Mar 6, 2018

Seven ways to grow BC’s co-op sector

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On May 17, 2017, some 36 representatives from British Columbia’s co-operative (or ‘co-op’) sector met to share ideas about how to grow the sector, to better understand challenges that co-ops are facing, and to explore next steps—both in terms of what the sector can accomplish itself, as well as what government support will be needed to help the sector flourish.

The workshop was a co-production of the BC Co-operative Association, Vancity Credit Union and the CCPA, and these organizations developed the following document (PDF version here) and recommendations out of the discussion and conversations from that workshop.

Co-ops in BC

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.

Co-operatives create both a political and economic democracy. Politically, all members have an equal voice in the management of the co-operative, regardless of their individual circumstances; economically, members benefit in proportion to their use of the co-operative’s services. Focused on meeting the needs of their members and without external shareholders to pay, co-ops help to keep capital circulating within local communities.

The co-operative model is highly adaptable. It can be designed to serve consumers, support producers of goods or services, provide labour opportunities, or any combination of these via a multi-stakeholder co-operative. Co-ops can be for-profit enterprises or not-for-profit (“community service”). Beyond the goods and services produced, co-ops build communities. By bringing together a diverse group of individuals with common needs, co-ops provide a forum to cultivate working relationships, build trust and reciprocity, and enhance the stock of social capital and civic cohesion.

There are about 700 co-ops in BC, representing about 7% of BC employment, with $2.5 billion in revenues (2015). While they can be found across British Columbia, co-ops are prevalent in the Lower Mainland, the West Kootenays and, in particular, Vancouver Island. Co-operatives that have reached substantive size include Vancity, MEC, Modo, BC Tree Fruits, Island Farms (now part of Agropur Co-operative) and the Kootenay Co-op.

Co-ops are a necessary component of system change that supports social innovation and entrepreneurship.

Given key societal challenges—including needs for affordable housing, secure and sustainable jobs and increased local resilience—there is room for a great many more co-operative enterprises to support meaningful employment, deliver needed services, reduce the cost of access to high quality goods, and promote democratic values and principles. Co-ops are a necessary component of system change that supports social innovation and entrepreneurship, and should not be relegated to the margins of our economy.

Here’s how we can strengthen BC’s co-op sector.

A self-help model

By bringing people together to support common needs, co-operatives embody the concept of self-help. Consequently, it is the sector’s responsibility—through the BC Co-operative Association—to support its own development and growth.

Here are three sets of recommendations that the co-op sector could implement.

1.  Build awareness

A central problem is awareness about the co-op model. Many young entrepreneurs, for example, learn too late about the co-op model. To build awareness, the co-op sector should:

  • Better market the co-op value proposition through public engagement events;
  • Develop case studies of success that can be promoted, shared, replicated and scaled-up;
  • Portray itself externally and internally as standard bearers representing system change, not just an alternative on the margins of the mainstream economy; and
  • Develop a plan to educate key partners in government, regional districts, municipalities and chambers of commerce, and ensure that the co-op model is taught in business schools and economics departments.

2.  Support growth

Co-operatives need resources and technical support for start-up and growth. In particular, the sector needs to:

  • Ensure access to a wide range of services, including legal, accounting, branding and education;
  • Develop and disseminate best practices supporting the development and financing of co-operatives;
  • Work with unions, chambers of commerce and other partners to develop new opportunities for worker co-op ownership of businesses undergoing succession;
  • Create mentorships and student co-op placements, to bring older co-operators with wisdom to share together with the many young people interested in working differently through co-ops;
  • Develop a strategy to bolster support from and the involvement of credit unions; and
  • Promote training for co-op board members.

3.  Identify new opportunities

The co-operative sector also needs to identify opportunities to introduce or expand co-operatives. It can do this by:

  • Piloting social co-operatives, which are co-ops specifically geared to the provision of personal care. Possibilities include child care, elder care, senior-focused housing and the provision of mental health services;
  • Increasing the awareness and application of co-op models to secure agricultural land, reduce input costs, improve access to farmland for young agrarians, market and distribute product, and support value-add;
  • Discussing the conversion of existing businesses facing succession to worker co-operatives; and
  • Building of 114,000 units of affordable rental non-profit and co-op housing units over a 10 year period, in accordance with the BC Rental Housing Coalition’s Affordable Housing Plan for BC.

There is room for a great many more co-operative enterprises to support meaningful employment, deliver needed services, reduce the cost of access to high quality goods, and promote democratic values and principles.

The enabling environment

The co-op sector also requires government support to realize a stronger enabling environment to bolster its impact.

Here are four areas where the government could better support the co-op sector.

1.  Streamline provincial administration

The co-operative sector requests that the provincial government identify an executive lead for the sector, to serve primarily as a cross-Ministry contact and resource in the context of the emerging and sustainable economy. Policy priorities for this lead might include:

  • Improving access to data on co-ops and the co-operative sector in support of outcomes measurement;
  • Streamlining the incorporation process for starting a co-op and for converting businesses into co-operatives, including establishing an online ling and reporting system for new co-op incorporation (in line with similar systems in use for other incorporated entities);
  • Ensuring agricultural co-operatives have access to relevant and up-to-date resources on the business model through the Ministry of Agriculture, including access for co-op start-ups to the suite of Farm Business Advisory Services Program;
  • Ensuring co-operatives are positioned as a preferential succession option at the point of corporate entity dissolution, with workers having the right of first refusal;
  • Including co-operatives in developing rural economic development policies and approaches, as both catalysts and agents for sustainable development, particularly where other policy approaches have been unsuccessful; and
  • Modernizing the Co-operatives Associations Act to ensure efficiency, flexibility and a more effective enabling environment.

2.  Loosen restrictions on local investments

Currently, most RRSP investments leave local economies and migrate worldwide. Community investment co-operatives (CICs) are a vehicle that allows people to accumulate capital and democratically invest in their local economy. Properly structured, their investment shares can be held in RSPs and other registered investment vehicles. While several CICs have been established in British Columbia, their impact has been constrained by the governing legislation.

BC has a specific local securities exemption (to prospectus and registration requirements) in Local Instrument 45-530, but its limits on capital raising from co-op members have not been updated for many years. Consequently, many co-ops have difficulty raising sufficient capital.

The co-operative sector requests that the provincial government make changes to Local Instrument 45-530—and consider other local policies under the Securities Act to enable CICs to better accumulate capital and invest in their local economies—including:

  • Increasing the maximum amount that may be invested per member from $5,000 to $15,000 per year (under 45-530);
  • Removing the 12 month membership requirement for members purchasing investment shares (under 45-530);
  • Eliminating the current 150 person “blanket” exemption limit for a co-operative issuing investment shares (under 45-530);
  • With appropriate safeguards, exempting local CICs from the cumbersome requirements imposed on investment funds; and
  • Permitting British Columbia co-operatives to raise capital under an Offering Memorandum without the need for expensive audited financial statements.

3.  Improve tax incentives for co-ops

The Small Business Capital Venture Act requires that recipients of venture capital tax credits (VCCs) be incorporated under the Business Corporations Act. This means co-ops are ineligible to register for VCCs. Although the legislation does not impose similar restrictions on all aspects of the program, information provided to the public does not explain that co-ops can be eligible business corporations.

The co-operative sector requests the provincial government:

  • Amend the Small Business Capital Venture Act so that co-ops can apply for VCCs; and
  • Review the program to ensure that co-ops are able to participate in the same way as other forms of for-profit corporations.

Further, as co-ops often outlive their founding members, government should incentivize co-ops to remain intact and serve their communities as multigenerational assets. To support this important long-term social and economic impact, co-ops need to establish indivisible reserves. Such reserves would comprise a circumscribed asset base that cannot be divided and allocated to members in the case of demutualization and dissolution of the co-op. To promote this course of action, the co-operative sector requests that the provincial government consider preferential tax treatment for any allocation co-ops that create indivisible reserves.

4.  Encourage government to work with co-ops

The co-operative sector supports the Social Impact Purchasing Guidelines published by the Ministry of Social Development & Social Innovation in 2014. The co-operative sector requests and encourages:

  • The provincial government to update the Core Policy & Procedures Manual to explicitly guide and support procurement from co-operatives and other forms of social enterprise;
  • Ministries and Crown agencies to include social purchasing provisions in procurement activities and initiatives wherever possible; and
  • The government to educate all ministries and Crown agencies on the benefits of procurement from co-operatives and social enterprises.

Closing thoughts

Taken together, these seven sets of recommendations would help strengthen BC’s co-ops and bring the co-operative model further into the mainstream. This would go a ways toward supporting secure and sustainable jobs for British Columbians, promoting innovation, increasing access to services and creating a more democratic economic system with strong social and environmental values.

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