A Case for Business Diversity

This summer, the predominantly investor-facing Business 20 (B20) committee, which advises the Group of Twenty (G20) on how to promote international economic growth and job creation, invited a new player to the table. The B20 was established in 2010 when the G20, under the Canadian presidency, decided to widen its field of vision and enlarge its global governance to business and trade. It formed during the Toronto G20 summit, and continued to play an increasingly important role throughout the succeeding Korean, French, Mexican, and Russian host years. This year, it included a co-operative business representative for the first time—an important step toward the creation of a more balanced economy, and consequentially, stability, growth, and job creation.

Co-operatives and mutuals (co-ops) compose a worldwide network of more than 1 million small, medium, and large businesses that operate in all sectors. They include public utilities companies like the US National Rural Electric Co-operative Association, banks such as the National Co-operative Bank, national health organizations like Brazil’s hospital network Unimed, and food and agriculture companies such as Sunkist Growers Incorporated in California. The top 300 co-operatives and mutuals in the world have a collective turnover of $2 trillion—about equivalent to the world’s ninth largest economy.

A balance to investor enterprise

Co-ops are a popular topic today because citizens are concerned about the unbalanced market power of investor enterprise. Decades of little-controlled deregulation and competition in areas such as electricity and gas have resulted in job loss, skill-base erosion, and price hikes. Power and profits consistently seem to land with the same handful of individuals and groups nationwide, and for many consumers, the ensuing feeling is that corporate interests are capturing the democratic process.

This general dissatisfaction leads policy makers to look for alternative forms of business with renewed attention, but not all of these have the infrastructure and historic credentials to counterbalance investor-owned predominance. In the quest to give people a form of control over the economy, it seems that the co-operative option is gaining popularity with governments. For example, in Finland, a new Co-operatives Act, which aims to facilitate the creation of new co-operatives, came into force in January this year. Last year, France passed a long-awaited bill on social and solidary economy, which enables the transfer of an SME (small and medium enterprise) to its employees as an alternative to closure. During the Argentinian downturn of 2001, the same mechanism saved hundreds of companies, the so-called “recuperadas.”

Meeting needs before making profit

Co-operative and mutual models allow people to finance, own, and run enterprises that fill a specific need—for example, local supermarkets, utilities companies, and agricultural machinery parks.  And unlike investor-owned companies, which return earnings to stockholders who are often remote and disconnected from the business, co-op owner-members share profits and business decisions.

Generally speaking, investor enterprise will look to maximize gain, whereas co-ops will ask, “How do we recover our costs and still do the right thing for consumers?” In this way, co-ops offer a stabilizing force in the economy.

The member focus of co-ops is reflected by elevated customer satisfaction figures. For instance, in last May’s American Customer Satisfaction Index (ACSI) survey, consumer-members belonging to nonprofit electric co-operatives beat investor-owned (IOU) or municipal utilities for the third year in a row; when consumers rated the ability of their utility “to provide reliable electric service,” co-operatives scored the highest.

A means toward better utilities

This year’s B20’s final policy recommendations included a call to governments to consider mutualization as an opportunity for infrastructure companies and assets. This is vital for governments looking for different ways to privatize public assets. Co-operatives and mutuals have proved themselves safe guardians of the supply chain, energy, and infrastructure in general. Thanks to the National Rural Electrical Co-operative Association (NRECA) International, for example, more than 100 million people in more than 40 developing countries have gained access to safe, reliable, and affordable electricity. In Bangladesh, a rural electrification program led to the establishment of 70 co-operative electric distribution societies that now deliver power to more than 45 million people.

Co-operatives and mutuals have proved themselves safe guardians of the supply chain, energy, and infrastructure in general. (Illustration by Juan Catez)

It is important to recognize that we should not limit infrastructure development through co-op enterprises to huge projects. Experience proves the approach works on all scales of enterprises. In Belgium, for example, a co-operative called Ecopower has been funding renewable energy projects since 1991 and has grown to the point where it currently supplies 1 percent of households in the country.

Looking ahead

There is no doubt that G20 leaders want to encourage growth and employment, but it’s important that we don’t revert to speculation and the pursuit of blind profit before citizens’ interests. The inclusion of co-operatives in economies is an important consideration to arrive at a sustainable global economic agenda. As an economic alternative, co-ops require legislation that takes into account their difference and keeps their services affordable. Co-operatives and mutuals show that a fairer, more inclusive, sustainable, and resilient enterprise is possible, and B20’s inclusion of the sector is a move in the right direction.

Co-operative businesses improve economic diversity and resilience in times of crisis, effectively meet the needs of many consumers, and offer a promising solution to improving infrastructure. With political institutions in many nations struggling to keep up with a rapidly changing world, it is essential that citizens become increasingly resourceful. We have to be entrepreneurial, and stand up for our options to undertake business and live in a sustainable and stable economy. Rarely has the argument in favor of co-operatives looked stronger than it does today.

Read more stories by Jan Schiettecatte.