the co-operative the co the advantage - operative advantage operative Creating a successful family of Co-operative businesses The Report of the Co-operative CommissionCo-operative the of Report The 2001 January The Report of the Co-operative Commission January 2001 January 2001 www.co-opcommission.org.uk Contents Introduction by Tony Blair Preface by John Monks 2 Summary of the Co-operative Commission’s recommendations 4 Process and overview 10 Chapter 1 – Re-establishing the Co-operative Advantage 12 Chapter 2 – Successful Co-operative Business in the Twenty-first Century 28 Chapter 3 – Membership, Participation and Securing the Co-operative Movement's Legacy 38 Chapter 4 – Effective Management for Change and Development 50 Chapter 5 – National, Regional and Local Structures 62 Chapter 6 – The Social Economy and Co-operation 72 Chapter 7 – Mission Statement and Next Steps 82 Annexes 1 The Co-operative Commission 88 2 Terms of reference 90 3 The ICA statement on the Co-operative identity 91 4 Submissions 92 5 CWS within the Co-operative Movement 94 6 Counsel’s advice 96 7 The Co-operative Independent Commission 1958 100 8 Co-operative milestones 102 9 Glossary of terms 104 Preface by John Monks Preface by John Monks, Commission Chair A renaissance of the Co-operative Co-operatively owned business have not Over the past 20 years small businesses Movement in the UK is long overdue. functioned effectively. Efficiency levels have have been seen as the engine for change not matched the best of public companies. in the economy. I see no reason why many Over the past 11 months it has become in this generation should not look to clear to me, as it has to my fellow The Co-operative Movement today has Co-operatives as a natural vehicle through Commissioners, that the Co-operative many strengths. The scale of business which to pursue their entrepreneurial Movement has the potential to step up makes it one of the UK's biggest retailers. ambitions. It should be as easy and as its impact on both business and society. It operates across sectors from food to natural to set up a Co-op, as it is to pharmacy, from financial services to travel. establish any other form of business. We know, from the evidence that we have There are many dedicated people working received, that there is much that could be within the Co-operative Movement who I am grateful to my fellow Commissioners, done to boost the performance of many have the commitment and the imagination drawn both from within and outside the of the current businesses. Indeed it has to transform the Movement and make a Co-operative Movement, who have brought no alternative if it is to survive. real impact on national life. The Co-operative extensive knowledge and experience to our ethos can be in tune with an age that is deliberations. We have had first class support We can also see opportunities to expand increasingly disillusioned with corporate from the staff of the Commission and from our the Movement into new areas that cry out greed and lack of ethical standards advisers. Most of all we benefited from the for Co-operative solutions. But above all, displayed in some parts of the private sector. wealth of information and opinion provided we believe that Co-operative principles for us by the individuals and organisations are highly relevant to society in an age One of the Movement's greatest that go to make up the Co-operative of unprecedented change. weaknesses is the widespread image Movement who took up our invitation of the Co-op as an old-fashioned retail to submit evidence for our consideration. The purpose of this Report is to show how store chain incapable of meeting the that potential can be turned into reality. expectations of today's consumers. The Commission's work is now complete. Our vision, as set out in the mission statement Changes are being made. Some local It is up to the Co-operative Movement which we commend to the Co-operative Societies have broken free of the old to decide whether it is prepared to Movement, is one of a revitalised image and make a real impact in their grasp the opportunity and to put these Movement which challenges conventional local communities. The Co-operative proposals into practice. enterprises by building a commercially Bank is a model of transformation and successful family of businesses that how to seize the moment and the mood. If it fails to do so; if it picks and chooses offers a clear Co-operative advantage. Lord Morris and his team are now putting between the recommendations rejecting in place new structures to take forward the radical and the difficult, or if it adopts In successful Co-operatives, the ethical the Co-operative Group (CWS) Ltd., our recommendations but fails to values of honesty, openness, social which has been created following the implement them, then I fear for the future responsibility and caring for others, can merger of CWS and CRS. of the Movement. give an edge over businesses driven simply by the profit motive. That edge helps build Our job has been to look beyond these But, if it adopts them with enthusiasm and commercial success, and that, in turn, first steps and to plot a journey that can commitment and implements them in full, provides the resources to strengthen the take the Co-operative Movement on to then I believe the prospects can be as bright ethical dimension. Where Co-operatives a higher plane: where business efficiency as at any time in the Movement’s history. have failed to match their potential this matches the best in the plc sector; where virtuous circle has been broken; the way the Co-operative principles strengthen the business has been conducted has not our business; where, through our work always reflected the ethical values and in the community, we raise awareness the links between the members and their of the value of co-operation. January 2001 The Report of the Co-operative Commission 2–3 left to right: Graham Melmoth, John Monks and Tony Blair at the launch of the Co-operative Commission, February 2000 the commission’s work is now complete; it is up to the co-operative movement to decide whether it is prepared to grasp the opportunity and to put these proposals into practice Summary of the Co-operative Commission’s recommendations Mission statement: “to challenge conventional UK enterprise by building a commercially successful family of businesses that offers a clear co-operative advantage" Summary of the Co-operative Commission’s recommendations In some cases these recommendations compared with that of major 12.1 External auditors should be have been abbreviated: the full competitors and peer employed to help guarantee the recommendations are to be found Co-operative Societies. transparency of the accounting at the end of each chapter. procedure. Social performance improvement 12.2 The Strategy Group of CRTG should Chapter 1 – Re-establishing the 7 The Co-operative Union should be made up of Chief Executives of Co-operative Advantage establish challenging Key Social Societies and the Controller, CWS Commercial performance Performance Indicators (KSPIs), for Retail, for the time being, should be improvement performance in relation to Co-operative the CEO of CRTG and be a member 1 Boards of Co-operative Societies and social goals and should monitor of the Strategy Group. must establish challenging targets the performance of individual Societies 12.3 The governance of CRTG should for the commercial performance of objectively against those targets. be reformed. their Society. 8 Boards of Societies should 12.4 Each member of the Strategy Group 2 The commercial performance ensure that the Society’s KSPIs should have a vote proportional to targets should include Return on are presented to the Society’s the purchase volumes of their Society Capital Employed, which should members annually. through CRTG. achieve a minimum of 10 per cent 12.5 Clear terms of reference for CRTG as a first step. Social auditing should be established. 3 All Societies should urgently review 9 The Co-operative Union should 12.6 The CEO of CRTG should produce the performance of each of their develop a standard system for strategic and annual plans for various business sectors to ensure social reporting, so that there is approval by the Strategy Group. that each can achieve and/or consistency across the Movement. 12.7 Delivery of the service to members maintain financial viability over 10 The Co-operative Union should of CRTG should be based on a the medium/long term. produce an annual report on the revised form of contract. work of the Commercial and Social 13 The Commission, given the reform Societies’ performance Performance Panel to be presented of CRTG, recommends that all 4 In order to implement and to Congress. Societies should now join CRTG. monitor the commercial and social performance of Societies, the Reinvesting the profit Financial services Co-operative Union should be given 11 Reinvestment in the business must 14 CWS should develop and implement responsibility for establishing always have the first claim on profits, an integrated business strategy for a Commercial and Social but where a Society is trading its two financial services subsidiaries, Performance Panel. profitably, the Commission CIS and The Co-operative Bank, in recommends that the minimum order to harness the latent synergies Financial auditing commitment to the members and between the two businesses. 5 Co-operative Societies should the community dividend should 15 CWS should review the governance conform to accounting standards be 10 per cent of the profit and that structure of both CIS and The and adopt a standard system the ratio distribution of individual Co-operative Bank with a view of financial reporting.