside Nutshell). He died last month and so I shared with his family the story of what we had done, the story of a big heart.

Peter’s sister, Jani, was an imaginative nursery school teacher and activist and when she knew she was dying, in 2001, Peter, I and a few friends took up a project that she had started, Merry. Jani had started by collecting buttons, for children in Mozambique, initially deposited in the local branch of the Co-operative Bank. With money from her flat after she died, and subsequently from the will of her Aunty Marge, Pete turned this into a formal charity and we set about making things happen on the other side of the world – and in Deptford where Jani had lived and worked.

Mozambique had been the poorest country in the world, measured by money, but one of the richest, measured by culture. From his own time in Africa, Peter, as Jani, knew that progress starts with focusing on what you have, not what you lack.

Fifteen years on, Merry has supported an astonishing array of tiny inspirations, cultural projects in Northern Mozambique – like teaching teachers how to paint, so that they could teach children in turn, like supporting woodcarvers to take over a shop as a co-operative to sell their work to tourists, like paying for the skins for traditional drums in a community centre overlooking the coastal town of Pemba and paying again when years later, the skins had given way through constant use, like supporting the first film ever made by people and about people in Pemba, like supporting cultural festivals that thousands of people took part in.

In Deptford, on the same principles of building on culture and thinking globally, Merry has sponsored one or two classes to go to shows, in every single primary school in Deptford and New Cross. It has supported school workshops on culture and world issues, dance, drumming and story telling, including an annual visit from a writer, Beverley Naidoo, dealing with issues rarely touched on even today of race in children’s literature.

Peter was a can-do organiser, able to make things happen in ways that made everyone feel good. We are all used to the idea that big global issues require big global organisations, but no, here with a lightness of touch and agility, with so little administration and fuss (and cost), one family, the Llewellyns and a few trustees, meeting in the cafe at British Film Institute on the South Bank, raised smiles, raised hopes and even raised life chances – in communities that can feel so distant and so different, if you don’t have the mindset to think in another way,with a big heart…

…that people you don’t know from across the world are friends to make, people to learn from and partners to co-operate with.

Spreading the co-operative spirit of Christmas

Christmas is coming and with it the usual rush to seasonal cheer. I’m mugging up my lines as an extra for the local Christmas Choir.

But there are some co-operatives for whom cheer and community seem to be year-long affairs, part of the way that they do business. Here are two very special ones.

Thrivent Financial is a non-profit mutual in the USA. With its roots in Lutheran congregations, Thrivent has opened out in recent years to all faith communities, both of which mean that it has extensive connections with churches across the USA and its financial reinvestment is geared to fit the life and needs of those involved at a local parish level.

One current initiative, now in its second full year of operating, is to offer a support package for members who are involved in local events. Any member can take advantage, for up to two events each over the course of a year. The package includes an events kit with banners, T-shirt and a pre-paid card good for spending $250 on the event, which needs to be done with a month of receipt. With an extraordinary level of take-up, Thrivent sponsored 110,000 local events last year. Along with this it distributed one million T shirts, with the slogan ‘Live generously’.

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An independent economic study of the community impact of fraternal societies such as Thrivent in the USA suggests that they generate social capital valued at an average of $1.7 billion annually, or $8.6 billion total. These enormous contributions vastly outweigh the estimated $50 million costs of a federal tax exemption for fraternal societies, who are then required to return monies back to their community, which makes the fraternal model possible and produces a 76-to-1 return on the public investment.  The support of the tax code gives rise to immense benefits to society, thanks to the efforts of the members of fraternal benefit societies.

The Co-op Cuppa is an offer from the East of England Co-operative. 99 Tea is one of the most iconic of brands sold in Co-op food stores, which is ironic as it was never intended to be a brand. I believe that the number 99 was chosen, along with the slogan of ‘prescription tea’ as a drink widely assumed to be healthy, because it was simply the next number in the series of own brand products launched by the Co-operative Wholesale Society. It came after product 98, but 99 has stuck – and the non-brand has become a brand.

In fact, the Co-operate Wholesale Society itself, now a key part of today’s Co-op Group, started at a tea party in a barn at Lowbands Farm, Jumbo, Middleton, on August 12th 1860. Tea seems to oil the wheels of co-operation. And in 2008, 99 tea became fully fairtrade, as the Co-op was the first retailer to convert all of its hot drinks own brand range to fairtrade.

Tea was perhaps always therefore the place to start when members of the East of England Co-operative looked to see how the business could support co-operation in the community. For a local community event, or for a programme of events, the co-operative now offers a free pack of 99 teabags. You can apply here.

In its first sixteen months of operation, over 415,000 cups of tea have been drunk in events run by 514 local good causes. Included in this were 75 dementia cafes or groups, connecting up to a wider programme run by the co-operative to support dementia awareness, including training all of its staff in stores (the business has recently been awarded the Alzheimer Society’s Dementia Friendly Organisation of the Year, as well as a Princess Royal Training Award).

This Winter, local night shelters and soup kitchens will be running on co-op cuppas from Norwich to Colchester. Hospices too have taken up the offer and charities have included them in Winter Warmer kits for the elderly. Coming up are a swathe of carol concerts, with 99 tea after all the singing is over. Overall, something like 60,000 tea bags have been requested in Norfolk, 210,000 in Suffolk and 90,000 in Essex.

The Co-op Cuppa programme has generated waves of media and social media coverage on the back of what community groups were doing. And the costs? The total annual direct spend on the programme amounted to no more than £10,000.

Of course, every business can be affected by Christmas, whether through trading, giving gifts for raffles, staff volunteering or corporate charitable giving. But it is a special kind of business that is owned by the communities they work in and that support those communities to do the things they want to do.

They are spreading the co-operative spirit of Christmas throughout the year.

In a crisis, it is time to be different – a 1920s case study of worker ownership

I’m on my way to the University of Leicester to present at an event on economic democracy.

Reading Workplace Democratization by Paul Bernstein on the way, after meeting him last month, I learned of the astonishing story of the Czech shoe company Bat’a in the 1920s. The firm had suffered huge debts after being taken over during World War 1 by the Austro-Hungarian Army and from a dramatic warehouse fire one year after the war. By 1922, with high unemployment and inflation, the company did something different.

Rather than lay off workers and raise prices, as other firms were, Bat’a decided to cut the selling price of the product by almost half (46%) and to lower wages of all staff, including management, by 40%. To make the difference, the owner decided to cut internal costs and waste by turning over the firm to the workforce.

After a test with one production unit, the firm reorganised on the basis of self managed workshops. The price cut had caused a surge in sales, as people always need shoes even in a recession, and the new production model proved far more successful in meeting the new demand. One year on, Bat’a was able to cut prices again by 17% and to raise wages by 25%. The model of self administration was extended across all areas of the company, including accounting, sales, procurement.

By 1926, only four years after of the start of the plan, wages in the firm had risen on average by 44% while the average price of shoes to the customer had been cut by 40% beyond the initial price drop.

The key to this was a reorganisation based on what worked, with incentives flowing to those who helped to raise the production and quality of the shoes. The share of the profit of the workshops rose from 50% to 80% while central company operations now received only 20%.

Such was the success that the country passed legislation to make it easier to bring in employee self administration and ownership in the same decade, perhaps helping to explain a culture in which the Czech cooperative sector, from furniture to jewellery, is still one of the most admired worldwide.