Starting a cooperative — and their potential for impact — explained.

What is a co-op? And why is it a good model for a social purpose organization?

Why It Matters

The pandemic was hard on small business owners, their staff and their communities. Cooperatives can be a viable, alternative business ownership model that creates both social and financial value for communities, and prioritizes people and planet as much as profit.

This story is in partnership with Desjardins Group. 

When someone’s looking to start a purpose-oriented business or non-profit, their business model is likely one of the first considerations — after their mission, of course. 

While for some the cooperative model is a no-brainer, many have no idea what the term even means. 

That’s why Desjardins, one of Canada’s largest cooperative financial institutions and the largest federation of credit unions in North America, hosted a webinar during Co-op Week (a Canada-wide celebration of cooperatives) on this very subject — here’s what you need to know:

 

What is a cooperative?

Few Canadians understand what exactly it means for an organization to be a cooperative, the panelists said. Meg Ronson, training program director at CoopZone and committee member of Canada’s Emerging Co-operators, explained it like this: “The difference between a co-op and a conventional enterprise is how it is governed — who makes the decisions for the enterprise,” she said. The great thing that co-ops bring is that they are owned and governed by the people who depend on them. In housing co-ops, it’s the people who live in the co-op. In daycare co-ops, it’s the people whose children attend the daycare. In worker co-ops, it’s the employees of the company.” These people co-own co-operative organizations, and are referred to as their members. 

Ove Hansen, the corporate secretary and director of member relations at cooperative Gay Lea Foods, pointed to the seven guiding principles for co-ops: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; co-operation among co-operatives; and concern for community. 

 

Why choose a cooperative model?

For social entrepreneurs, the co-op model can be a way to make sure their organization’s values of equity and sustainability extend to the people working for them or purchasing their products and services.

The webinar’s speakers agreed that co-ops have many benefits, chief among them being a more equitable distribution of the organization’s financial success. “Not only did [the model] help Desjardins withstand the uncertainty of the last few months, but it also serves as our blueprint for shaping the future — a future that is more equitable and more inclusive,” said Guy Cormier, president and CEO of Desjardins Group, during his opening remarks.

“In any situation where you need the right people making the decisions, and not just the person with the most money — which, sometimes, is the case — then co-ops are the best model that you can choose, in my opinion,” said Ronson. 

Cormier’s first point, about co-ops being more resilient, has been well-documented throughout the pandemic. Hansen said one reason for this resilience could be that more consumers are resonating post-pandemic with the ideology behind cooperatives. “We found that a lot of the cooperative [values] such as locally owned, that the profits return or stay in the local community…that is something we’ve found people connect with,” he said. 

 

Any downsides?

Cooperatives can take more work to set up and run than conventional business models, Ronson said. “Young entrepreneurs and emerging entrepreneurs, they have so much passion and a lot of ideas and drive, but co-ops are a lot of work. Achieving consensus [among members] is a lot of work. Building an organization that really truly lives and breathes in the needs of its members is more work than having a business where the CEO chooses the direction of the company, or a small group of people choose.” 

Of course, Ronson believes the extra work is worth it.

 

Co-op myths — debunked.

Hansen stressed that many consumers don’t connect to the word ‘cooperative.’ That may be because they don’t know what it means, or because there are a lot of common misconceptions about the model. 

One such misconception is that co-ops can’t make a profit. Not true, speakers said. In fact, while there are non-profit co-ops, profit is key to the sustainability of many other co-ops and their members, said Hansen. “If we’re not profitable, we’re not around for reinvesting in the business, and we’re not around for the next generation.” Hansen said he’s also heard the myth that co-ops have to stay small. Again, untrue — as Desjardins and other medium and large cooperatives demonstrate.

 

What sectors are best for co-ops?

Ronson said the cooperative model can work for just about any organization in any sector, but there are two categories of sectors (which may overlap) that are particularly welcoming to a new co-op. The first is any sector where the market fails often “in a way that requires people to find their own solutions because the market’s just not doing its job in providing people the things they need,” said Ronson. Some examples may be affordable housing, childcare, fashion, or performance spaces for artists. 

The second category, Ronson said, are “sectors where there is lots of labouring love and a strong sense of attachment to community and to place.” Examples might include tourism, religion, education, or elder care. 

 

So, how can one start a cooperative?

The first two things aspiring co-op founders should have are a community and a need, said Ronson. “The community can be as well-defined as a church parish or a group of employees at a bakery, or it can be as ill-defined as a bunch of friends, or a bunch of residents in a neighborhood, town or city,” she said.

Founders should also have “something in common that they need, and they need to have a willingness to come together and sort out how best to fulfill that need,” Ronson said. She added that the next step is to establish some amount of leadership, “either from some of the members or all of the members, if that’s possible.” 

Next, founders need a business plan even if they’re planning to make the co-op a non-profit — that includes their values, vision, and mission. Then, founders should seek startup financing. “This is where our friends at Desjardins can help, as they’re big supporters of startups. Because…they are a co-op themselves, they understand the model is more likely to provide capital. Unfortunately, some of our bigger banks hear about co-ops and say, ‘No, sorry, I’ve never provided loans to a co-op before, so no thank you.’”

Dardan Isufi, the chief operating officer and co-founder of a worker-owned rideshare and delivery service in Quebec called Eva, added one more thing: a network of other co-op founders. “You need existing co-ops to help you out with financing and building this thing up.” 

Isufi pointed out that ‘cooperation among cooperatives’ is one of the core values that all co-ops operate by — yet another advantage to choosing the cooperative model, he said.