Philanthropy & Cooperatives Need to Get to Know Each Other Better

Cooperatives can provide an innovative way to address inequality and disadvantage by using ownership as a tool to empower people and build community wealth, writes Krystian Seibert, Policy & Research Manager with Philanthropy Australia.

Cooperatives and mutuals (from here on in I’ll just refer to ‘cooperatives’) are member based enterprises ‘owned’ by or on behalf of their customers, employees, a group of like-minded producers or a combination of these.

These organisations exist to serve their members rather than to reward external investors. They include so called ‘distributive cooperatives’ and ‘non-distributive cooperatives’ (many of which can access charitable status, depending on their purposes).

Cooperatives are characterised by their member ownership and control, democratic governance, autonomy and independence, re-investment of profits and surpluses in communities, and creation of both social and commercial value for members and future members.

Cooperatives have been referred to as being part of Australia’s ‘hidden economy’, and this is not a bad way of describing them – their role in our economy is not fully appreciated, and their potential impact in our community is not fully realised.

The philanthropic and cooperative sectors in Australia are certainly quite hidden from each other – there is very little engagement or collaboration between the two sectors.

This is a shame, and it’s time that philanthropy and cooperatives got to know each other better.

So why should philanthropy be interested in cooperatives?

Cooperatives adopt a different approach to ‘traditional’ charities, and to social enterprises supported through external investors.

In the case of cooperatives, ‘ownership’ is the key ingredient. As stated by the coordinator of the Nundah Community Enterprises Cooperative in an article for Pro Bono Australia News last year ‘Helping people to own a problem and to secure the means with which to address it, can unlock their creativity, drive and entrepreneurship’.

The approach is very much ‘bottom-up’ rather than ‘top-down’ and with a focus on ‘self-help’. This involves communities taking the initiative and taking the lead.

Ownership is a form of empowerment, and this empowerment is one reason why cooperatives can be innovative and responsive organisations that can be effective at tackling systemic challenges.

Consider the example of the Nundah Community Enterprises Cooperative referred to above,  which trains and engages people in meaningful work opportunities through two businesses – a café and catering enterprise and a public parks maintenance business.

Twenty people with a disability have secured stable long-term employment through the cooperative. Importantly, they not only have a job, but also a stake in the organisation they work for.

Another example is the National Health Co-operative – which was started by community members in the ACT to provide affordable and accessible medical and health services for the local community in response to a doctor shortage. The members of National Health Co-operative own the organisation, and enjoy many benefits including bulk-billed GP and allied health visits.

These are just two examples of cooperatives making an impact and addressing systemic issues within their communities. In the case of the Nundah Community Enterprises Cooperative, it has received assistance from Social Ventures Australia, the Westpac Foundation and Foresters Community Finance – so there is some limited engagement and collaboration between the philanthropic and the cooperative sectors.

But in its recent submission to the current Senate Committee Inquiry into Cooperative, Mutual and Member-owned firms, the National Health Co-operative pointed out that although it had developed some partnerships with local businesses to support its growth, access to capital was still a problem.

So there is still a big opportunity for much closer engagement and collaboration between the philanthropic and cooperative sectors. Part of this involves cooperatives more proactively communicating to philanthropy the benefits of their different approach, as this isn’t well understood at the moment.

When it comes to taxation restrictions, the words ‘ownership’ and ‘member benefit’ may ring some alarm bells for philanthropy – but there’s no need to be alarmed, as the above organisations are respectively registered as a Public Benevolent Institution and a Health Promotion Charity (‘Item 1 Deductible Gift Recipients’). Taxation restrictions are no barrier to engagement and collaboration.

Over in the US, there are numerous examples of how philanthropy is promoting the growth of cooperatives as a way of building community wealth and resilience.

The National Committee for Responsive Philanthropy has set out six reasons why foundations should support employee-owned cooperatives, which provide ‘an effective tool for creating and maintaining sustainable, dignified jobs; generating wealth; improving the quality of life of workers; and promoting community and local economic development, particularly for people who lack access to business ownership or even sustainable work options.’

The Northwest Area Foundation is supporting the Learning/Action Lab for Community Wealth Building, a project which is assisting five Native American organisations to establish social enterprises and employee-owned cooperatives.

The Surdna Foundation has established the Strong Local Economies Program, which supports local job creation for people impacted by inequality by spreading alternative business models such as employee-owned cooperatives, benefit corporations, and social enterprises.

The Ford Foundation helped establish the WealthWorks program, to promote rural and regional economic development which is locally owned and controlled, with the wealth generated being reinvested in the community.

These cutting edge initiatives aim to address inequality and disadvantage by using ownership as a tool to empower people and build community wealth.

Within philanthropy there is lots of focus on collective impact, impact investment and other ‘tools in the toolbox’ – and understandably so, because these are innovative and emerging approaches to tackling systemic challenges.

But it’s also time for philanthropy and cooperatives to get to know each other better – closer engagement and collaboration will add another tool into the toolbox, and help both philanthropy and cooperatives make more of an impact in our community.

About the author: Krystian Seibert is a regular columnist for Pro Bono Australia News on philanthropy, public policy and research. He is the Policy & Research Manager with Philanthropy Australia and tweets at @KSeibertAu