Solidarity as a Business Model The use of

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Solidarity as a Business Model The use of multi-stakeholder cooperatives in a sustainable food

Solidarity as a Business Model The use of multi-stakeholder cooperatives in a sustainable food system

What is a multi-stakeholder coop? n Co-op with at least two different membership classes

What is a multi-stakeholder coop? n Co-op with at least two different membership classes q q q n n Users Workers Supporters Consciously built on common mission but heterogeneous base “solidarity co-ops” are the fastest growing kind of co-op in Quebec

Different potential classes of members. . n USER membership classes q q q q

Different potential classes of members. . n USER membership classes q q q q Consumers Clients Families of clients Institutional purchasers Producers Groups of producers Intermediaries – processors, distributors etc.

Different potential classes of members. . n WORKER membership classes q q n Workers

Different potential classes of members. . n WORKER membership classes q q n Workers Professional employees (social workers, physicians, managers etc. ) SUPPORTER membership classes q q Community members investors

Variations between different classes of members. . Short Term Need Long Term Objective Consumers

Variations between different classes of members. . Short Term Need Long Term Objective Consumers Accessible location and price Access to specialized good or services; predictable pricing, supply Producers Production costs covered Workers Community Members Non-financial Contribution Equity Contributio n Purchasing power Generally Low Stake in Outcome Reduced risk; sustainable source of income; market development Industry knowledge; specialized product Medium – high Low – High depending on alternate distribution channels Reliable work; fair wage Safe, respectful, gainful employment Lowmedium High Existence of resource in community Healthy and vibrant local economy Industry knowledge; firm specific knowledge Possible special expertise Low – sometimes quite high Low - Medium Low-High depending on alternative supply sources

Balancing Interests. . . n n Allocation of governance rights Distribution of surplus Transfer

Balancing Interests. . . n n Allocation of governance rights Distribution of surplus Transfer rights Dissolution

Transformational vs. n Built upon relationships – relationships themselves Transactional are seen to have

Transformational vs. n Built upon relationships – relationships themselves Transactional are seen to have value n n Dependent upon transparency, free flow of information Patient, striving for mutual best long term interests as much as short term gains – alignment of interests at a higher level n Systemic perspective – allows for joint consideration of supply and demand n Inclusive

Other ways to invite participation. . . n n n Preferred stock Advisory boards

Other ways to invite participation. . . n n n Preferred stock Advisory boards Labor/management committees/Works councils Partnerships Limited liability companies (LLCs)

What does the research say? . . . (not that much but perhaps some

What does the research say? . . . (not that much but perhaps some surprises) n Theory – high transaction costs, inefficient decision-making, ultimately unstable q q n No real data to support this view But. . the jury is out on institutional partners Alternate theory – highly evolved mechanisms for the collection and coordination of disparate information in the pursuit of common objectives – + trust relationships = lower transaction costs

What does the research say? n Theory – membership classes will compete for resources

What does the research say? n Theory – membership classes will compete for resources (“zero sum” game) q Data --- Italian study of 300 social co-ops found addition of supporter class did not take a way from ability of worker class to achieve goals on pay and meaningful employment

What does the research say? n Theory: differences = conflict q q q Data

What does the research say? n Theory: differences = conflict q q q Data – survey of 79 MSC in Quebec found high level of satisfaction with governance MSCs in Quebec do not use mediation services more than any other kind of co-op Ostrom research – face-to-face communication increases the level of cooperation

What does the research say? n Robert Putnam – “Bonding” and “Bridging” social capital

What does the research say? n Robert Putnam – “Bonding” and “Bridging” social capital q q q Both are important Bridging is the harder one to do, absolutely vital to keeping a diverse democracy vigorous and inclusive MSC are a natural ground for building bridges “social capital represents not a comfortable alternative to social conflict but a way of making controversy productive”

Value(s) Chain vs. Supply Chain

Value(s) Chain vs. Supply Chain

Typical Food Industry Supply Chain Producer Processor Distributor Wholesaler Retailer Consumer

Typical Food Industry Supply Chain Producer Processor Distributor Wholesaler Retailer Consumer

Characteristics of supply chains. . n Inputs are interchangeable n n n n Relationships

Characteristics of supply chains. . n Inputs are interchangeable n n n n Relationships are transactional Participants are competitive Price rules Zero sum game (you win, I lose) Advantage is manifested through control of inputs, dominance of markets or both Benefits are unevenly distributed Risk is born by the least powerful

“Value” Chains Business concept from mid-1980’s n n n Look at whole process together

“Value” Chains Business concept from mid-1980’s n n n Look at whole process together and in order At each stop/activity the product gains some value The chain of activities gives the products more added value than the sum of the independent activity's value In food, “value-added” could be productionoriented (milk to cheese) or based upon attribute differentiation (organic, local) Cost of activity not the same as value

Advantages of the value chain approach. . planning n Assist in strategic Encourage information

Advantages of the value chain approach. . planning n Assist in strategic Encourage information flow upstream and downstream n Support quality enhancement activities n Vertical coordination rather than vertical integration is more flexible However. . n Does not fundamentally challenge power/risk relationships n “partnering” may be profound or superficial n

“Values-based” Supply Chain n Takes into consideration both the characteristics of the product and

“Values-based” Supply Chain n Takes into consideration both the characteristics of the product and the characteristics of the business relationship. .

Characteristics of a values-based supply chain n n n Links are between strategic partners

Characteristics of a values-based supply chain n n n Links are between strategic partners (not necessarily every link is a partner. ) Long term relationships with win-win orientation High levels of collaboration and trust Partners have articulated rights and responsibilities in regard to information, risk-taking and decision-making Commitment to “fairness” and welfare of all in terms of pricing, wages, contracts etc. Often decentralized (respect for local input, control) Need for common values, vision

Advantages of a values-based approach n n Can combine scale with product differentiation Can

Advantages of a values-based approach n n Can combine scale with product differentiation Can achieve high levels of quality, consumer trust Can outperform other business models in rapidly changing markets – high level of information, learning A perfect environment for multistakeholder cooperatives!

Where do co-ops fit in? n n n Horizontal collaboration may be needed to

Where do co-ops fit in? n n n Horizontal collaboration may be needed to assemble sufficient volumes Co-ops may be needed to provide missing links between existing actors in a system Co-ops can provide a specific role for community supporters Can add a link to employees which is missing in both supply and value chain models Can articulate and reinforce a specific set of values along a continuum. . A community solution to a community issue

Co-ops could fit in anyplace along here. . Producer Processor Distributor Wholesaler Retailer Consumer

Co-ops could fit in anyplace along here. . Producer Processor Distributor Wholesaler Retailer Consumer In a single-member model, co-op exists at one juncture. . . in a multi-stakeholder model, can exist at more than one if desired. . .

Recent USDA local Food Hub study. . n n Majority has started within the

Recent USDA local Food Hub study. . n n Majority has started within the last 5 years Over a quarter were started as cooperatives Another 20+% were formed as LLCs Changing market -- significant percentage of new food hubs formed during the year of the study

Are we a marketplace or are we an ecosystem?

Are we a marketplace or are we an ecosystem?

Examples of MSCs in Sustainable foods. . n n n Local Roots – producers

Examples of MSCs in Sustainable foods. . n n n Local Roots – producers and consumers Fifth Season – producers, producer groups, processors, distributors, buyers, workers Weavers Street Market – workers, consumers Maple Valley Co-op – producers, buyers, workers, community supporters/investors Eastern Carolina Organics – producers, managers Sandhills Farm to Table -- Producers, consumers, workers

Eastern Carolina Organics

Eastern Carolina Organics

Eastern Carolina Organics (ECO) n n n Started in 2004 as a project of

Eastern Carolina Organics (ECO) n n n Started in 2004 as a project of a local nonprofit with a mission to support organic farmers Issue was established “foodie” culture but lack of volume, variety and seasonality of product “Farmer-owned” is key element of identity 2005 there were 13 growers and 2 staff owners; 2011 - ECO has 17 farmer-members, 40 growers Members are farmers and two managers who oversaw the launch of the business No desire to involve customers in actual ownership. – “simplicity is key to our success”

Value-add of ECO n Provide a stable market for organic product for farmers (growth

Value-add of ECO n Provide a stable market for organic product for farmers (growth more from expansion of existing members than adding more members) n n n Key to attracting larger producers needed to meet customer demand for organic Can mix producers, product and provide seasonal food choices throughout the year Facilitate collaboration with customers, planning for each season

Value-add of ECO n n n Field to customer in matter of days Can

Value-add of ECO n n n Field to customer in matter of days Can assist farmers in transition to organic Quality control is vital and having employees engaged and empowered as part of the organization helps facilitate this Support farming as a dignified living Lots of related ancillary activities – biofuels, CSA, composting, solar panels, local currency, foundation

Iowa Valley Food Co-op, Cedar Rapids, IA

Iowa Valley Food Co-op, Cedar Rapids, IA

Iowa Valley Food Co-op n n n 270 consumer members, 55 producers Internet-based orders,

Iowa Valley Food Co-op n n n 270 consumer members, 55 producers Internet-based orders, monthly pick-up Open source software, developed by Oklahoma food co-op 2 producers, 2 consumers on board, rest can be mixed Patronage split half and half Plans for growth – more pick-up sites, more often; no plans for a store

Local Roots, Wooster, OH

Local Roots, Wooster, OH

Local Roots n n n Storefront operates as almost a year-around farmers market Farmers

Local Roots n n n Storefront operates as almost a year-around farmers market Farmers bring their own products, sell on consignment Artisans can also be members, sell product Consumers, producers, businesses are members; same cost No specific board representation, but most are farmers Next step – kitchen in back for value-added

Weaver Street Market n n n Hybrid worker-consumer cooperative since its founding in 1988

Weaver Street Market n n n Hybrid worker-consumer cooperative since its founding in 1988 Cost for worker members is $500; about half join. Patronage can add $1 an hour in good years Seven member board – 2 workers, 2 consumers, 2 appointed by the rest and GM Advantage: “grounding the board in reality”

Case studies. . Industries • Local food production and distribution • Brewing • Healthcare

Case studies. . Industries • Local food production and distribution • Brewing • Healthcare • Social services • Arts, photography • Retail grocery • Forestry/lumber milling Countries US – France – Spain – Italy - Canada

Learnings. . n n Can combine formal ownership-sharing with meaningful partnerships – no “perfect”

Learnings. . n n Can combine formal ownership-sharing with meaningful partnerships – no “perfect” MSC “Form follows function” --what is the problem you are trying to solve? -- A complication to one is an enhancement to another n Information, communication (facilitator), sunshine all are necessary for success

Want to learn more?

Want to learn more?

See the real thing. . . n Case study session at 3: 45

See the real thing. . . n Case study session at 3: 45

Forthcoming. . . “Multi-stakeholder Cooperatives: Engines of Innovation for Building A Healthier Local Food

Forthcoming. . . “Multi-stakeholder Cooperatives: Engines of Innovation for Building A Healthier Local Food System and a Healthier Economy” by Margaret Lund In the special “Green Economies” issue of the Journal of Cooperatives, UK

“Solidarity as a Business Model: A Multi-stakeholder Cooperative Manual” http: //oeockent. org/index. php/library/category/4 6/cooperatives

“Solidarity as a Business Model: A Multi-stakeholder Cooperative Manual” http: //oeockent. org/index. php/library/category/4 6/cooperatives Publication # 20 on the list Margaret Lund 612 -750 -1431 [email protected] com