Co Operatives Meaning Principles Types Examples Importance

Co-operatives Meaning

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Co-operatives are more productive and often have more success than other businesses. This is because they form by bringing together people, especially those who belong to the same profession. Also, most co-operatives address social concerns and become more inclusive – they encourage women’s participation, support LGBTQIA+ communities – and are overall progressive.

Key Takeaways

Co-operatives are self-governing institutions formed by people with common social, cultural, and economic interests, often intending to address a specific issue.It brings together people, functions like a normal legal entity, and even conducts business.Most co-ops follow the seven Rochdale principles in their due course. The principles are laid down by the Rochdale Society of Equitable Pioneers, England.Co-ops are extremely democratic organizations. The members exercise their voting rights to elect their leaders and make important decisions.

Co-operatives Explained

Co-operatives’ history can be traced back to the first ever established, the Mondragon Corporation, a worker co-op founded by José María Arizmendiarietta, a Catholic priest, in 1956. It is still in operation.

Co-operatives are simple associations of people who either have similar interests or face similar problems. Mostly, their objective is to resolve the issue and help everyone benefit. Unlike other types of enterprises or business organizations, they are not motivated by profits.

Hence, co-ops are more productive. Surveys suggest that 80% of co-operatives are likelier to succeed in the first five years of establishment than 41% of other business enterprises.

Nowadays, many co-ops even have an online presence. Further, they have a global base and accept membership from eligible candidates worldwide. This gives them a good level of influence and global reach. Moreover, one can easily identify co-op websites by the .coop domain.

Principles of Co-operatives

Co-operatives are usually governed by the seven Rochdale principles put forth by the Rochdale Society of Equitable Pioneers, England, in 1844.

Voluntary and open organizations

Volunteers form co-ops with membership open to all considered eligible. It functions beyond gender, racial, and social stereotypes.

Democratic member control

Co-ops are extremely democratic organizations that elect members to govern. Therefore, they make most decisions by considering the opinion of all the members.

Member economic participation

Since co-ops are autonomous organizations, they are funded internally by the members. Therefore, members contribute to financing the co-op activities. Any profit made by the co-op is first set aside for its operations and then divided between the members.

Autonomy and independence

The very word ‘autonomy’ defines co-ops. They are self-governed and not answerable to other associations except the law.

Education, Training, and Information

Co-ops offer education and training to their members to enhance their overall capability and skills. They also disseminate information within and with their partner organizations.

Co-operation among co-operatives

Co-ops work in partnership with other co-ops locally, nationally, and internationally with similar or complementary interests. This can present a win-win situation for all the co-ops involved.

Concern for the community

Co-ops usually address important social and economic issues like unemployment, racial or gender discrimination, environmental and sustainability concerns, etc.

Types

Now, let’s discuss the prominent types of co-operatives around the world.

Consumer co-operatives – These are co-ops that consumers themselves own. Examples include retail co-ops, housing co-ops, etc. These help the management address the needs of the consumers and tailor their offerings accordingly.Worker co-operatives – These associations form by people who often belong to the same profession. They train, educate, and prepare the members to get employment. Occasionally, they also address some issues faced by the people working in the same field.Purchasing co-operatives – Those co-ops form by businesses that partner for common buying interests and requirements. For example, firms that sell flour can demand a wheat price reduction.Producer co-operatives – Producers of similar goods and services, form associations known as producer co-ops. Agricultural co-operatives are an excellent example of this category. For instance, sellers of wheat can together demand that its price be increased.Financial co-operatives – In this type, associations of people provide financial services like banking and insurance. Credit unions are a good example. There are a large number of co-operative banks worldwide, providing critical financial assistance to those who need it.

These are the most common types of co-ops. Some other less common types include multi-stakeholder co-ops, which consist of the different stakeholders of an organization, like employees, shareholders, partners, etc. Another type is the federal co-op, in which many co-ops form a secondary association.

Examples

Let’s discuss co-operatives in detail with the help of a real-life and hypothetical example.

Example #1

Here is a hypothetical example of a worker co-op X in the United States. It was formed by graduates who could not land a job due to outsourcing. Over the years, the co-op partnered with many organizations to specialize in members’ training.

The association expanded to Canada and now focuses on jobs lost due to automation. The main objective of the co-op is to enable the members to get jobs that are less liable to be lost by external factors.

Example #2

Consider this recent example of energy co-ops in Belgium. Unfortunately, the present electricity situation in Europe is not pleasant. The Russia-Ukraine war has contributed to soaring electricity prices, and the demand is only increasing.

Enter energy co-operatives, which can power their members for half of what the commercial provider would ask. But the condition isn’t great here either. The demand for energy co-op memberships has also increased, and these associations have had to stop taking new admissions temporarily.

In Belgium, there are 40 co-ops, currently supplying power to 2% of households. The market leader is Ecopower, which alone powers 55,000 homes and produced about 80 kWh last year. However, a more supportive legal framework could benefit the citizens with the demand-supply situation.

Importance

Co-operatives are one of the increasingly popular enterprise types in the world. So let’s look at the key factors that make them important.

Co-ops are formed mostly due to social and economic concerns. For example, women in business can together form an association and work for equitable pay and job representation.Co-ops are generally considered more productive than other types of organizations. This is probably because they have other objectives rather than just making profits.Co-ops promote democracy within organizations. In the era of many management techniques, bureaucratic and flat organizations, productivity through democracy can be a convincing reason for the popularity of a co-operative.Co-ops can provide quality. Since they are formed by identifying gaps or addressing the needs of a section of society, their personal needs are often associated with their goals. Hence, they strive to benefit by providing quality.