Best Practices

AKSourceLink: What if Businesses Were Stewards of Community Values and Sustainability All Over the World?

Published Sep 24, 2014 by

by Renata Ballesteros

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Some already are! Some entrepreneurs have decided that generating profit is not enough to satisfy their aspirations. They want businesses that fulfill essential community needs; businesses that create wealth for their communities, and not only in monetary shape, but also educational, cultural, social, environmental and even nutritional ways.

In 2008, for example, the L3C, (Low-profit, Limited Liability Company) made an appearance in Vermont: a business structure that combines the flexibility and capitalization possibilities of an LLC with the charitable purposes and low-regulation of a non-profit. To qualify as an L3C as defined by the IRS, the company must significantly foster charitable or educational purposes as defined by the IRS, have no significant production of income or appreciation of property, and to not engage in political, legislative, or lobbying activities.[1] Since its creation, Illinois, Louisiana, Maine, Michigan, North Carolina, Rhode Island, Utah, Vermont, and Wyoming have also adopted L3C legislation and about a thousand have been started.[2] Several other business structures for charitable purposes have also materialized in the last few years, such as the Benefit Corporation (B-Corp) and the Flexible-Purpose Corporation in California that stress a “triple bottom-line” on their business community: people, planet and profit.

These new legal structures are proof that the desire to do good can be powerful fuel for innovation and that social causes can be economically independent and sustainable. Companies such as Patagonia, the outdoor clothing brand, Seventh Generation and Method, (the biodegradable cleaning products producers), are examples of this model’s subscribers that are reaching shelves and customers all over the country.

There is a business structure, however, that has become quiet and obscure but has been value-centered and extremely successful all over the world for over 150 years: The Cooperative.

1A co-op is a user-owned and democratically controlled business that distributes profits and benefits among its members in the basis of use. Co-ops exist in almost every country in the world and in every economic sector, always following this definition and guided by a set of principles established by the International Cooperative Alliance, one of the largest non-profits in the planet with branches in 94 countries. [3] The seven principles cooperatives subscribe to internationally are: 

  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

 
4The co-op concept and principles date back to the 1840’s, when a group of 28 weavers in the town of Rochdale, England, got together to find solutions to the dire poverty that industrialization had brought to Britain. Providing 1 pound each (~$60 today) after years of preparations, they opened a small store that they ran based on democratic principles and planned to use the profits to provide education and improve the lives of their members. Their success was beyond anything they ever dreamed of: by 1860 their cooperative had reached 3,500 members, hundreds of communities around Britain had adopted their model, and their reputation was known across continents, from North America, where abolitionists such as W.E.B. Du Bois used this very model to educate and generate funds for newly liberated slaves and Japan, as it sought to modernize during the Meiji Restoration and later rebuild its economy after WWII.[4]

There are about 30 thousand cooperatives in the United States today that generate about $500 billion in revenue, and about 1.4 million worldwide.[5] Their achievements in global community development led to the UN declaring 2012 the International Year of Co-ops and that, in the words of the UN Secretary General Ban Ki-moon, "cooperatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility."[6]community values

Something, however, that cooperatives could learn from L3C’s and B-corps is the legal binding of their social commitment; in other words, an L3C or a Benefit Corporation can be brought to court if it strays from its mission, whereas the Cooperative Principles are simply guidelines that a co-op can choose not to follow. Still, it is amazing and inspiring to see commitment that companies around the world working together to change food systems, healthcare coordination, industry standards and environmental practices.

It is an exciting time for the social entrepreneur when old and new models are making the dream of a purely purpose-driven business a reality.

Content Contributed by Renata Ballesteros of the Alaska Cooperative Development Center, a partner program of AKSourceLink.  AKSourceLink is a proud U.S.SourceLink affiliate, America's largest resource network for entrepreneurs.

 



[1] NOLO Law, L3C’s, “A Hybrid, Low-Profit Business Entity” http://www.nolo.com/legal-encyclopedia/l3cs-a-hybrid-low-profit-business-entity.html

[2] InterSector Partners L3C, “Tally,” http://www.intersectorl3c.com/l3c_tally.html

[3] International Cooperative Alliance, “Cooperative Facts and Figures,” http://ica.coop/en/whats-co-op/co-operative-facts-figures

[4] David J. Thompson. Weavers of Dreams: Founders of the Modern Cooperative Movement.

University of California, 1994.

Jessica Gordon Nembrhard. Collective Courage. Pennsylvannia State University Press, 2014.

David J. Thompson. “Japan, Land of Cooperatives.” Cooperative Grocer. March-April 2008.

http://www.cooperativegrocer.coop/articles/2008-04-22/japan-land-cooperatives

[5] University of Wisconsin Center for Cooperatives, Cooperatives in the US Economy.  June 2009. http://reic.uwcc.wisc.edu/issues/

[6] 2012 International Year of Cooperatives, http://social.un.org/coopsyear/