New co-op body to stress economic, social value of model

07 October 2013

The Sustainability Report, by Rachel Alembakis | 4 October 2013

There is a new push in Australia to raise the profile of the co-operative and mutual business model, which proponents say inherently melds social and economic goals while contributing to a diversified economy.

The recently launched Business Council of Co-operatives and Mutuals (BCCM) is developing a campaign and policy agenda to raise awareness about the function and power of member-owned businesses. There are 1800 co-operatives and 108 mutual banking institutions, according to BCCM, and 8 out of 10 Australians have a relationship with a mutual or co-op, through organisations like industry superannuation funds and automobile organisations.

The BCCM’s aim is to contribute to the growth and development of the member-owned sector and increase awareness of the role that mutuals and co-ops can play in supporting a diversified, sustainable national economy.

“We have a very strong emphasis on wanting to have more cooperative and mutual ownership in the economy,” said Melina Morrison, BCCM CEO. “We want our own sector to grow in terms of our contribution to GDP and also we believe that … Australia, like other countries, needs a more diversified economy. We have a very polarised view of business at the moment – you have charities, publicly owned business and investor-owned business. We want to bring in the voice of the member-owned business sector.”

Mutuals and co-ops operate to economic and social goals by nature, but because the social goals are intrinsic to the foundation of a member-owned organization, companies often don’t articulate their social impact, another area that the BCCM is looking to remedy.

“What we’ll be concentrating on is explaining that the business model itself delivers social impact,” Morrison said. “There is a very business-centric way of looking at this new area of social impact that’s come out of business structures where those forms of social responsibility are add-ons. Cooperatives don’t talk about it in a way because it’s a raison d’etre. You don’t have a cooperative business unless you have a group of people that collectively decide that they have a need that they can address.”

The BCCM board is made up of organisations including motorist association NRMA, health fund HCF and co-operative retailer The Co-op. BCCM notes that the industry holds economic and financial heft – industry superannuation funds, which are member-owned, have AU$244 billion in assets under management, while financial mutuals have AU$83 million in combined total assets and the top 100 co-ops and mutuals had combined annual revenue of AU$17.8 billion in 2012.

The economic argument is one aspect that BCCM will focus on, but Morrison is also quite to point out that member-owned organisations are also social enterprises, even if the organisations themselves are reluctant to self-identify as such.

“Co-operatives are a bit shy of calling themselves social enterprises,” she said. “They shouldn’t be, but they call themselves businesses because they don’t want the misunderstanding. Co-operatives do what they do for the good of people using business and market mechanisms.”

Part of the reason the social value of co-operatives and mutuals is not emphasised is the fact that the metrics measuring social value are still not sophisticated and do not measure all of the aspects of value generated by mutuals, according to Alan Greig, a director of Social Business Australia (SBA), an organisation of social businesses to dedicated to developing the sector.

“There is a big, new wave of interest on social impact measures in Australia,” Greig said. “But there’s a problem – social impact measures don’t measure things like building social capital, community well-being, keeping assets in the community, regenerating collective endeavor. The metrics that are being used don’t measure what cooperatives do well and co-operatives have to build their own.”

The increased focus on building the co-op and mutual sector, as well as the development of the social enterprise sector at large is not only part of developing a diversified economy, but also an opportunity to develop a sector that can step in to meet the needs as public sector functions are outsourced.

“We are also looking at how we might respond to the outsourcing of the public sector – co-ops might have a role to play here in Australia,” Greig said. ”It’s happening quite a bit now in the UK, and [SBA] are developing a green paper on it to work up a model for it, to meet the demand arising from some states with employees that are keen to get out of the public sector and be more entrepreneurial.

There are a few legal structural challenges that need to be resolved to facilitate the development of the sector – Greig pointed to the development of a national, uniform set of laws for co-ops as a step forward, and said also that legal classifications need to be developed to facilitate co-ops ability to raise capital for development.

Morrison said that one of the strengths of the co-op model is the fact that profits are retained within the ownership structure.

“Co-operatives and mutuals would say would say there are some areas where prima facie, you want a profit motive, but you don’t want the surplus then to reward the investment of capital because it takes the money out of the system,” she said. “You create what’s called the virtuous circle. We talk a lot in economic growth terms about inviting investment in, to encourage people to get into social finance – we can encourage investors to invest in companies because they see a social and environmental return, we applaud that, but the other way is to build the economy is to keep it in local economies and keep it local. Cooperatives and mutuals are people centred business. … We’re not saying don’t have those enterprises – it’s important to have a good strong business ecosystem, but our main focus at the council is understanding that if you want long term social and environmental impact, look to co-operatives and mutuals.”