EXAMINING OURCOOPERATIVE IDENTITY

Discussion Paper
for the 33rd World Cooperative Congress
Seoul, 1-3 December 2021

Alexandra Wilson, Ann Hoyt, Bruno Roelants & Santosh Kumar

Foreword by Martin Lowery

Contents
Foreword

3

Acknowledgements

4

Introduction

5

1. The Definition of a Cooperative

9

2. Cooperative and Ethical Values

11

3. Cooperative Principles

17

Conclusion

38

Appendix 1: ICA Statement on the Cooperative Identity

40

Appendix 2: The ICA Statement on the Cooperative Identity Cast in a
Historical Perspective

42

Appendix 3: Comparative Review of the Cooperative Principles

45

Appendix 4: Suggested Readings

47© International Cooperative Alliance, 2021

2

International Cooperative Alliance

EXAMINING OUR COOPERATIVEIDENTITY‘The ICA Statement on the Cooperative Identity goes on to set out the values
on which cooperatives are based and concludes by enunciating the principles
which today’s cooperatives follow to put these values into practice’.
Graham Melmoth
ICA President, 1995-1997

Foreword
The purpose of the present document is to launch a re-examination of the ICA’s
Statement on the Cooperative Identity. Adopted in Manchester in 1995 at the 31st World
Cooperative Congress, the Statement set out for the first time the cooperative andethical values that lie behind the principles elaborated by the founders of thecooperative movement, provided a clear definition of the cooperative business model,
and updated the cooperative principles to reflect the contemporary features of the
movement. Since its adoption 25 years ago, the need to deepen an understanding ofand improve the utilization of the cooperative business model has grown steadily. For
this reason, it was agreed at the 2019 ICA General Assembly in Kigali, Rwanda to holdthe 33rd World Cooperative Congress on the theme of ‘Deepening our Cooperative
Identity’. The Congress, which takes place in Seoul, Korea and online from December
1-3, 2021, will explore the implications of the Statement on the Cooperative Identity intoday’s complex global environment and will mark the start of an intensive
examination of the Statement.
For the reader’s convenience, this document notes specific Congress sessions that will
directly address one or more aspects of the Statement and poses questions for thereader to consider both while attending the sessions and during the deliberations that
follow the Congress. In drafting the paper, the authors have drawn upon the GuidanceNotes on the Cooperative Principles, published by the ICA in 2015, as well as writings by
the late Professor Ian MacPherson, who led the consultation that culminated in the
adoption of the Statement on the Cooperative Identity. A list of these documents and othersuggested readings may be found at the end of the paper.
In disseminating this discussion paper, we look forward to robust and thoughtful
conversations across the global regions and sectors of the ICA prior to, during andwell beyond the 33rd World Cooperative Congress.
Martin Lowery
Chair, ICA Cooperative Identity Committee

3

Acknowledgements
The authors—Alexandra Wilson, member of the global Board of Directors of the ICA,Ann Hoyt, retired Professor at the University of Madison, Wisconsin, Bruno Roelants,
Director General of the ICA, and Santosh Kumar, ICA Director of Legislation, wish
to express their heartfelt gratitude to the many people who assisted in the productionof this paper, including▪
▪

▪

Gretchen Hacquard, ICA Director of Membership, and Hyungsik Eum, ICA
Director of Research, who reviewed the first version;
content reviewers: Ela Bhatt, founder of the Indian cooperative and trade union
movement the Self-Employed Women’s Association (SEWA); Gillian Lonergan,
Head of Heritage Resources, Co-operative Heritage Trust and Trustee of the UK
Society for Co-operative Studies; Patrick Develtere, Professor for the Centre for
Global Governance Studies at the University of Leuven, Belgium; and Clemente
Jaimes, former President of the Colombian workers cooperative Pollo Vencedor
and of the La Equidad insurance cooperative and co-author of the World
Declaration on Worker Cooperatives; andHagen Henry, Sonja Novkovic, Seungkwon Jang, Stefania Marcone and Gabriela
Buffa, members of the World Cooperative Congress Task Force, who reviewed
the document thoroughly prior to its final editing.

Our deepest thanks are also due to Martin Lowery, chair of the Identity Committee of
the ICA Board of Directors and chair of the 33rd World Cooperative Congress Task
Force, who provided invaluable advice throughout all stages of the drafting of thisdocument.

4

Introduction‘The history of cooperatives is one of a remarkably durable, resourceful and resilient
form of enterprise — groups of ordinary people coming together to provide
themselves with jobs, markets, goods and services at lower cost and higher quality thanotherwise available’.1
This document is intended to support a review of the three components of theStatement on the Cooperative Identity—the definition of a cooperative, the ten values that
undergird the cooperative business model, and the seven cooperative principles—andto open a continuing global dialogue on the relevance of cooperatives and theapplicability of the cooperative principles in the remainder of the 21st century. Thatdialogue will begin at the 33rd World Cooperative Congress, whose theme is‘Deepening our Cooperative Identity’. Congress sessions of relevance to the different
aspects of the cooperative identity are noted in the margins. Questions intended toprompt reflection and spark discussion appear throughout the paper.
The first cooperative to enunciate the set of working principles reflected in theStatement on the Cooperative Identity was founded in Rochdale, England in 1844. Since thisseminal moment, the cooperative movement has grown dramatically. Today it extends
its reach to almost all the countries of the world, comprises more than a billion
member-owners worldwide, provides approximately ten per cent of global
employment and makes up over three million enterprises operating in a wide varietyof economic sectors. Social, economic and political conditions have changed
repeatedly and dramatically during the nearly two centuries since the first principles
were drawn up, yet many of the cooperatives thriving today date their beginnings tomore than 100 years ago and people continue to turn to the cooperative businessmodel to meet their common needs, founding new cooperatives, often in new sectors,
nearly every day. A major reason for the strength and lasting appeal of cooperatives
across the globe is their common adherence to the fundamental operating principles,
supported by overarching values, that continue to define a unique business model.
The operating rules elaborated by the Rochdale Pioneers evolved into a formal set ofinternational cooperative principles following the establishment in 1895 of theInternational Cooperative Alliance (ICA). From the beginning, an important role ofthe ICA has been to define, advance and defend the principles. The first of these
responsibilities has been met through three successive updates, each informed byconsultations conducted democratically among the ICA’s members: the first in the
1930s, the next in the 1960s and the last in the 1990s. The evolution of the principles
through these updates is outlined in Appendix 2. Appendix 3 compares the results ofthe successive changes.
The most recent re-examination of the principles, carried out over several years andconcluding with the adoption of the Statement on the Cooperative Identity at the 1995
Congress in Manchester, took place against a backdrop of major economic and socialchanges wrought by the liberation of the remaining European colonies; the end of theCold War and the dramatic expansion of the European Union; the rise of neo-Liberal
1 A. Hoyt and T. Menzani, “The International Cooperative Movement: A Quiet Giant”, in The Cooperative

Business Movement, 1950 to the Present: Comparative Perspectives in Business History, ed. P. Battilani and H. G.
Schroter (Cambridge: Cambridge University Press, 2012), 57.

5

economic policies; the globalization of the world economy; and the advent of the newInformation Age. These changed external circumstances, combined with the growthof cooperatives worldwide, including in new economic sectors, provided the impetus
for a thoroughgoing review.
Congresssession 1:
Examining ourcooperative
identity

Despite a diversity of form and area of enterprise quite beyond the imagining of those
who founded the world’s first cooperatives, the cooperatives who participated in the
1990s review found that they had more in common than not and that, for the mostpart, the principles had stood the test of time. Indeed, there is a remarkable continuity
from one version to the next, provided by the retention of the following elements:
▪
▪
▪
▪
▪

cooperatives are open enterprises;
are politically neutral;
are governed democratically;
privilege persons over capital;and place great emphasis on the importance of education.

The Statement carries over from the 1966 version the principle of cooperation
among cooperatives, which, though now more often interpreted to refer to trade
among cooperatives and participation in associations of cooperatives, gave voice tothe long-held aspiration of the European cooperators of the 19th century to establish acooperative commonwealth.
The 1995 Congress reformulated the principles in a way that addressed the relevanceof the cooperative business model in the face of changing economic conditions andemerging social and environmental issues. The addition of a new principle expressing
a commitment towards the sustainable development of the communities in which
cooperatives are situated is of note in this regard. The Statement also contained, forthe first time, a universal definition of cooperatives based on meeting people’scommon economic, social and cultural needs and aspirations and set out a seriesof overarching cooperative and ethical values that provided an important
foundational complement to the operational principles. With these new elements, theStatement constituted a more complete set of international standards for cooperatives
than any previous version and, as such, introduced the notion of an identity sharedby cooperatives around the world.
Seven years after the adoption of the 1995 Statement, in 2002, its separate components
were fully included in the International Labour Organization’s Promotion of
Cooperatives Recommendation, 2002 (n° 193). This marked the first time that theuniversal cooperative standards adopted by the international cooperative movement
had been included in full in the official text of an organisation within the United
Nations system. Recommendation 193 was adopted without opposition, indicating afull consensus within the international community. The Recommendation has in turnstimulated the adoption of cooperative statutes or changes to existing legislative
statutes in many countries including China, Brazil, India, Italy, Spain, France, South
Africa, Vietnam, the Philippines, Japan, Korea and several US states, thus further
harmonizing and promoting the cooperative identity throughout the world.
Twenty-five years have passed since the adoption of the Statement on the Cooperative
Identity. The pace of change and disruption in the world in which cooperatives ariseand operate has not slowed: the technological revolution that preoccupied managers

6

of cooperatives at the end of the last century has given way to the full digitalization of
the economy, transforming business and trade in ways scarcely discernible by the mostforward-looking business leaders of 25 years ago; girls across the globe have growing
access to education and women are moving to take their rightful place in the
productive activities and governance of their societies, challenging longstanding
cultural norms in the process; younger workers in the advanced economies increasingly
find themselves confined to the insecurity of the so-called gig economy, a status all too
familiar to the peoples of the developing economies; continued economic globalisationand technological change have marginalized whole segments of the population in many
countries, giving rise to a distrust of authority and populist, even reactionary, politicalmovements; diversity, equity and social inclusion have become rallying cries in many
countries; environmental degradation has worsened sharply and the spectre of climatechange is now a current climate emergency; massive population displacements induced
by a changing climate loom, particularly in the Global South; the aging and ultimate
shrinking of the population in the developed economies holds the promise of reduced
stress on the natural environment and the threat of economic stagnation; and apandemic that reached every corner of the globe in a few short months has disrupted
economies everywhere, throwing many out of work, demonstrating the enormous
potential heralded by remote work, and exposing the gaping holes in social safety nets
everywhere.
The world’s first cooperatives were arguably also the first actors in what today we callthe social and solidarity economy, seeking as they did to organise economic enterprises
whose aim was to meet people’s common needs for goods and services on a basis thatfairly shared the benefits of the business. They stood apart both from enterprises
formed for the purpose of securing profits for their investors and from charitable
undertakings that excluded recipients from any control over the provision of the goods
and services on which they relied. Invoking the values of self-help and solidarity,
cooperatives instead invited people to join together in voluntary associations to satisfy
their common needs.
The 20th century saw the creation of public enterprises to deliver services that had onceor might have been provided by cooperatives in such diverse sectors as energy,
housing, health, insurance and public transport. The last 25 years have witnessed thebirth of new forms of social enterprise that aim to serve and employ those living on
the margins of society; seen the invention of B Corporations, which seek to balance
purpose with profit, and the emergence of B certification systems; brought
environmental, social and governance issues into the forefront of corporate concerns;
and given rise to the emergence of purpose-driven investor-owned corporations. In
the meantime, isomorphic forces, inevitable in their effect if left unchecked, havecontinued to lead well established cooperatives, especially those in the developed
economies, to question the relevance of the cooperative identity as they adopt thepractices and norms of the corporate sea that surrounds them, distance themselvesfrom their members, and witness the failure or demutualisation of long-establishedpeers.
The time has come to ask whether revisions are needed once again, or whether theStatement remains fit for purpose, perhaps with greater interpretive support. While
this text will serve as a preparatory document for the discussions at the 33rd ICA World
Cooperative Congress, the reflections shared through the various congress sessions
will assist in opening a global conversation on the cooperative identity in a post-7

pandemic world, leading to potential improvements based on democratic
consultations with the ICA’s members, as has happened on previous occasions in the
ICA’s 126-year history.

8

1. The Definition of a Cooperative
Congresssession 1:
Examining ourcooperative
identity

The Statement on the Cooperative Identity contains the first definition of a cooperative
developed and agreed to by the international cooperative movement:‘A cooperative is an autonomous association of persons united voluntarily tomeet their common economic, social and cultural needs and aspirations
through a jointly owned and democratically controlled enterprise’.
Each of these words was carefully chosen, fully debated and ultimately endorsed by
the international cooperative movement through the deliberations of the International
Cooperative Alliance. Through ILO Promotion of Cooperatives Recommendation,
2002 (n° 193), 2 the definition was subsequently adopted by the wider
international community It is intended to apply equally to all types of cooperatives:
consumer, producer, worker, and multi-stakeholder.3
Perhaps most important, the definition emphasizes that cooperatives are associationsof persons, thus distinguishing them from investor-owned enterprises, which are, in
essence, associations of capital.
The persons in a cooperative unite voluntarily to meet their common economic,
social and cultural needs and aspirations. This implies that decision-making within acooperative should be based on the expressed interests of the people who share thosecommon needs and aspirations and not on owners of capital.

Congresssession 1.4:
Cooperative
cultural heritage

The needs and aspirations of those who unite voluntarily in a cooperative are to beunderstood as being simultaneously economic, social and cultural, and not as
either/or, as all cooperatives reflect elements of the three, if to varying degrees. The
cultural element is as fundamental as the other two, since cooperatives develop anddepend upon a culture of cooperation.
The conjunction of ownership and control by the cooperative’s members, which
precludes any opportunity for external control, is a key and original component of thecooperative business model.4 It does not preclude the use of external capital that does
not carry control features; nor does it preclude regular external audits, which are of
considerable importance, as explained below under the 2nd cooperative principle.
Cooperatives bring together a wide range of stakeholders and, in this sense, constitutea stakeholder economy.5 The members of a cooperative may be persons seeking fair
access to financial services or such essential utilities as energy and water. They may be
2 ILO Promotion of Cooperatives Recommendation, 2002 (n° 193),

https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:R1
93.
3 2019 ILO Guidelines Concerning Cooperative Statistics,
https://www.ilo.org/stat/Publications/WCMS_648558/lang--en/index.htm.
4 C. Sanchez Bajo and B. Roelants, Capital and the Debt Trap – Learning from Cooperatives in the Global Crisis(Basingstoke: Palgrave-MacMillan, 2013), 114-127.
5 “Cooperative stakeholders are motivated by solidarity and a shared objective they can realize througha cooperative enterprise. They each bring a different perspective to the table, but their interests align towork towards cooperative viability and adherence to cooperative values”. S. Novkovic and K. Miner
2015,
https://www.ica.coop/sites/default/files/basic-page-attachments/ica-governance-paper-en2108946839.pdf.

9persons seeking quality housing, food or other consumer goods at fair prices. They
may be craftspeople, such as bakers or mechanics, or self-employed professionals, suchas doctors and lawyers, joining together to provide a common service offering. They
may be businesses in the same sector or individual fishers, ranchers or farmers who
combine to meet their common supply and marketing needs. They may be workers
seeking stable employment and fair wages in competitive industrial or service
enterprises. They may be writers, artists, actors, musicians and others wishing to carryout cultural activities together or share administrative services. They may be service
providers seeking common control of a digital distribution platform. They may be
people seeking equal opportunity in employment or access to services. Examples
abound of the diversity of cooperative members in a stakeholder economy.
Cooperatives of all types offer people the opportunity to unite in their efforts—as thedefinition states—to meet their common economic, social and cultural needs andaspirations. They strive to achieve fairer pricing, better quality, greater accessibility, andmore assured long-term economic sustainability than might be achieved throughindividual entrepreneurship or an enterprise model motivated by goals or aspirations
other than service to their members.
Congresssession 2:
Strengthening
our cooperative
identity as acompetitive
advantage

It must be underlined that, notwithstanding its social purpose, a cooperative is an
economic enterprise. It must make its way in the marketplace and so must be fullycompetitive. Its essential cooperative character need not stand in the way ofcommercial success. In fact, the cooperative identity contains many components that,
if emphasized, can constitute a substantial competitive advantage.

QUESTION: Is the definition of a cooperative complete? Is any part of it obsolete? Is
any part of it superfluous?

10

2. Cooperative and Ethical Values
Congresssession 1:
Examining ourcooperative
identity

Introduction
Though normally insisting upon religious and political neutrality, the cooperative
movement has deep connections to the world’s array of ideologies and religions.
Cooperators have repeatedly explored their own value systems and attempted to
identify those personal ethics and social ideals that they share and that motivate theiractions. The 1995 Statement on the Cooperative Identity attempts to identify the best
features in the cooperative movement’s value systems and articulates these as the idealsof personal and social conduct to which the movement aspires. In the ‘Background
Paper on the ICA Statement on the Cooperative Identity’, the ICA explained, ‘Any discussionof values within cooperatives must inevitably involve deeply-felt concerns about
appropriate ethical behaviour. Consequently, achieving a consensus on the essential
cooperative values is a complex but rewarding task’.6
According to the Cambridge Dictionary, values are ‘the principles that help you to
decide what is right and wrong, and how to act in various situations’.7 Basic cooperativevalues are general norms that cooperatives and their members, leaders and staff are
expected to share, and that should guide their thoughts and actions. The values affirm
what is the right thing to do. The description of cooperative and ethical values in the
ICA’s Statement on the Cooperative Identity seeks to engage the heart, conscience andloyalty of current and future cooperative members.
The project to articulate universal values for the movement can be traced back to the
ICA Copenhagen Congress of 1978 at which the need was expressed to understandthe pressures being exerted on cooperatives by the profound socioeconomic andpolitical changes then emerging in the world. Canada’s Alexander Laidlaw wascommissioned by the ICA to study the subject. His report, Cooperatives in the Year 2000,
was presented to the Moscow Congress in 1980 and underlined the need for the further
development of cooperative thought. The 1984 ICA Congress in Hamburg went on
to discuss how the cooperative movement should address such global issues as peace,food security, energy, environmental protection, and international cooperative
development. This reflection inspired and informed subsequent work on cooperativevalues. ‘Basic Cooperative Values’ was the main theme of the ICA Congress convened in
Stockholm in 1988, where Sweden’s Sven Åke Böök was entrusted with the task of
preparing a report on values. Böök’s report was presented to the ICA Congress heldin Tokyo in 1992.
In his essay ‘What is the end purpose of it all, The Centrality of Values for Cooperative
Success in the Market Place’, 8 Ian MacPherson, who led the work that culminated in
the elaboration of the Statement on the Cooperative Identity for the ICA, argues that the

6 “Background Paper on the ICA Statement on the Cooperative Identity”, in “XXXI ICA Congress

Manchester 1995 – Agenda and Reports”, Review of International Co-operation, Volume 88, N°3, 12.
7 https://dictionary.cambridge.org/dictionary/english/values.
8 “What is the end purpose of it all?: The Centrality of Values for Cooperative Success in the Market
Place” in The Cooperative Business Movement, 1850 to the Present, ed. Patrizia Battalani and Harm Schröter(Cambridge: Cambridge University Press, 2012), 107-125 and in “2012: A Year to Remember”, Enterprise
January (2013): 16-21.

11

values are more permanent than the principles, which, as operating rules, have been
modified every few decades in response to experience and changing conditions.9

Cooperative Values‘Cooperatives are based on the values of self-help, self-responsibility,
democracy, equality, equity and solidarity’.
Self-help10 alludes to the belief that people can and should influence their own destiny.
They can develop their own skills, knowledge and understanding through cooperative
action. The value assumes that people have the will and the ability to improve their lot
in life peacefully through joint action, which can be more powerful than individual
effort.
Self-Responsibility indicates that members assume responsibility for theircooperatives and promote them to their friends and families. It is the responsibility ofmembers to ensure that cooperatives remain independent from undue external
influence from such sources as private capital and government. The value also
highlights that members have a responsibility towards their own selves.
Democracy offers a system through which members have the right to participate, tobe informed, to be heard and to be involved in making decisions. Members are thesource of all authority in the cooperative. ‘The basic unit of the cooperative is themember.... This basis in human personality is one of the main features distinguishinga cooperative from firms controlled primarily in the interests of capital’ 11 (ICA
Background Paper).
Congresssession 2.2:
Inclusive
governance

Equality is fundamental to cooperation. Because the basic unit of any cooperative isthe member, this value argues for equal rights and opportunities for members andprohibits differential treatment of members based on any kind of artificial difference
among them. Cooperatives assume that equal rights and opportunities for people to

9 Given that the values are more permanent than the principles, why did the cooperative movement not

codify them earlier on? According to Ian MacPherson, the answer, at least in part, is that different
cooperative schools had been influenced by the values inherent in different political theories (liberal,conservative, Marxist, social democratic, etc.), but the cooperative movement was determined to achieve
unity through political neutrality. In addition, national loyalties were often divisive in the first years of
the cooperative movement. As the movement grew and expanded, first to Eastern Europe and then toother continents, it carried European values with it. However, it was important, if the movement was
to take firm root outside Europe, that the cooperative business model resonate with the values held by
the peoples on other continents. By the 1990s, the ICA had a firmly global character and the clashingideologies of the Cold War no longer threatened division within the movement. This opened the door
to a discussion of values informed by the reflections of contemporary and earlier cooperative thinkers
including Gino Mattarelli of the social cooperative movement in Italy, Ela Bhatt of the SEWA
movement in India, Jose Maria Arizmendiarrieta of Mondragon, Alphonse and Dorimène Desjardins(Canada), Alexander Fraser Laidlaw (Canada), W.P. Watkins (UK), James Peter Warbasse (USA) andToyohiko Kagawa (Japan). Such great political figures as Mahatma Gandhi, Martin Luther King, Kwame
Nkrumah and Nelson Mandela, and the concept of the relation with the earth enunciated by Pacha
Mama in Latin America, further inspired cooperators internationally to explore and give expression totheir shared values.
10 The French version of the Statement on the Cooperative Identity translates this value as ‘entraide’, literally‘mutual aid’, which underscores the collective approach to self-help.
11 “Background Paper on the ICA Statement on the Cooperative Identity”, in “XXXI ICA Congress
Manchester 1995 – Agenda and Reports”, Review of International Co-operation Volume 88, N°3, 13.

12

participate democratically will improve the use of society's resources and foster
mutuality, understanding and solidarity.
Equity refers to fairness or justice in the way people are treated. In the cooperative
context it means that resources and opportunities are allocated among members in a
way that seeks equal outcomes despite different circumstances. The allocation of
resources and opportunities should promote fair outcomes based on members’
participation in and democratic control over their cooperative. Methods to distributeresources for the benefit of all members may include returns to members, allocations
to capital reserves, increases or improvements in services or reduced charges (see third
cooperative principle below).
Congresssession 2.3: A
strongentrepreneurial
network

Solidarity grows out of the assumption that there is strength in numbers, that many
people working together to meet their personal needs (self-help) and the needs of thegroup (mutual self-help) can produce greater benefits to the individual than working
alone. Globalization of the world economy and advanced information technology haveboth heightened the need and increased the opportunity for solidarity among members,
who work together through their cooperatives to improve their collective wellbeing
and strive to connect with the larger cooperative movement from the local to theinternational level, while also upholding universal ethical values.

Ethical Values‘In the tradition of their founders, cooperative members believe in the ethicalvalues of honesty, openness, social responsibility and caring for others’.
The Statement on the Cooperative Identity goes on to articulate values of personal and ethicalbehaviour that cooperators actualize in their enterprises. The ethical values practisedby those women and men who were cooperative pioneers continue to define the fabricand character of today’s cooperatives. Over time, the high expectations members havefor the cooperatives they own and control have grown to include social responsibility
and caring for others. This reflects concern for the health and wellbeing of individuals
within communities and a commitment to help them help themselves throughcooperatives. The four ethical values are listed and explained below.
Congresssession 2.2:
Ethical value
chain
management

Honesty is first among the four ethical values. The earliest cooperatives emphasized
the importance of honest dealings in the marketplace: accurate measurement, reliable
quality and fair prices. Cooperative members continue to insist that their enterprises
have honest dealings with them and with clients and providers along the value chain.
This commitment has built cooperatives’ reputation and standing in communities asenterprises that can be trusted. This in turn has led to honest dealings with nonmembers and a high level of openness throughout the organization.
Openness is characterized by an emphasis on transparency and collaboration. It refersto ‘accessibility of knowledge, technology and other resources; the transparency ofaction; the permeability of organizational structures; and the inclusiveness of13

participation’12 and ‘…the structured and reasonable availability to the membership of
information and knowledge relevant to the successful life of the [cooperative]’.13
Congresssession 3.1:
The survival of
the planetSocial responsibility is individual commitment outside the boundaries of any private
or state economic entity. With respect to cooperatives, it refers to the cooperative
accepting responsibility for and ameliorating the negative consequences for society
stemming from its actions and operations. It also refers to a cooperative’s acceptanceof the responsibility to contribute to the welfare of society and the environment whilelessening negative impacts on them.
Caring for others reflects cooperators’ tolerance for others and concern for theircommunity. This ethical value that may be found in different forms of entity but is abasic value for cooperatives, to be put into practice. Cooperatives have a naturalaffinity for creating a temperament of camaraderie and interdependence among people
through actions based on the mindfulness and deep concern for the other.

Connecting the Values to the Definition and the Principles
Explicitly associating the cooperative values with the cooperative definition andprinciples is a key contribution of the Statement on the Cooperative Identity.
The following relationships are suggested partly by Ian Macpherson’s abovementioned text and partly by the Guidance Notes on the Cooperative Principles.
The value of [mutual] self-help finds its correspondence mainly in the jointly owned
and democratically controlled enterprise part of the definition, and in the principles
of member economic participation, autonomy and independence and concern
for community.
Self-responsibility is directly expressed in the principles of democratic member
control and of member economic participation.
Democracy is referenced both in the definition and in the principle of democratic
member control.
Equality and equity are reflected in both ‘jointly-owned and democraticallycontrolled enterprise’ and the principle of members’ economic
participation; equality is also connected to the principle of education, training andinformation.
Solidarity is primarily connected to the first part of the definition (‘meeting theircommon economic, social and cultural needs and aspirations’), to the principleof cooperation among cooperatives and to the principle of concern forcommunity.

12 Daniel Schlagwein, Kieran Conboy, Joseph Feller, Jan Marco Leimeister and Lorraine Morgan,“Openness With and Without Information Technology: A Framework and a Brief History,” Journal of
Information Technology 32, no. 4 (2017): 297–305, as cited in https://en.wikipedia.org/wiki/Openness.
13 Sidney Pobihushchy, “The Cooperative Values: Their Meaning and Practical Significance”, CBL
Reader (2012): 25-27.

14

15

QUESTIONS:
1. Is the list of cooperative values—self-help, self-responsibility, democracy,
equality, equity and solidarity—complete? Is there anything missing? Are there
any that do not belong? Is their meaning clear? What are their implications forthe way cooperatives govern and operate themselves?
2. Is the list of ethical values—honesty, openness, social responsibility and caring
for others—complete? Is there anything missing? Are there any that do notbelong? What are their implications for the way cooperatives govern and operatethemselves?

16

3. Cooperative Principles
Congresssession 1:
Examining ourcooperative
identity

Cooperatives are distinguished from other enterprises by seven operational principles
that give expression to the cooperative and ethical values examined above. The term‘principle’ may lead to confusion, as these are not moral principles, but standards
through which the cooperative business model is implemented on a day-to-day basis.

1st Cooperative Principle: Voluntary and Open
Membership
Congresssession 1.2:
Inclusive
governance‘Cooperatives are voluntary organizations, open to all persons able to use theirservices and willing to accept the responsibilities of membership, without
gender, social, racial, political or religious discrimination’.
This principle has a connection to the ethical value of openness.14
Cooperatives do not limit themselves to satisfying the needs and aspirations of a closed
group of citizens. A cooperative is meant to be open to all people who can benefit
from the services it is intended to meet and who belong to the category of memberstakeholder it has as its mission to serve. Joining a cooperative is voluntary; it is an actof free will and is not legally imposed. The principle precludes any artificial barrier tomembership, such as discrimination against racial minorities would constitute,provided the candidate accepts the responsibilities of membership.
This openness towards the outside world, however, is conditioned by certain
limitations, in particular:▪

the willingness of candidates for membership to accept the accompanying
responsibilities;▪

the type of stakeholder whose needs and aspirations the cooperative has themission to meet: for example, one normally needs to be a farmer to be eligible tobe a member of an agricultural cooperative;▪

the geographical area the cooperative covers: many cooperatives are bound to a
specific geographic area, which can vary from the village to an entire country, withsome cooperatives having an international membership;▪

any inherent limit on the number of persons the cooperative can serve: for
instance, a housing cooperative will comprise a fixed number of housing units at
any one point in time;▪

the pace of the cooperative’s entrepreneurial development: economic development
is crucial if the openness principle to be satisfied. The cooperative’s pace of
openness must often be controlled if it is to fulfil its mission. In the case of worker

14 See graph in part 2: Cooperative and Ethical Values above.

17

cooperatives, this first principle must be conditioned on the existence of a specificworkplace, which in turn depends upon the cooperative’s level of development.15
With this first principle, we find the first mention of members in the Statement on the
Cooperative Identity. Members are a central element of a cooperative. They are thepersons who, in the definition of a cooperative, jointly own and democratically control
the enterprise. A member is usually an individual i.e., a natural person, in particular in
primary cooperatives, but can also be an organization, in particular, but not exclusively,
in higher level cooperatives.
Diversity and Inclusion
Congresssession 2.1:
Inclusive
governance

The 1st cooperative principle is closely linked to the issue of inclusion. From the
beginning, the cooperative movement has shown inclusion in dealing with the diversityof human society. It has strived to bring together people of different social groups,
genders, ages, political affiliations and religious beliefs and to include them within thecooperative.
Although the Rochdale Pioneers explicitly included women as voting members, the1995 wording of this principle mentions gender for the first time. Although progressfrom a global perspective has been slow, significant gains have been made in the last
decades in advancing gender equality in cooperatives, including access for women andmembers with diverse gender identities, increased opportunities at work, favourable
legislation, protection against all forms of violence and harassment, and support for
women’s entrepreneurship. Women have, in different places, set up women’s
cooperatives to overcome discrimination and gain a voice and a place for women. Suchcooperatives, where membership is only open to women, do comply with the 1stprinciple as they are established to overcome gender discrimination and meet thecommon economic, social and cultural needs and aspirations experienced by women
specifically. In many countries, they have been an important force for change. The
same is true of cooperatives formed within disadvantaged communities or minority
groups with the aim of empowering their members to better their material and social
circumstances.

15 “World Declaration on Worker Cooperatives”, referred to in the Californian legislation on worker

cooperatives. See https://cicopa.coop/wpcontent/uploads/2018/02/world_declaration_on_worker_coops_en.pdf

18

QUESTIONS:
1. How well have cooperatives respected this principle?
2. May membership in a cooperative be truly said to be voluntary and open where
it offers the only available access to necessary goods and services?
3. Are the limitations cited above on open access reasonable?
4. Have cooperatives fallen behind private, public or charitable enterprises inensuring equitable treatment and full inclusion of minorities and disadvantaged
persons? Have they fallen behind in ensuring the full equality of their women
members?

__________________________________________________________________

2nd Cooperative Principle: Democratic Member Control‘Cooperatives are democratic organizations controlled by their members, who
actively participate in setting their policies and making decisions. Men andwomen serving as elected representatives are accountable to the membership.
In primary cooperatives members have equal voting rights (one member, onevote) and cooperatives at other levels are also organized in a democraticmanner’.
This principle is linked to the cooperative values of democracy and self-responsibility.16
Voting
The 2nd principle specifies that the democratic control by members, which we saw inthe cooperative definition above, must be implemented based not on the amount of
capital held, but through one-person-one-vote procedures in primary (grassroots)cooperatives, while higher level cooperatives can have different democratic
arrangements reflecting, for instance, the ratio among the grassroots members.
Multi-stakeholder cooperatives, namely cooperatives with more than one membershipgroup, such as consumers, employees, independent entrepreneurs and legal persons,which have emerged over the last few decades, are characterized by specificarrangements in their bylaws providing for suitable representation of the various
stakeholders, e.g., different weighting systems within each stakeholder category.
Congresssession 2.2:
Entrepreneurial
networks

Regardless of the types of members, a cooperative is controlled by long-term
members-stakeholders (producers, workers, accountholders, borrowers, etc.17) whochange neither identity nor socioeconomic stakes overnight, and whose behaviour is
not dictated by the highest possible return on investment, but instead by the aim tomeet common needs and create shared prosperity. Thus, the cooperative must
generate surpluses and have a long-term strategy to ensure its success within its
community, sustainable jobs and sustainable operations.
16 See graph in part 2: Cooperative and Ethical Values above.
17 See part 1: The Definition of a Cooperative above.

19

Checks and BalancesCongresssession 2.2:
Ethical value
chain
management

Congresssession 2.1:
Takingadvantage of thedigital age

Democratic control by members is not simply limited to formal procedures in general
assemblies, but also includes the separation of powers, as in a modern state, withchecks and balances exercised internally. These checks and balances are important ina single cooperative but are also fundamental in secondary and tertiary cooperatives
and in cooperative groups, which have more complex structures, as well as in national
and international ecosystems of trade and commerce where cooperatives are integrated
into global value chains consisting of different types of enterprises and entities,
including state owned agencies.
Technological Advances
Advances in modern information and communication technologies provide new tools
to engage members in the democratic processes of the cooperative. ‘Free technologies’
have facilitated the creation and circulation of knowledge with collaborative processesof innovation oriented towards developing cooperative solutions. At the same time,
due consideration must be given to digital literacy and education in the interests ofbridging the glaring divide among countries.
Members Elected to the Governing Structures18
All elected board members are accountable for their actions to the cooperative’s
membership, at election time and throughout their mandate. According to the 2nd
principle, cooperative members should hold the board accountable for key
entrepreneurial decisions and see to it that continuous democratic renewal, with new
candidates standing for elected office, takes place.
This principle also implies that a cooperative’s bylaws make provision for themembership to recall and dismiss democratically elected representatives who abuse
their positions or fail to fulfil their duties as elected representatives.
However, the 2nd cooperative principle does not mean that cooperative members andboards should be involved in the day-to-day business management responsibility, whendelegated and entrusted to chief executives and senior managers, under the board’s
supervision.
Protection against External Takeovers
Democratic member control, if properly carried out, makes it far more difficult for an
external person or entity to control the firm than in conventional enterprises, andimpossible through acquisition, unless the enterprise has first been ‘decooperativised’(demutualised), or, in other words, once the members have legally and definitively
relinquished their democratic control and joint ownership rights over the enterprise.

18 Governing structures such as boards, management councils and other governance bodies.

20

Congress
session 2.1:
Inclusive
governance

Congresssession 3.2:
Peace andequality

Diversity and Inclusion
Under the 2nd principle, members elected to positions of responsibility in a cooperative
should reflect the diversity of the cooperative’s membership. Positive action should be
encouraged to encourage individuals from under-represented groups in themembership to stand for election to the governing structures.19
Conflict Resolution
One of the challenges facing cooperative members in implementing democratic
control is to develop a culture that welcomes and encourages debate, and can identify,
manage and solve conflict, under the understanding that the occurrence of conflict ina democratic institution is normal.
Regulation of Democratic Member Control
In most countries, democratic member control is regulated by cooperative legislation.
Where legislation is not effective or appropriate, cooperatives need to ensure
democratic control through their bylaws.
AuditsIn some countries such as Germany, France and Austria, there are legal provisions forcompulsory auditing specific to cooperatives, including an audit of democratic
governance processes: this practice considerably helps protect members’ democratic
rights and ensure that democratic governance stands up to external scrutiny.
QUESTIONS:
1. Do members of cooperatives take their democratic rights for granted? How canthis problem be solved?
2. Do larger cooperatives do enough to stimulate and facilitate the democratic
participation of their members? Should the principles speak to this challenge?
3. Have cooperatives fallen behind in ensuring full participation and representationin their governance structures of women and other traditionally
underrepresented social groups? Can this principle address the problem?
4. How well have cooperatives whose members are moral rather than natural
persons, including secondary and tertiary cooperatives and cooperative groups
and primary cooperatives whose members are businesses, respected theprinciple of democratic control? Is further guidance required?

__________________________________________________________________
19 Article 21 of the Articles of Association of Cooperatives Europe stipulates, “The board composition

should reflect diversity regarding age and gender, ensuring a minimum of 40% proportion regarding
gender diversity”. In 2020, the General Assembly of Cooperatives Europe adopted a “Charter ofCommitments” including a section on gender equality that sates: “It is only through the inclusion,
participation, cohesion and enhancement of differences that we can proceed on the path of change,
which we know is a crucial element in responding to the social and economic challenges that the worldis facing”.

21

3rd Cooperative Principle: Member Economic Participation
Congresssession 2.4:
Meeting future
capital needs‘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 cooperative.
Members usually receive limited compensation, if any, on capital subscribed asa condition of membership. Members allocate surpluses for any or all of thefollowing purposes: developing their cooperative, possibly by setting up
reserves, part of which at least would be indivisible; benefiting members inproportion to their transactions with the cooperative; and supporting otheractivities approved by the membership’.
The 3rd principle corresponds to the cooperative values of [mutual] self-help, selfresponsibility, equality and equity, the last of which is to be understood here in thesense of fairness.20
The key economic concept enshrined in this principle, as stated in the Guidance Notes
on the Cooperative Principles, is that ‘in a cooperative, capital is the servant, not themaster’ 21 and that cooperative capital is ‘in service of people and labour, not thereverse.’ 22 Indeed, according to the definition of a cooperative in the Statement on the
Cooperative Identity, cooperative members aim to meet ‘common economic, social andcultural needs and aspirations’, not to remunerate capital.
As stated in the principle, member economic participation encompasses member
democratic control of capital, two types of internal capital (the capital contributed byand repayable to the members and the capital that is the common property of thecooperative), and the allocation of surpluses.
Members Democratically Control the Capital of their Cooperative
The Guidance Notes on the Cooperative Principles state that ‘the 3rd Principle is mainly afinancial translation of the definition of the identity of a cooperative and of thefinancial implications of the 2nd principle – Member Democratic Control.’23 Indeed, if
the cooperative is run as a ‘jointly-owned and democratically controlled enterprise’, its
members who exercise democratic control over it necessarily must democraticallycontrol its capital as well.
The Two Types of Capital in a Cooperative
The two types of capital in a cooperative are a) the nominal capital contributed by its
members (plus possibly, under some national laws, minority external capital; see below)
and b) the capital that is the common property of the cooperative.

20 See graph in part 2: Cooperative and Ethical Values above.

21 International Cooperative Alliance, Guidance Notes on the Cooperative Principles (Brussels: ICA, 2015),

30. See https://www.ica.coop/en/media/library/research-and-reviews/guidance-notes-cooperativeprinciples.
22 Ibid.
23 Ibid.

22a) Nominal capital
Members’ contributions to capital can be modest or substantial, depending on the
different cooperative sectors and types. As an example, worker-members in someworker cooperatives might invest, by way of financial participation, an amount equal
to one year’s wages. At the same time, the minimum capital contribution required frommembers needs to be financially affordable and its payment process manageable. This
contribution to the capital of the cooperative qualifies a member for co-ownership in
the cooperative.
In order to control democratically the capital of the cooperative, members must own
and control most, or at least a clear majority, of its capital. Cooperatives are therefore
not listed on the stock exchange, nor can they be in the hands of private equity
investors, unless they are first ‘demutualized’ and thus cease to be cooperatives.
Some national legal provisions do allow for minority participation to the nominal
capital of the cooperative by external investors, always subject to the cooperative’s
general assembly approval, and always below a fixed threshold.
Cooperative members’ financial participation is distinct from shareholders’ shares in a
publicly traded company, as member shares cannot be traded even among themembers themselves. The redemption and release of capital to members is thus
normally subject to approval by the cooperative decision-making bodies, ensuring thatthe members that form the cooperative maintain control over its equity.
Members’ contributed capital is treated as equity and not as a liability on the balance
sheet, because democratic control over capital remains in the hands of the cooperative
membership as a collective and not in the hands of an individual member, and because
there is little probability of a major turnover of members at any given time. 24
The provision of the 3rd principle that stipulates that ‘Members usually receive limitedcompensation, if any, on capital subscribed as a condition of membership’ is aimed atpreventing the nominal capital subscribed from devaluating, rather than to enable
members to obtain an income from it. Frequently, the rate of interest provided issimilar to the rate paid on an ordinary deposit account in a bank. It is justified tocompensate members for a loss of value through inflation. In any case, consideringthat capital in a cooperative is instrumental as mentioned above, any interest received
should not constitute a financial motivation, and generally it does not. Instead, financial
participation in the cooperative’s nominal capital is motivated not by financial interest
but by the common needs and aspirations of cooperative members (as per thedefinition of a cooperative).
b) The capital that is the common property of the cooperative
Considering that it is ‘jointly owned’, the cooperative as an enterprise must have capitalthat is its common property, and not only nominal capital contributed by members
and redeemable when they leave. This common capital takes the form of reserves,which can be financial or converted into fixed assets.
24 This was recognized by the International Accounting Standards Board in 2004 with the approval of

the IFRIC 2 exception to IAS 32.

23

Congress
session 3.5:
Facing crises
with strength

In cooperatives, the systematic and long-term constitution of reserves that are separate
from the nominal capital held individually by members is a fundamental element offinancial sustainability, ensuring the cooperative’s capacity for economic development
and resilience in times of crisis. Reserves have the same importance in all cooperatives
throughout the world, of different sizes and scope of activity, regardless of how muchof the surplus is earmarked for them.
The importance of maintaining and developing reserves as common capital is fourfold:

Congresssession 3.4:
Strengthening
the community▪

Most cooperatives do not have access to financial markets. While somecooperatives can and do use financial instruments such as the issuance of bonds
without voting rights, these financial instruments do not usually compensate forthe concrete capital limitation that many cooperatives face, making it
fundamentally important to build reserves.

▪

Second, in order to be economically sustainable, cooperatives need to protect
themselves as much as possible from market volatility. Times of crisis usually provethe correctness of this strategy. Cooperative reserves are generally invested in thelong-term growth of the enterprise but can also be used as collateral or common
guarantee systems when it is necessary to negotiate urgent loans with banks, suchas during economic crises. In cooperative banks, the fact that a high percentage ofcapital is made up of reserves rather than nominal capital from members tends tosubstantially raise its quality and rating.

▪

Third, the constitution of common reserves reduces the financial risk for theindividual cooperative member, as losses are mainly absorbed by the reserves
rather than by members’ nominal capital. It makes it possible for members to enjoy
limited liability in the cooperative (generally limited to the amount of theircontribution to the cooperative’s capital), as is the case in most cooperative legal
regimes.

▪

Fourth, by gradually raising the common capital compared to the nominal capital
contributed by members, the reserves constitute a fundamental element of
economic growth of the cooperative, and, considering the cooperative’s strong
embeddedness in the community, a key contribution to the sustainable
development of the community.

The 3rd cooperative principle also foresees the possibility that part of the reserves‘would be indivisible’. Indivisible reserves are assets that can never be redistributed tomembers, even in case of dissolution of the cooperative. The indivisible reserves are
not necessarily locked assets (and usually aren’t), and can instead be used for any
purpose, such as investment in the growth of the business or even cash-flow in caseof need.25 Under an indivisible reserve regime, if the enterprise is closed down, its
25 Indivisible reserves are seen more commonly in countries with Civil law traditions than in common

law jurisdictions. Legislation in places such as France, Italy, Spain, Portugal, Argentina and the Canadianprovince of Quebec makes such reserves mandatory. Legislative trends have seen a requirement forindivisible reserves spread to other parts of the world including, in recent years, California, Greece andJapan. The US Department of Agriculture has also been actively promoting indivisible reserves. See
B. Reynolds, “Indivisible Reserves – some see unallocated equity as a way co-ops can help fortify their
future”, USDA: Rural Cooperatives (May/June 2013): 12-15.

24

reserves, if there are any after payment of any outstanding debt, are usually transferred
to a federation, a cooperative development fund or a similar institution promoting
cooperatives. For this reason, they are generally submitted to a favourable tax regime.
Indivisible reserves are a powerful deterrent against fraud as well as demutualizationand external take-over attempts. Indeed, the external acquirer needs to convince
cooperative members to renounce their democratic control power through a general
assembly decision. Even when this happens and the enterprise has been demutualized
and sold, the acquirer cannot claim possession over such reserves.
Indivisible reserves also confer an additional level of stability to the common capitalof the cooperative, and thus also an even more solid contribution to the sustainable
development of the community.
Indivisible reserves provide us with another fundamental clue in the underlying
rationality of cooperatives, which are seen as belonging not only to their present
members, but also to their future ones. Indeed, since a cooperative is a long-term
economic entity whereby actual and potential members straddle generations, its
membership should be seen as spanning generations as well.
Allocation of Surpluses
Since the members are the co-owners of the cooperative, they are also the co-ownersof the surpluses the cooperative generates. The surpluses of a cooperative may beallocated to reserves, to members in proportion to their transactions with thecooperative, or to other purposes approved by the membership. The ratio between
these different destinations is under the members’ democratic control, within the limitsof cooperative legislation, which can provide minimum ratios for some of them.
a) Part of the surpluses allocated to reserves
Considering their importance, the reserves we examined above are one of the key
destinations for the surpluses.
b) Part of the surpluses allocated to members in proportion to their transactions withthe cooperative
Part of the surplus is normally allocated to members, but according to a totally different
mechanism than shareholders’ dividends, as it is not based on the remuneration ofcapital, but on the transactions that take place during the year between the member
and the cooperative.
What are these transactions? They are the ordinary financial exchanges that take place
between the member and the cooperative. They can be of three different basic types:▪
▪

Sale of goods or services to or through the cooperative by members such as
farmers or artisans;
Purchase of goods or services from or through the cooperative by members suchas consumers, patients, credit holders, electricity users etc;25▪

Remuneration by the cooperative to members for the work they contribute to it,
as in the case of worker-members. 26

Each of these three types of transaction between the member and the cooperative(sales, purchases or remuneration) is made based on previously defined financial values.
The allocation of year-end surpluses to members makes it possible to provide an
upward adjustment to this financial value, and thus to provide members with the fairest
possible financial value for the transactions they have had with their cooperative during
the year.
It should be underlined that the allocation of surpluses to members is not compulsory.
Cooperative members can jointly decide not to redistribute any surplus, either
temporarily or permanently. This is often the case, for example, in social cooperatives.
c) Part of the surpluses allocated to other activities approved by the membership
In a number of countries, part of the surplus is earmarked for specific funds, like an
education and promotion fund in Spain. In some cases, part of the surplus is earmarked
for a fund common to a wider network of cooperatives, like in the Mondragon group.
Cooperatives may also choose to allocate a portion of the surplus to a specific fundthat contributes to the local community or to social causes, giving effect to the 7thprinciple (see below).
Final Considerations
As we have seen, the 3rd principle establishes the instrumental role of capital in acooperative, in accordance with the mission of cooperatives, which is to meet
members’ ‘common economic, social and cultural needs and aspirations’. It extends
the 2nd cooperative principle of democratic member control to the field of capital andfinancial management. It establishes two types of capital in a cooperative, the nominal
capital contributed by members, and the capital that is the common property of thecooperative and is constituted by reserves. It provides guidelines on how surpluses
should be allocated, indicating two main destinations—the reserves and the members
in proportion to their transactions with the cooperative—, plus any other allocationthat may be decided by the members. It introduces the concept of indivisibility for partof the reserves, that part being never shareable among members, even in case of
dissolution of the cooperative.
These provisions provide the main financial guidelines to ensure cooperatives’
financial sustainability and resilience, in compliance with the other components of thecooperative business model as expressed in the Statement on the Cooperative Identity.

26 These three basic types of cooperative member (producer-member, consumer member and worker-

member) have been formally recognized by the ILO 20th Conference of Labour Statisticians throughthe first-ever “ILO Guidelines Concerning Statistics of Cooperatives” (October 2018),
https://www.ilo.org/wcmsp5/groups/public/---dgreports/--stat/documents/meetingdocument/wcms_648558.pdf.

26

QUESTIONS:
1. Do the provisions respecting member financial participation adequately address
the capital needs of cooperatives at all stages of their development (i.e., startup, growth and development, maturity)?
2. Should indivisible reserves, which offer an effective defence against attempts at
demutualization, be more strongly emphasized?

__________________________________________________________________

4th Cooperative Principle: Autonomy and Independence
Congresssession 1.5:
Partnerships
withgovernments‘Cooperatives are autonomous, self-help organizations controlled by theirmembers. If they enter into agreements with other organizations, including
governments, or raise capital from external sources, they do so on terms that
ensure democratic control by their members and maintain their cooperativeautonomy’.
This principle is linked to the value of [mutual] self-help.27 It defines the relations
between a cooperative and government or any other entity with which it could enter
into an agreement. It cautions cooperatives not to put their independence and member
democratic control at risk by entering into agreements that could compromise thecooperative’s autonomy.
Relations with Governments
The 4th principle clarifies that cooperatives are non-state actors, even when they haveagreements with public authorities, such as contracts for the delivery of public services.
When a cooperative is seen as a para-public type of entity, it is often the result ofconfusion between the concepts of ‘public’ and ‘common’. Despite their common
character (democratic control, joint ownership, common needs and aspirations,common capital, collective stakeholder approach), cooperatives are not public but
fully-fledged non-public enterprises enjoying complete autonomy and independence
from the state: they can have strong partnerships with the public sector, but they mustnot be confused with it.
The essential role of government in promoting cooperatives while respecting theprinciple of cooperatives’ autonomy and independence is clearly expressed in ILO
Promotion of Cooperatives Recommendation, 2001 (n° 193), which states that
‘Governments should provide a supportive policy and legal framework consistent with
the nature and function of cooperatives and guided by the cooperative values andprinciples’ (paragraph 6) and makes the case for cooperatives being ‘treated inaccordance with national law and practice and on terms no less favourable than thoseaccorded to other forms of enterprise and social organisation’ (paragraph 7.2.).

27 See graph in part 2: Cooperative and Ethical Values above.

27

ILO Recommendation 193 further states: ‘Governments should introduce support
measures, where appropriate, for the activities of cooperatives that meet specific socialand public policy outcomes, such as employment promotion or the development ofactivities benefiting disadvantaged groups or regions. Such measures could include,
among others and in so far as is possible, tax benefits, loans, grants, access to public
works programmes, and special procurement provisions’ (paragraph 7.2.).28
The 4th principle requires that, where government policies promote the delivery ofservices by cooperatives in particular economic sectors, or support job-creation andpoverty-alleviation activities by cooperatives, such support should be provided in a
way that preserves the autonomy and independence of the cooperative.
Congresssession 2:
Strengthening
our cooperative
identity ascompetitive
advantage

Congresssession 4.2:
Accessible
health andsocial services

The last few years have seen increased examples of partnerships between government
and the cooperative movement, according to the concept of co-creation. This type of
relationship fully maintains the autonomy and independence of the cooperative as anactor in its own right and shows that such autonomy and independence are compatible
with a high degree of cooperation with public authorities. The principle of an effective
and equal partnership for the advancement of cooperatives between government andthe cooperative movement is elucidated in the 2001 United Nations guideline A/56/73
aimed at creating a supportive environment for the development of cooperatives,
including institutional support, research and information, the provision of finance, andlaw and policy making.
The growth of social cooperatives, which arose first in Italy, is a manifestation of thecooperative movement’s mission to respond to people’s needs by delivering services
of general benefit (health, education, social services, etc.) and providing employment
for the disadvantaged. For this reason, the principle of autonomy and independence isfurther emphasized in the case of social cooperatives: they often have a strong
interaction with public authorities in the delivery of services of general benefit, as set
out in the World Standards of Social Cooperatives29, which complements the Statement on
Cooperative Identity for social cooperatives.
Raising Capital from Other Sources and Dependence on Another Enterprise

Congresssession 2.4:
Meeting future
capital needs

The 4th cooperative principle also requires that cooperatives avoid the dangers ofcapital from external investors, or effective control over a cooperative’s business being
exercised through compliance obligations, which can lead to the ceding of control
from members to external persons or entities.
The Role of Cooperative Organisations
Cooperative organisations, namely organisations federating, serving and representing
cooperatives, which have been formally recognized by ILO Promotion of
Cooperatives Recommendation, 2002 (n° 193), have a key role to play in promoting
compliance with the 4th principle by ensuring that governments establish legal andregulatory frameworks in which cooperatives can flourish while maintaining theirautonomy and independence.
28 http://www.ilo.org/dyn/normlex/en/f?p=1000:12100:0::No::P12100_ILo_CoDe:r193,(2).
29 https://www.cicopa.coop/wp-content/uploads/2017/12/World-Standards-of-SocialCooperatives_EN-1-1.pdf.

28

clause 7

QUESTIONS:
1. Does the principle as stated adequately recognize that public authorities intrude
on cooperatives’ autonomy as often by legislation and regulation as by the termsof the legal contracts they enter into with cooperatives?
2. Do the pressures of the marketplace compromise cooperatives’ autonomy andfreedom of action as much as the legal agreements they enter into? Can the 4thprinciple address this challenge?

__________________________________________________________________

5th Cooperative Principle: Education, Training andInformation
Congresssession 1.3:
Educational
opportunities‘Cooperatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute effectively tothe development of their cooperatives. They inform the general public—
particularly young people and opinion leaders—about the nature and benefitsof cooperation’.
This principle is linked to the cooperative values of democracy, equality andsolidarity.30
Together with the 2nd principle of democratic member control, education is one ofearliest cooperative principles, as established in the United Kingdom by the Rochdale
Pioneers. Cooperative education also played a fundamental role in the growth ofcooperatives in other traditions, such as Raiffeisen in Germany, Antigonish in Canada,
and Mondragon in the Spanish Basque Country. Education was and remains a driverof cooperative growth. The willingness to share experiences and learn from earlier
successes, setbacks and failures are major factors in the size and diversity ofcooperatives in today’s cooperative movement.
The 5th principle is first of all aimed at helping cooperative members understand thecooperative identity in its various components and learn to apply them in today’s fastchanging world.
There are three distinct concepts in this 5th Principle: education, training andinformation:▪

▪

Education is about understanding the cooperative identity and its standards andknowing how to apply them in the day-to-day operations of a cooperative business.
It also encompasses wider cooperative education through the regular educational
system.
Training is about developing the practical skills that members and employees needboth to run their cooperative in accordance with efficient and ethical business

30 See graph in part 2: Cooperative and Ethical Values above.

29

▪

practices and to control their cooperative democratically in a responsible andtransparent manner.
Information is aimed at making sure that the general public, ‘particularly young
people and opinion leaders’, know about cooperatives and the benefits they bringto society at large. It captures the information the cooperative’s members need inorder to exercise democratic control over their enterprise, as well as theinformation and knowledge exchanged among cooperatives.

Education, Training and Democratic Member Control
The 5th principle is essentially connected to the proper implementation of the 2nd
principle. Indeed, the possibility for members to exercise effective democratic control
over their enterprise requires that they be properly trained to shoulder the
responsibility of running a business, to make strategic decisions in general assemblies
and elected boards, and to understand the evolution of their business.
It is fundamental to understand that a cooperative is a type of business in which
ordinary citizens have a unique chance to become fully trained in shouldering
entrepreneurial responsibilities and in being involved in economic democracy.
Members of a cooperative are, as we saw in part 1 above on the cooperative definition,
ordinary stakeholders such as farmers, fishers, consumers, etc. Even though they are
not all familiar with ordinary enterprise management, they must occasionally makedifficult entrepreneurial decisions. Therefore, the only way in which democratic
member control can be assured effectively in cooperatives is to invest strongly intraining and education for ordinary members.
Congresssession 1.2:
Inclusive
governance

The 5th principle thus requires that member education be accessible to and inclusive of
all members, especially those groups of members underrepresented in thecooperative’s democratic structures.
It is equally fundamental, under the 5th principle, that elected representatives acquire
the necessary skills and knowledge to enable them to make decisions in the long-term
interests of their cooperative and its members, while abiding by the cooperative
business model. This principle extends to managers and employees of cooperatives.
Students’ and Children’s Cooperatives
Significant potential for cooperative education lies with cooperatives of students andchildren. Across the world, cooperative education through such cooperatives goesbeyond providing a learning experience about cooperation: it imparts the skills
necessary for job creation and income generation through the development of newcooperatives and stimulates the formation of a pool of future cooperative leaders.
University and school cooperatives in Japan, Republic of Korea, Malaysia, thePhilippines and other Asian countries, as well as Canada, Finland, Germany, Spain andmany more countries, are also proving to be a source and training ground for a newgeneration of cooperative leaders in the formal education space, with cooperative
experiments being undertaken in semi-formal and informal education settings.

30

Cooperative Education in the Formal Educational System
A current challenge facing the cooperative movement is how to deal with therecognition of cooperatives in curricula in elementary and secondary schools anduniversities, which has declined in several parts of the world with cooperative courses
being shut down, and grown in some other countries, like Argentina and Brazil.
ILO Recommendation 193 states that ‘National policies should notably promote
education and training in cooperative principles and practices, at all appropriate levelsof the national education and training systems, and in the wider society’ (Paragraph 8.
(1) (f)). Cooperative organisations, namely organisations serving, promoting andrepresenting cooperatives, have an important mission in making this policy statement
come true.
Young people everywhere have to adapt their economic thinking to today’scompetitive world. The cooperative movement in many countries has contributed tothe development of teaching and learning about cooperatives for young people
through the formal education system and through voluntary education and training.
Throughout the world, cooperative colleges have played an important role in helping
develop managers with appropriate cooperative skills. In recent decades, higher level
programmes, such as master’s degrees in cooperative management, have created
opportunities for emerging leaders of different cooperatives to come together, andshare their ideas and experience both in person and online.
The 5th principle requires that providers of specialist cooperative education andtraining, such as cooperative colleges and departments of cooperative studies within
institutions of higher education, be further recognized and promoted, with stronger
networks and consortia between cooperatives and education providers. Research oncooperative business and education, law, and the history of the movement should bepromoted, supported through public funding.
The predominance of other business models in business education makes it even morevital to promote the cooperative business model through education.
Information and Communication
The 5th principle also requires that information on cooperatives be disseminatedthrough the media, and cooperative organisations have a particularly important role inthis regard.
Congresssession 1.1: A
strongcooperative
brand

In order for cooperatives to adapt to today’s world, the 5th principle requires thatcooperatives develop communication strategies adapted to the new opportunities for
improved communication. It also requires approaching opinion leaders as a key target
group to be addressed through the dissemination of information about cooperatives,
including cooperative economic data and statistics.
Information and Communication Technology

Congresssession 2.1:
Takingadvantage of theDigital Age

The development of advanced information and communication technologies (ICT)
provides new opportunities for the delivery of cooperative education, enabling31

innovative programmes and resources to be delivered to large numbers of cooperative
members. It makes it possible for learners to seek information and develop knowledge
at any time and wherever access is available.
On the other hand, the rapid advance of ICT in the global digital economy creates animportant new set of issues linked to information that need to be addressed from theperspective of the cooperative identity. In particular, there is a potential conflict
between the sharing of members’ digital data within a cooperative or among
cooperatives and the members’ individual right to data privacy.
How can cooperatives best access and use member data, and in particular the data
produced by members in their interaction with devices and digital platforms, for thedevelopment of cooperative enterprises? Cooperation entails the sharing of common
objectives. Shared data has significant potential for cooperatives to better meet thosecommon objectives in all sectors, especially in the timely development of new products
and services.
The sharing of data between the members and the cooperative for social purposes andmutual benefit can be expedited if the cooperative’s members have expressly given it
the right to use and enhance their data as well as to share that data with third
parties. This could generate enormous social and economic value by merging data thatis being acquired by cooperatives every minute, creating the potential not only for
greater efficiency of enterprises throughout the cooperative ecosystem but also acompletely new way of understanding system mutuality.
When a cooperative member’s digital data becomes a valued asset useful in achieving
a common objective, how do the current cooperative principles and values apply?
Cooperative Education as a Stimulus to Innovation
Congresssession 2.5:
Entrepreneurial
innovation

Cooperatives have a proven record in innovation, particularly organizationalinnovation, e.g., the inclusion of various stakeholders in the ownership and control ofthe same enterprise through organization of multi-stakeholder cooperatives, but also
in financial and sustainable product innovation, e.g., innovative forms of capital andfinancial instruments. This innovation capacity is indissociable from cooperatives’
strong efforts in education, training and information, and their inter-cooperation indeveloping centres of research, science, and inventions, and as seen most recently insoftware and alternative currency systems.
Funding of Cooperative Education
Education and training by cooperatives themselves should be financed through thecooperative movement’s own resources, supported by tax exemptions, as a task ofcooperative representative organisations, in partnership with the government.
Inclusion and Social Transformation

Congresssession 1.2:
Inclusive
governance

Cooperative education also goes in the direction of a knowledge-based society thatgenerates, processes, shares and makes available knowledge, and that encourages lifelong learning with a view to building a culture of civic participation, solidarity andsocial transformation.

32

Cooperative education within the cooperative is not only about enterprisemanagement. For example, we find participative educational activities launched byconsumer cooperatives on food and health. These examples are about educating
people to fully shoulder their responsibilities as specific stakeholders (consumers,
fishers, etc.) and as fully aware and responsible citizens, and about developing asustainable, inclusive and peaceful future for all.
QUESTION:
1. Is the scope of this principle too broad? Not broad enough?

__________________________________________________________________

6th Cooperative Principle: Cooperation among Cooperatives‘Cooperatives serve their members most effectively and strengthen thecooperative movement by working together through local, national, regional
and international structures’.
This principle is linked to the cooperative value of solidarity and to the ethical valueof social responsibility.31
From their early days in the 19th century, cooperatives from the same country and indifferent countries started to work together. They have gradually established national
apex organisations to unite and represent cooperatives. In the economic sphere, theCooperative Wholesale Society (CWS) was established as early as 1863 as the first large
secondary cooperative among UK consumer cooperatives, and many other secondary
and tertiary cooperatives and cooperative groups have been established since thenacross the world. However, it was only during the 1960s review of the cooperative
standards that this principle was explicitly formulated.
The 6th cooperative principle refers to a wider cooperative movement to which
individual cooperatives belong and contribute, namely an open and dynamic
community of people. It suggests that, while cooperatives can achieve muchindividually, they achieve much more when they work together in a continuous fashion
to create economies of scale and build common representative strength. The
integration of cooperatives is fundamentally aimed at strengthening the primarystructures and it must always serve the interests and needs of the members of primary
cooperatives.32
The implementation of this process takes time, resources, and democratic procedures,
namely the application of the 2nd principle (democratic member control) at another
31 See graph in part 2: Cooperative and Ethical Values above.
32 ILO Promotion of Cooperatives Recommendation 2002 (No. 193), in paragraph 6 (d), states, while

enunciating the features of a balanced society as one comprising a strong cooperative and mutual sector
and other social and non-governmental sectors, that cooperative policy and laws must be consistent
with the values and principles and should facilitate the membership of cooperatives in cooperative
structures responding to the needs of cooperative members.

33

level. It requires parity and an environment in which no one person or group
dominates the process. It also requires reciprocity, as effective cooperation involves
mutual benefit, taking into consideration that, in the lifecycle of individual
cooperatives, there are times when they need support and other times when they arecapable of providing it.
Cooperation among cooperatives reinforces and extends on a larger scale the missionof cooperatives of meeting people’s common economic-social-cultural needs andaspirations through democratic entrepreneurship and of having a strong impact on theeconomy, society and the environment. It is key to creating an economy in which the
production and distribution of goods, services and knowledge, and knowledge-based
outputs, is undertaken through mutual self-help and in the interest of the communities
in which cooperatives are situated.
We should distinguish between the two main applications of this 6th principle, namely
cooperation among cooperatives in the entrepreneurial field, and in the representationof cooperatives’ interests.
Cooperation among Cooperatives in the Entrepreneurial Field
Congresssession 2.3: A
strongentrepreneurial
networkThe 6th principle enables cooperatives to create economies of scale and scope among
themselves, through an array of mutualised entrepreneurial support instruments andhorizontal groups among them, that are democratically controlled by them, in the fieldsof financing, training, consulting, marketing R&D etc., allowing them to become
mainstream economic actors in the globalized economy.

Congresssession 2.4:
Meeting future
capital needs

In some countries, cooperatives have successfully created mutualistic and solidarity
funds elaborated to pool financial resources among cooperatives through which new
and weaker cooperatives receive the financial support and technical assistance theyneed.

Congresssession 2.4:
Ethical value
chain
management

Cooperative-to-cooperative trade can be promoted when cooperatives collaborate
entrepreneurially to promote shared economic goals. This includes common
purchasing and supply chain contracts with other cooperatives, which benefits boththe supplier cooperative and the purchaser one. Among the successful examples ofcooperative-to-cooperative trade, we find the relationships between agricultural
cooperatives and consumer cooperatives and the role cooperatives are having indeveloping the fair-trade movement and ethical value chains.
Cooperation among Cooperatives in Representing Cooperatives’ Interests
In terms of representation of cooperatives’ interests, the cooperative movement has
managed to gradually put in place federative systems, with national, continental, andsectoral structures with one global umbrella organization, the International
Cooperative Alliance (ICA), established in London in 1895 as the representative
association of all cooperatives. With its 317 members in 110 countries, in turn
representing 789 million individual cooperative members (out of over 1 billion
cooperative members existing worldwide), the ICA is the largest civil society memberbased organisation in the world, while having consultative status to the UN Economic
and Social Council and general consultative status with the ILO.

Congresssession 1.5:
Partnerships
withgovernments

34

Cooperative representative organisations act as advocates on behalf of cooperatives intheir dealings with governments and regulators, as hubs to share knowledge andresources, and as support institutions serving cooperatives independently andcollectively. They are fundamental in establishing a relation of partnership and cocreation between the cooperative movement and the public authorities.
ILO Recommendation 193 calls on cooperative organisations, namely organisations
representing cooperatives, to ‘establish an active relationship with employers' andworkers' organizations and concerned governmental and non-governmental agencies
with a view to creating a favourable climate for the development of cooperatives’.
Cooperative organisations usually focus on an array of fields such as development,
education, provision of services and advocacy. They also help to ensure thatcooperatives are treated as fairly and equitably as other forms of enterprise in national
legislation and policy, while obtaining the recognition of their distinctive
characteristics.
The fact that cooperatives declare support for each other as stipulated in this sixth
cooperative principle does not mean that they necessarily help each other directly.
Indirect support to the wider cooperative system is a common practice among
cooperatives, including very large ones, through federation fees, contribution todevelopment funds, sharing of know-how, etc. Cooperatives act in this fashion to help
develop the cooperative movement.
Congresssession 1.1:
Cooperativebrand

A practical application of the 6th Principle at the international level includes
disseminating the shared cooperative identity by using the international cooperative
marque to brand cooperatives and the DotCoop Internet domain name.
QUESTIONS:
1. The 6th principle is normally interpreted to include cooperation among
cooperatives within the arenas of trade and business development. Should thisbe made explicit?
2. Should cooperatives favour other cooperatives in their procurement activities?
3. In some places, cooperatives contribute systematically to the development of
new cooperatives at home or abroad through grants, loans, guarantees,
contributions to cooperative development funds, the provision of expertise andlike support. Should this practice be generalized and incorporated within the 6thprinciple?

__________________________________________________________________

7th Cooperative Principle: Concern [in French‘engagement’, meaning ‘commitment’] for Community
Congresssession 3:
Committing toour cooperative
identity andbringing about
positive andlasting change
in the world‘Cooperatives work for the sustainable development of their communities
through policies approved by their members’.

35

The 7th principle, first adopted at the 1995 Manchester Congress, is grounded in thecooperative values of [mutual] self-help and self-responsibility and in the ethical valuesof honesty, openness, social responsibility and caring for others. Social responsibility,in particular, expresses the essence of the 7th principle.33
The successful implementation of the 7th principle by individual cooperatives is fully
dependent on how one characterizes sustainable community development. The
Guidance Notes on the Cooperative Principles address this by reference to the 1987 report of
the United Nations World Commission on Environment and Development titled ‘Our
Common Future,’ commonly known as the Brundtland report. The report defines‘sustainable development’ as ‘development that meets the needs of the present withoutcompromising the ability of future generations to meet their own needs.’
Congresssession 3.4:
Strengthening
the community

Members create cooperative enterprises based on needs. It is thus natural thatcooperatives express concern and care for the communities they serve. The larger thepresence of cooperatives in a community, the higher the chances of their having a
direct impact on sustainable community development, given that members oblige
themselves to exercise a concern for their community through their own policies on asustainable future.
The Guidance Notes further suggest that the wording of the 7th principle makes evident
the link between local community concerns and the global concern for sustainable
development—in other words, that local community decisions regarding sustainable
development can have a global impact. In fact, cooperatives have made significant
contributions to each of the 17 United Nations Sustainable Development Goals andwill continue to do so.
It is important to recognize the further wording of the 7th principle that the actions
taken by cooperatives are ‘through policies approved by their members’. As locallyowned and controlled enterprises, the membership itself determines the cooperative’s
focus and priorities. This focus may vary based upon the type of cooperative—worker,
consumer, producer or multi-stakeholder—as well as the economic and social
circumstances prevailing within a specific community.

Congresssession 3.1

The Guidance Notes point out that the 7th principle speaks to multiple socioeconomic
issues:Congresssession 4.2▪

The gravity of global environmental problems▪

Access to health care and other essential services▪

Open-source IT software, especially in the banking and insurance sectors▪

Collaboration with other organizations on meeting the UN SDGs▪

Promoting global peace and social cohesion▪

Helping to build civil society

Congresssession 2.1
Congresssession 4
Congresssession 3.2

33 See graph in part 2: Cooperative and Ethical Values above.

36

Other areas that could potentially be encompassed by the 7th principle are:Congresssession 3.3
Congresssession 1.2
Congresssession 4.1
Congresssession 2.2
Congresssession 4.3
Congresssession 1.4
Congresssession 4.5
Congresssession 4.4▪

Sustainable development▪

Diversity and inclusion▪

Decent work▪

Ethical value chains▪

Food security▪

Intangible cultural heritage of humanity▪

Housing and energy▪

Partnerships

Specific ICA Declarations address the importance of widening our understanding of
the 7th principle, including the 1992 Tokyo Congress Declaration on the Environment
and Sustainable Development, the 2018 Buenos Aires General Assembly Declaration
on Decent Work and Against Harassment, and the 2019 Kigali General
Assembly Declaration on Positive Peace and Resolution on Cooperatives forDevelopment.
The climate emergency and the challenges of the post-pandemic environment theworld is slowly entering suggest the need for an even greater emphasis on sustainable
development in all areas of human endeavour. The triple bottom line ofcooperatives—economic, social and environmental—makes cooperative enterpriseideally suited to address these challenges, primarily through an expansion of thinking
around the 7th principle.
QUESTIONS:
1. Does the wording of this principle convey its full scope? Does it convey itstrongly enough?
2. Are cooperatives in advanced economies losing ground in the realm ofredressing social inequities and promoting sustainable development to otherforms of social and solidarity enterprise and forward-looking investor-owned
corporations?
3. The cooperative principles do not address the place or treatment of employeesof cooperatives. Should they?

37

Conclusion
The establishment of the ICA 126 years ago and the sustained strength of thecooperative model are testimony to the relevance of cooperative enterprise, to theresilience of our cooperative identity and to the contributions of cooperatives to theirmembers, their families, their communities and the global community.
The cooperative movement managed to survive and grow through the Industrial Age,
the great 20th century economic depression, the tragedies of the two World Wars, thehigh tensions of the Cold War, the financial crisis of the early 21st century, co-optation
by totalitarian and autocratic governments, repeated crimes against humanity during
internal national and international conflicts, and multiple pressures to conform to thepractices of the for-profit, investor-owned business model that dominates in most of
the world’s economies.
Today’s ICA represents 317 member organisations in 110 countries who together
represent 789 million grassroots members (out of over one billion cooperative
members worldwide). It has more members than at any other time in the past,highlighting the growing global importance of the cooperative movement as well as its
growing interconnectedness. There is strong evidence that, from the first Industrial
Revolution to today, cooperatives have been economically sustainable in most sectorsof the economy and continue to place fundamental and evolving human needs at theforefront.
Cooperatives are designed to meet people’s common economic, social and culturalneeds and aspirations. It should be anticipated that new forms of cooperatives will
logically continue to emerge as the socio-economic needs and aspirations of humanbeings evolve. The Statement on the Cooperative Identity clarifies the basic standards
cooperatives should follow, making it easier to create new types of cooperatives thatabide by these basic standards while having complementary characteristics of theirown. The common standards enshrined in the Statement on the Cooperative Identity havepromoted diversity within unity and are allowing citizens to meet more of theircommon economic, social and cultural needs and aspirations through cooperation.
The innovation and dynamism of cooperatives are visible throughout the world. With
the rapid advance of new technologies and the increasing interest of youth leadershipin global issues, we are seeing a new interest in the cooperative model. Youth, as global
citizens, are becoming more determined to bring forward actively the subjects ofenvironmental sustainability and the impact of climate change, as well as theimportance of addressing inequality and discrimination.
The global COVID pandemic has very strong economic, social and environmental
implications, including for the transformation of our global health systems. Our
cooperative identity provides the foundation for cooperatives to being strongly
resilient and remain effective in the face of the acute economic, social andenvironmental challenges that we are facing today.
Cooperatives represent the true spirit of cooperation, resilience and solidarity, and arecapable of overcoming all types of challenges, transformations and crises. How
cooperatives contribute to meeting the challenges now before the world requires us todeepen our own understanding of our cooperative identity.

38

Appendix 1

ICA Statement on the Cooperative Identity
Definition

A cooperative is an autonomous association of persons united voluntarily to meet theircommon economic, social and cultural needs and aspirations through a jointly owned
and democratically controlled enterprise.

ValuesCooperatives are based on the values of self-help, self-responsibility, democracy,
equality, equity and solidarity. In the tradition of their founders, cooperative members
believe in the ethical values of honesty, openness, social responsibility and caring forothers.

Cooperative principles
The cooperative principles are guidelines by which cooperatives put their values into
practice.
1st Principle: Voluntary and Open Membership
Cooperatives are voluntary organizations, 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.
2nd Principle: Democratic Member Control
Cooperatives are democratic organizations controlled by their members, who actively
participate in setting their policies and making decisions. Men and women serving aselected representatives are accountable to the membership. In primary cooperatives
members have equal voting rights (one member, one vote) and cooperatives at otherlevels are also organized in a democratic manner.
3rd Principle: Member Economic Participation
Members contribute equitably to, and democratically control, the capital of theircooperative. At least part of that capital is usually the common property of thecooperative.
Members usually receive limited compensation, if any, on capital subscribed as acondition of membership. Members allocate surpluses for any or all of the following
purposes: developing their cooperative, possibly by setting up reserves, part of which
at least would be indivisible; benefiting members in proportion to their transactions
with the cooperative; and supporting other activities approved by the membership.
4th Principle: Autonomy and Independence
Cooperatives are autonomous, self-help organizations controlled by their members. Ifthey enter into agreements with other organizations, including governments, or raise
capital from external sources, they do so on terms that ensure democratic control by
their members and maintain their cooperative autonomy.

39

5th Principle: Education, Training and Information
Cooperatives provide education and training for their members, elected
representatives, managers, and employees so they can contribute effectively to thedevelopment of their cooperatives. They inform the general public—particularly
young people and opinion leaders—about the nature and benefits of cooperation.
6th Principle: Cooperation among cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative
movement by working together through local, national, regional and international
structures.
7th Principle: Concern for Community
Cooperatives work for the sustainable development of their communities throughpolicies approved by their members.

40Appendix 2

The ICA Statement on the Cooperative Identity
Cast in a Historical Perspective
A 151-Year Process of Defining Global Standards for Cooperatives: 1844-1995
The First Years
The common standards observed today by cooperatives around the world, as
enshrined in the Statement on the Cooperative Identity, were arrived at through a gradualprocess beginning two centuries ago of examining and experimenting with different
business and governance practices. A great many efforts were made at forming
cooperatives in the early to mid-19th century. Almost none survived. Among those thatsucceeded was the Rochdale Society of Equitable Pioneers, in Rochdale, England. The
Pioneers developed a distinctive set of rules, or operational guidelines, in 1844, whichwere ultimately published in the Pioneers’ 1860 almanac.
A fundamental innovation of the Rochdale Pioneers was the insistence on the
predominance of persons over capital. In some pre-Rochdale cooperatives in the
United Kingdom, the investment capital required to start the enterprise came from
non-members, with the result that the societies found themselves distributing theirprofits mainly to their investors, leaving the members who made purchases in thestores with few benefits. Firmly committed to securing the interests of the members
who patronized the cooperative over those of the providers of capital, the Rochdale
Pioneers paid limited interest on capital, effectively reducing the incentive for external
investors to participate.
Following the entrepreneurial success of the Rochdale cooperative, the Rochdale
guidelines were gradually internalized by cooperatives across the United Kingdom as
the ‘Rochdale Method’. With the formation of the Cooperative Wholesale Society in1863 as a cooperative of cooperatives (also called a secondary cooperative), many morecooperatives were established on the Rochdale model.
From the middle of the 19th century, early cooperators crossed borders and travelledlong distances to meet each other and exchange observations and ideas about how to
operate their cooperatives. Its sustained business success meant that, as early as the1860s, the Rochdale cooperative was a popular destination. Meanwhile, cooperatorsfrom various countries attended and took part in each other’s early national congresses.
All of these exchanges were vital to the gradual development of a distinctive
cooperative business model based on common operating standards.
The Rochdale standards, initially called ‘rules’ or ‘practices’ and later dubbed‘principles’, were followed as rough guidelines by cooperatives in different countries
but were particularly appropriate for consumer cooperatives, which flourished in the
United Kingdom. Contemporaneous with these organisations, cooperatives began toemerge in other business sectors in other countries. These included financial
cooperatives in Germany, producer and worker cooperatives in France and Italy, andagricultural cooperatives in the United States and Denmark. It took significant effort
for proponents of these different types of cooperatives to define together a common
business model.

41

The ICA’s First Years and through the Two World Wars: the 1937 Revision of the
Cooperative Principles
Since its foundation in 1895, the ICA has had the explicit mission of promoting thecooperative principles. In its first years, the new organisation encouraged andfacilitated regular dialogue among proponents of different schools of thought andcooperatives operating in different business sectors, who were gradually coming toknow each other. The fruit of the ICA’s adaptability was a quickly growing
membership of mainly European cooperatives, while the quest for minimum common
standards at the international level enabled its diverse membership to remain unified
through an ever-changing and often challenging international environment. The FirstWorld War led to a temporary suspension of contact among cooperatives whosecountries were on opposite sides of the conflict, but the end of the war was quickly
followed by the vigorous resumption of the ICA’s activities.
The ICA and its members maintained the original Rochdale principles untouched until
the 1930s. In 1937, after several years of preparation, the principles were formally reexamined for the first time, leading to the adoption at the ICA’s 15th World
Cooperative Congress in Paris of amendments that would make the principles more
readily applicable to all forms of cooperatives. This change took place within a tenseinternational environment, marked by the advent of Fascist and Nazi regimes whose
ideologies were incompatible with the cooperative model. One result was the exclusionfrom the ICA for several years of the German, Austrian and Italian cooperative
movements.
The Post-Second World War Cold War and Decolonization: the 1966 Revision of the
Cooperative Principles
With post-war decolonization, and despite the Cold War and the tense international
relations it engendered, more non-European cooperative organisations joined the ICA
and, by the mid-1960’s, its members hailed from all continents. The ICA was no longera mainly European organisation. At the 1966 ICA Congress in Vienna, following aperiod of extended deliberation, the principles were rephrased to reflect common
contemporary practices. It was then that the new principle of cooperation among
cooperatives was added.
The 1995 Statement on the Cooperative Identity
Since the previous revision of the cooperative principles in 1966, many more countries
had joined the ICA and, by 1995, there was much stronger representation from thenon-European world.
The 1980s marked the start of a period of rapid globalisation of the world economy,
accompanied by neo-Liberal economic policies, strong economic growth in Asia andstructural adjustment programmes in the former European colonies. The fall of the
Berlin wall at the end of the decade had profound economic and geopoliticalconsequences. Focused on adapting to the business challenges these changes brought
about, the ICA’s members called for an update of the cooperative principles to reflect
the new realities.

42

In its role as custodian, the ICA organized a fresh exploration of the cooperative
principles to determine the relevance of the 1966 formulation for the future. The
review was launched with a paper by Professor Ian MacPherson, then Dean of
Humanities at the University of Victoria in Canada, and included several years ofextensive consultation through surveys and questionnaires coordinated by the ICA. In
1995, at the 31st World Cooperative Congress, held in Manchester, England tocelebrate the 100th anniversary of the ICA, delegates adopted the Statement on the
Cooperative Identity. ICA members in all regions of the world had taken part in its
development and, despite their increasing diversity, had been able to reformulate theprinciples in a way that all agreed properly described the cooperative business model.

43

Appendix 3

Comparative Review of the Cooperative Principles
The table below demonstrates a remarkable constancy in the international cooperative
principles, even as the cooperative business model has spread across the world andchanged over time to meet contemporary circumstances. Indeed, other than ‘cash
trading’, which technological change had rendered obsolete by 1966, the original
Rochdale practices have either remained intact or have their echo in today’s principles.
A close examination of the changes adopted in 1966 reveals a hesitancy around theideas of neutrality, autonomy and voluntary membership reflective of the particulargeopolitical reality of that era but, with the 1995 revision, these concepts once again
found their place. The adoption of today’s sixth and seventh principles—cooperation
among cooperatives and concern for community—brought the principles closer to theaims of the earliest cooperators, demonstrating the enduring ideal of a better world
brought about by cooperation.
Evolution of the Cooperative Principles
Recognized Practices(1844, 1845 and
1854)

4 Mandatory & 3
Non-mandatory
Principles (1937)

6 Principles (1966)

7 Principles (1995)

1.

Open
Membership

1.

Open
membership

1.

Voluntary
membership

1.

Voluntary andopen
membership2.

Democratic
Control2.

Democratic
control2.

Democracy

2.

Democratic
member control

3.

Distribution of
Surplus inproportion to
trade

3.

Dividend paid
according tobusiness done3.

Distribution of
surplus3.

4.

Payment oflimited interest
on capital

4.

Limited interest
on capital

4.

Limited interest
on capital

Membereconomic
participation(member
contribution tocapital, common
ownership ofcapital, limited
interest on
member capital,
distribution of
surplus)5.

Political andreligious
neutrality

5.

Political andreligious
neutrality[addressed undervoluntary
membership]

4.

Autonomy andIndependence

6.

Cash trading

6.

Cash trading

7.

Promotion of
education

7.

Promotion of
education

5.

Provision for
education

5.

Education,
training andinformation

6.

Cooperation
among
cooperatives

6.

Cooperation
among
cooperatives

44

Evolution of the Cooperative Principles
Recognized Practices(1844, 1845 and
1854)

4 Mandatory & 3
Non-mandatory
Principles (1937)

6 Principles (1966)

7 Principles (1995)
7.

45

Concern forCommunity

Appendix 4
Suggested Readings
The following list is not exhaustive.
Birchall, Johnston. People-Centred Businesses: Co-operatives, Mutuals and the Idea ofMembership. Palgrave-MacMillan, 2011
Birchall, Johnston and Lou Hammond Ketilson. Resilience of the Cooperative Business
Model in Times of Crisis. ILO, 2009Böök, Sven Åke, Margaret Prickett ad Mary Treacy. Co-operative Values in a Changing
World: Report to the ICA Congress. October 1992, Tokyo
Guidance Notes on the Cooperative Principles. ICA, 2015
Henrÿ, Hagen. Guidelines for Cooperative Legislation, Third Revised Edition. Geneva:
ILO, 2012
Hoyt, Ann. “And Then There Were Seven: Cooperative Principles
Updated” Cooperative Grocer, 1996, 1–6
ILO Promotion of Cooperatives Recommendation, 2002 (n° 193)
Macpherson, Ian. Co-operative Principles for the 21st Century. ICA, 1995
MacPherson, Ian and Yehuda Paz. Concern for Community: The Relevance of Co-operatives
to Peace, edited by Joy Emmanuel. Turning Times Research and Consulting, 2015
Roelants, B., D. Dovgan, H. Eum and E. Terras. The Resilience of the Cooperative Model:
How Worker Cooperatives, Social Cooperatives and Other Worker-owned Enterprises Respond to
the Crisis and Its Consequences. 2012
Sánchez Bajo, Claudia & Bruno Roelants, Capital and the Debt Trap - Learning fromCooperatives in the Global Crisis (Basingstoke: Palgrave-MacMillan, 2013
United Nations, Guidelines Aimed at Creating a Supportive Environment for the Developmentof Cooperatives, 2001, 2002, UN doc. A/RES/54/123 and doc. A/RES/56/114;
A/56/73-E/2001/68; Res./56
Watkins, W.P. Cooperative Principles Today and Tomorrow. Holyoake Books, 1986

46