1:55am – The Co-operative Business Model

Allan Bramble

A co-op is a user owned and controlled business where benefits are derived and distributed equitably on the basis of use. Co-ops typically work for the sustainable development of their communities via policies approved by their members with the next generation of members in mind. Co-ops are a proven model for scaling up agriculture.

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What Role Do Cooperatives in Australia Play?

The International Cooperative Alliance defines a cooperative as: “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” Australia has over 1,700 cooperatives, many of them small. They are often involved in the distribution of goods or services for the benefit of its members and run by the members. Cooperative organisations are most commonly organised by farmers and consumers and are independent from government. The history of the cooperative enterprise can trace its origins back to around the 15th Century. The modern rules for cooperatives were laid down in Britain by the “Rochedale Society of Equitable Pioneers” in 1844. This group consisted of weavers who were going through difficult times and wanted to regain some control of the economic current surrounding their industry. The Society penned these seven guiding principles for cooperative enterprises:

  1. Voluntary and open membership
  2. Democratic member control
  3. Member economic participation
  4. Autonomy and independence
  5. Education, training and information
  6. Cooperation among cooperatives
  7. Concern for the community.

In Australia law regarding cooperatives has been patchy and divided by state. At the federal government level there has been a lack of engagement and support for cooperative initiatives.

In a survey of the top 20 Australian cooperatives in 2016 there were 13 wholesale and 4 retail organisations featured. The top organisation CBH Group (WA) produced profits of over 1 billion dollars. CBH Group operates to help the Australian grain producers along the value chain from grain storage, handling, transport, marketing and processing. The second and third biggest cooperatives in Australia 2016 were also farming related organisations. Both Norco Cooperative Ltd. (NSW) and Namoi Cotton cooperative Ltd. (NSW) are involved in the dairy and cotton production fields respectively. Together the top 3 cooperatives turn over annually over 2 billion dollars.

In 2012 the Wordwatch Institute research discovered that over one billion people in 96 countries were members of cooperatives of some description. A characteristic feature of cooperatives is their desire to give a portion of their profits back to the community to help social goals. Cooperatives are by nature more resilient to economic downturns, 80% of cooperatives survive the first five years of operation, whereas only 41% of traditional businesses survive.

In Australia the law allows the formation of two distinct types of cooperatives, a distributing cooperative and a non-distributing co-operative; this recognises that cooperatives can provide both economic and social benefits to people. Distributing cooperatives undertake commercial ventures where the members can share in profits made from trading and from the asset growth of the co-operative. The distributing cooperative is popular with primary producers, other small businesses and community enterprises. In direct comparison is the non-distributing cooperative which is strictly “not-for-profit” in nature, profits cannot be distributed to members during its existence or upon its termination.

Cooperative enterprises are operated successfully in almost all industries and offer significant competitive advantages to their members both economically and socially.