Co-ops: Form, Function, and the Triple Bottom Line
At its most simplistic, a cooperative is a collection of people with a common goal, who unite in an effort to achieve stronger economic clout or effectiveness than if each person acted alone. The group focuses less on profit and more on realizing their shared vision. Co-ops in town include First Alternative Natural Foods Co-op; any credit union, such as Central Willamette or OSU Federal; Teal seasonal art gallery; LBCC’s Benton Center Pre-School; Pioneer Telephone service provider in Philomath; the Beaver Lodge men’s housing cooperative near campus; Consumers Power electricity provider; and downtown’s Art of the Valley gallery. Cooperatives are all around us, surviving and thriving, even though their business model is extraordinarily different from the norm.
For a business that benefits its members so much more than the standard business strategies, why isn’t the cooperative a more prevalent model? Well, there are legislative obstacles, as well as lobbying obstacles. Start-up can also prove challenging, especially securing funding (credit unions especially can have a hard time getting loans from banks—because why would a bank loan money to a direct competitor?). Co-ops are also very grassroots, which means it can be difficult to have a national voice; for instance, natural food co-ops are becoming more widespread partially thanks to the 2005 formation of the National Cooperative Grocers Association, which not only connects food co-ops across the country with educational programs and member support, but helps them take advantage of the economies of scale when purchasing. And just as credit unions experienced more consumer interest as a reaction to the bank scandals of 2008, co-ops all over may become more popular as citizens become disenchanted with the cutthroat practices of larger chains.
Members of cooperatives are also the owners—and typically have to “buy in” to join—and are referred to as either “owners” or “members.” While there are several different varieties of co-ops—visit http://usa2012.coop/about-co-ops/types for more information–they all strive to adhere to the Seven Cooperative Principles. These principles serve to support co-ops with an engaged and informed membership, while also keeping them as free of special interests and corruption as possible. The Seven Principles are:
1) Voluntary and Open Membership
2) Democratic Member Control
3) Member’s Economic Participation
4) Autonomy and Independence
5) Education, Training, and Information
6) Cooperation Among Cooperatives
7) Concern for Community
“I do an orientation session with every new employee who comes to the Co-op,” says First Alternative’s general manager, Cindee Lolik. “I ask the question, do you know what a bottom line is?…Well, a bottom line means profit. Then I ask, what is a triple bottom line?…Because a triple bottom line is not only profit, it’s the people and the planet. So you’re considering all three of them at the same time.” That focus on more than just profit is the primary difference between the cooperative model and the standard business model. “With stockholders, the only thing that they are really interested in is getting a return on their investment,” Lolik continues. “There’s a lot more freedom in the co-operative model for the owners and staff and the board of directors to steer the business in the direction that they want to go in.”
Of course cooperatives need to at least break even to survive, and many do end up turning a profit. Instead of lining of a few shareholders pockets, however, “Any profit that co-ops get, they basically turn around and give extra benefits to the members,” says Tyler Hill, the Corvallis branch manager of Central Willamette Credit Union. “In a financial setting that means lower interest rates on loans and lending products and higher interest yields on savings accounts; we have a checking account with interest. Basically [co-ops] give back to the community as a whole, compared to other places which usually have shareholders and profits, [who] answer not to their members but to their shareholders.”
Cooperatives rely on an engaged and vocal membership to help guide the direction of the business, which is both a blessing and challenge. “It sometimes it takes a little bit longer to make decisions and move forward with things because we want to do it by the democratic process;” says Lolik. “Everybody has a say, there’s discussion before it’s put to a final vote–or even better, we reach consensus about something.” Members can be very vocal, or choose to hardly participate at all; although Central Willamette has thousands of members, less than 50 may choose to show up to the annual meeting.
Co-ops can be almost any size and serve any purpose. They range from Spain’s Mondragon industrial group, which was formed in 1956 and operates everything from a chain of grocery co-ops to appliance manufacturers, to Corvallis’ own short-lived yet successful Biodiesel Cooperative, which formed in 2001 in an effort to increase accessibility of renewable fuel alternatives. The biodiesel cooperative initially produced their own biodiesel but then grew into a bulk buying club; by 2005, they had succeeded in getting biodiesel commercially available in town, and amicably dissolved.
Expect the profile of this unique business model to become even more visible in 2013; First Alternative is spearheading the formation of a local cooperative alliance in time for October, aka “Cooperative Month.” Look for the alliance at local festivals and events later this year, and look for co-ops, well, everywhere.
Co-ops: Recession Resistant?
Mondragon, a massive “Cooperative Corporation” based out of the Basque region of Spain, oversees more than 100,000 employees within 256 businesses, of which 146 are cooperatives. It brings in over 14 billion Euros annually, and has held up remarkably well in the face of the 2008 global recession.
Because Mondragon’s workers have a voice in guiding the company’s policies, jobs have been protected throughout recent budget cuts. Cooperatives within the corporation that are still turning a profit loan money to assist fellow Mondragon cooperatives that are in the red. And while workers are taking pay cuts—just like workers at non-Mondragon companies—the managers are taking the steepest cuts of all (by the way, managerial salaries were already capped at eight times the lowest salary). Another job-saving measure: companies with an excess of workers are shifting those workers to other Mondragon co-ops who could use the extra help.
While Mondragon is feeling the hard times like everyone else, it is still turning a profit and its workforce is holding steady—especially compared to the rest of Spain, which is experiencing 26% unemployment. There’s no doubt that the cooperative system—with workers vocal participants in the direction of the company—has something to do with its current success.