Redefine "just business" at the SB'20 Just Brands virtual conference on August 18-19.

Walking the Talk
Community Support, Collaboration Signal Resilient Future for Co-operatives

The coronavirus pandemic has made clear the importance of each person and business acting individually to work toward a shared goal that benefits society as a whole. Co-ops are inherently set up for resilience, as they act with the best interest of the community in mind.

While the world has been locked down due to the coronavirus pandemic, a pointed spotlight was turned on supporting local businesses. Communities around the world rallied to help small business retain out-of-work employees, pay rent and keep their doors open — even if they were forced to temporarily close. People bought gift cards, ordered take-out meals, left generous tips and accepted credit instead of refunds on cancelled services.

For some businesses, this groundswell of support for locally owned and operated businesses was a chance to show why a community-focused, co-operative (co-op) business model works. Co-ops are member-owned businesses where benefits are derived and distributed equitably. When owned by a group of small business owners (a producer-oriented co-operative), the businesses take risks and face challengers together. Individual businesses can also be co-ops; these are known as customer- or worker-owned co-ops. An alternative to the investor-owned business model, co-ops create competition and choice for consumers while adhering to seven key principles, among them a concern for community.

Throughout the pandemic, this particular guiding principle defined co-op responses. In Italy, co-ops from around the country joined forces to produce face masks, which were distributed to vulnerable populations. HCF, Australia’s largest not-for-profit health insurer, has postponed premium increases and ensured all HCF hospital policies are covered for COVID-19 at no additional cost. In Spain, agricultural co-ops worked together to disinfect city streets, and bookstores created a collective web portal to centralize online sales. Panola-Harrison Electric Cooperative in Texas suspended power disconnection for people who couldn’t pay their bills.

And, of course, food co-ops — which have been on the frontlines of the pandemic — changed store hours for thorough sanitization and to serve at-risk populations, installed plexiglass shields, and even provided bonuses to employees to acknowledge their service and commitment.

“Food co-ops are owned by their communities — they put people first every day,” C.E. Pugh, CEO of National Co+op Grocers, said in a recent statement. “The current crisis underscores how deeply rooted co-ops are and how much shoppers trust and rely on them. Co-ops are rising to the challenge and honored to be of service today and every day.”

The co-op model, established in 1844 in England, has proven to be highly resilient and successful, and has stood the test of time for more than 150 years. Because they are domestically owned businesses, co-ops can maintain business continuity even when supply chains have been disrupted, such as in the current crisis. They have lean operating models because their only function is to return benefits to members. Staying in business means these companies are doing what they’ve always done, adapting their business models as needed to continue meeting community needs.

“If we look back at past crises, it informs what is happening now in the COVID era,” said Melina Morrison, CEO of the Business Council of Co-operatives and Mutuals in Australia. During the last financial crisis, small and large businesses failed, but co-ops grew in many sectors. “We saw an explosion of people coming together to create sustainable work.”

Hilary Abell, co-founder of San Francisco-based Project Equity — an organization that fosters economic resiliency in low-income communities through worker ownership — details past examples in a soon-to-be-released whitepaper called The Case for Employee Ownership. At the height of 2010’s global recession, 12.3 percent of non-owners versus 2.6 percent of employee owners were laid off. In the Basque region of Spain, the Mondragon Cooperative Corporation employs approximately 85,000 people in 250 worker-owned co-operatives under its umbrella. During the 2010 recession, in this “recession-proof” corner of the world, all Mondragon workers took, on average, 5 percent pay cuts to avoid being laid off. Those who were laid off were hired at other Mondragon companies.

Competition seeded among standard businesses working isolated from each other can make it more difficult for any of them to recognize their full potential, especially during times of crisis when cash flow is tight and manpower may be limited. This problem is mitigated within the co-op community through the sixth principle — cooperation among co-operatives — which lifts these member-focused businesses up as a single unit. As an example, Shared Capital Cooperative — a loan fund connecting co-ops and capital — is working to make emergency loans available specifically to co-ops. Similarly, the Cooperative Development Foundation’s Disaster Recovery Fund is offering payment relief strategies for rural electric co-op customers. A core set of values stressing solidarity also helps explain this resiliency. The coronavirus pandemic has made clear the importance of each person and business acting individually to work toward a shared goal that benefits society as a whole. Simply by their nature, co-ops act with the best interest of the community in mind.

This is not to say co-ops are immune from the struggles businesses in general are facing right now. After all, co-ops are still businesses. Yet, one additional challenge co-ops face is that they do not have access to capital. “Other businesses will have capital issues. They’ll run out of money,” Morrison said. “But co-operatives kind of have this additional problem around accessing investment capital.” Additionally, Abell noted some worker-owned businesses had challenges accessing the federal Payroll Protection Program and Economic Injury Disaster Loans, due to unfamiliarity of the co-op structure by lenders.

The slow burn of the pandemic will force many businesses to permanently close. It has also exposed weaknesses in some sectors, which could be better addressed through the co-op model. In the travel sector, for example, a producer-owned co-op of small tour operators could share back office functions or digital infrastructure. As Morrison asserts:

“The problem you might have as an individual might only be overcome by teaming up with other people. You’re really trying to overcome your problem but the best way to do it is to cooperate with other people. It’s not that (co-ops) are good only in a crisis, but the crisis is often the catalyst.”

But the business case isn’t the only reason to embrace the co-op model. According to Edelman’s recent Trust and the COVID-19 Pandemic report, people’s trust in business has plummeted. Half of people believe business is doing poorly, mediocre or completely failing at putting people before profits; only 43 percent believe companies protected their employees from the coronavirus; and 46 percent don’t believe business is helping smaller suppliers and business customers remain viable by extending credit or offering more time to pay. Researchers note that, to increase trust, business should focus on solutions and not selling, and that respondents want the private sector to collaborate with competitors. In other words, people want businesses to adopt the model co-ops already embrace.

“While it’s a cliché, crisis can create opportunities,” Abell said, “and these well-proven business models can and should be a central focus in building a more resilient economy.”

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