What is a cooperative?

What is a cooperative?

Jeroen Douglas: Cooperatives are enterprises that are jointly owned and democratically controlled by and for their members.

As defined by the Statement of Cooperative Identity, a cooperative is “an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise”.

Cooperatives are based on values such as self-help, self-responsibility, democracy, equality, equity and solidarity, and follow principles that prioritise people over profit, with ‘one member, one vote’ governance.

Why and when were they first created?

JD: Modern cooperatives trace their roots to 1844, when the Rochdale Society of Equitable Pioneers was founded in Rochdale, England. These 28 working-class weavers and artisans banded together during a time of industrial hardship to create a member-owned store, selling basic goods at fair prices. The Rochdale Pioneers developed a set of principles – such as democratic control and distribution of surplus – which became the foundation for the global cooperative movement.

However, cooperative practices existed even earlier in various forms, from mutual aid societies to agricultural and credit unions in the 18th and early 19th centuries.

Who are the owners and members of a cooperative?

JD: The members of a cooperative are its owners. Depending on the cooperative’s model, members can be consumers, users, workers or producers. Each member typically has one vote, regardless of their level of investment, ensuring democratic governance and shared accountability.

How widespread are cooperatives? In which sectors are they most prevalent?

JD: Cooperatives are globally widespread, with more than 1 billion members across the world. They operate in all sectors of the economy, including:

• Agriculture (eg Land O’Lakes in the US; Fonterra in New Zealand)
• Banking and credit (eg Crédit Mutuel in France; Desjardins in Canada)
• Retail and wholesale (eg The Co-operative Group in the UK)
• Housing (Cooperativa Castalia in Uruguay)
• Health and social care (eg Kampala Medical & Allied Health Workers Cooperative Society, or KAMACOS, in Uganda)
• Energy and utilities (eg Enercoop, in France)
• Industrial/worker cooperatives (eg Mondragon Corporation in Spain)

In the World Cooperative Monitor report we can find the great diversity and size of cooperatives and its market share in the global economy. The top 300 cooperatives and mutuals in the world report a total turnover of more than US$2tn, based on 2021 financial data. These organisations operate in various economic sectors, with agriculture (105 enterprises) and insurance (96 enterprises) leading the list. Wholesale and retail trade represent the third biggest economic sector (57 enterprises) in the ranking.

Each member typically has one vote, regardless of their level of investment, ensuring democratic governance and shared accountability

What are the steps involved in setting up as or converting to a cooperative?

JD: While specific processes vary by country, the general steps to set up or convert to a cooperative include:

1. What are your common needs or aspirations? Define this and ask yourself how cooperative governance can help it to thrive.
2. Form a group with shared needs or goals (in most countries, a minimum of three people is needed to form a cooperative).
3. Define the purpose, type of cooperative, and member structure.
4. Draft the bylaws and constitution, following cooperative principles.
5. Register the cooperative with the appropriate legal body.
6. Raise capital through member contributions and possibly external sources.
7. Set up governance structures, including a board elected by members.
8. Start operations, ensuring transparency and member engagement.

Conversions to a cooperative model (eg an association becoming a worker cooperative) require member buy-in, restructuring and often legal and financial guidance.

How do cooperatives raise finance?

JD: Membership shares are often the primary source of capital. It depends on the country, but cooperatives typically raise further capital through:

• Retained earnings or surpluses reinvested into the business.
• Loans from cooperative banks and credit unions.
• Grants, especially in community-based or social cooperatives.

What are the main benefits of running as a cooperative?

JD: There are many benefits, including:

• Democratic control: members have equal say in decision-making.
• Economic participation: surpluses are shared equitably among members.
• Community resilience: co-ops are more locally rooted and socially responsible than mainstream businesses.
• Long-term sustainability: focused on people, not short-term profits.
• Job creation and stability, especially in worker cooperatives.
• Ethical and values-based: strong social and environmental ethics.

What are the challenges of running a cooperative?

JD: Challenges include the following:

• Access to capital can be limited, especially without outside investors.
• Public awareness: many people still don’t fully understand the cooperative model.
• Member engagement requires ongoing education and involvement.
• Scaling can be harder than in traditional investor-owned models.

Why is 2025 a significant year for cooperatives?

JD: The United Nations General Assembly has officially designated 2025 as the International Year of Cooperatives. This underscores cooperatives’ vital role in advancing sustainable development, eradicating poverty and fostering inclusive economic growth. A festival of cooperatives takes place in Manchester and Rochdale in July 2025.

The theme of the year, “Cooperatives build a better world” highlights their contributions to sustainable development across social, economic and environmental dimensions, showing how cooperatives are key drivers in achieving the UN Sustainable Development Goals (SDGs) by 2030. The theme also emphasises the unique ability of cooperatives to foster inclusive growth and strengthen community resilience.

This year also marks the 130th anniversary of the founding of the International Cooperative Alliance (ICA), which was established in 1895 in London. ICA is publishing a series of policy briefs this year on the SDGs.

• Jeroen Douglas is director general of the International Cooperative Alliance.