who, what, how
Understanding co-operatives
A UNIQUE BUSINESS MODEL
Member owned and democratically controlled
A co-operative is a member-owned and controlled business from which benefits are derived and distributed equitably on the basis of use. Co-operatives operate similarly to other businesses but they do have a number of unique characteristics.
These include:
- They are owned and democratically controlled by their members – the people who use the co-operative’s services or buy its goods, not by outside investors.
- They return surplus revenues to their members in proportion to their use of the co-op, not in proportion to their investment or share ownership.
- They meet their members’ needs rather than maximising the co-operative’s profit.
Rochdale Principles
The co-operative guiding principles
The International Co-operative Alliance (ICA) has global responsibility for maintaining the guiding principles which characterise the unique identity of co-operatives. Also known as the Rochdale Principles, these are guidelines by which co-operatives put their values into practice. They are regularly reviewed to ensure they remain relevant. You can also consult the Guidance Notes on the Cooperative Principles and Values which give detailed guidance and advice on the practical application of the Principles to the cooperative enterprises.
1
Voluntary and Open Membership
Co-operatives are open to all persons able to use their services and willing to accept the responsibilities of membership without gender, social, racial, political or religious discrimination.
2
Democratic Member Control
Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Those serving as elected representatives are accountable to the membership.
3
Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the co-operative.
4
Autonomy and Independence
Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.
5
Education, Training, and Information
Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives.
6
Cooperation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.
7
Concern for Community
Co-operatives work for the sustainable development of their communities through policies approved by their members.
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Want to learn more?
Check out the International Cooperative Alliance explanation of each principle.
Definition of co-ops
“A co-operative is 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.”
International Co-operative Alliance
breaking it down
Types of co-operatives
Co-operatives can meet almost any need across a sector. That’s why there’s no one-size-fits-all approach. Every co-operative is unique. Sometimes co-operatives may be a combination of the below ownership structures, often referred to as multi-stakeholder.
These are the most common forms of co-operative ownership structures in New Zealand.
Producer co-op
A co-operative where members produce similar types of products such as crops, livestock, milk, or crafts. By banding together, combining supply volumes and resources to process and market their products, greater economies of scale are achieved. Examples are Fonterra, Alliance and NZ Hops.
Consumer co-op
Consumer co-operatives are owned by people who buy goods or use services of the co-operative. These include co-ops that deliver utilities to their members. Examples include MHV Water, LIC, Farmlands, and RuralCo.
Purchasing/Shared Service co-op
Purchasing/shared services co-operatives are owned and governed by independent business owners that come together to enhance their purchasing power, lower their costs and improve their competitiveness and ability to provide quality services and products. Examples are Mitre 10, NZPM Co-operative, Ravensdown, Ballance, Foodstuffs, Paper Plus, ITM.
Insurance mutual
Insurance mutuals are owned entirely by those who take out policies. Surpluses are either used to reduce future premiums or rebated to policyholders as a dividend. Examples include FMG (Farmers Mutual Group) and Southern Cross Health Society.
Employee or worker co-op
The employees/workers are the members. This ownership model supports staff retention by involving them in business decisions and sharing in the profits. Examples are Ion Technologies and Loomio.
Financial service co-op
Financial services co-operatives belong to their members, who are at the same time owners and customers. They are set up as a bank, building society or credit union. Examples include SBS Bank, Nelson Building Society, First Credit Union.
Platform co-op
Platform co-operatives are evolving models based on a centralised technology platform that members sign up that enable them to access various services. They are starting to become more prevalent globally.
Housing co-op
A type of consumer co-operative, housing co-ops are a large part of Europe’s housing stock, filling the gap between social housing and private ownership. The properties are usually owned by the co-operative but controlled by the members (tenants) and are effective financial managers of housing as tenants have a sense of ownership and control in their management.