Co-ops thriving, says report
Co-operative businesses in New Zealand are thriving and coping well with the impact of Covid, according to Cooperative Business NZ chief executive Roz Henry.
The statistics are staggering: 330 co-operatives, generating 18% of NZ’s gross domestic product by revenue, co-op and mutual businesses owned by over 1.5 million members and shareholders, employing 15% of the total workforce in the country.
In 2014, the International Co-operative Alliance (ICA) declared New Zealand the most cooperative economy globally. NZ co-operatives continue to be showcased in the Top 300 World Co-op Monitor – including Fonterra, Zespri, Foodstuffs North Island, Foodstuffs South Island, Alliance Group, Silver Fern Farms and Farmlands.
However, while our co-operatives are considered business stars overseas, within NZ there is a lack of understanding of the business model. Alongside the important role these businesses play in our communities and the economy. There is also a lot of misinformation about co-ops.
Two years ago, the umbrella body for cooperatives – Co-operative Business NZ – undertook research with PwC “to showcase the scale of this business community”.
“Scarily, individuals who should know, or need to know, have limited knowledge,” says Co-operative Business NZ chief executive Roz Henry. “This is something that I am constantly amazed at and working to resolve.”
Henry points out that it hosts multiple engagements with the various political parties and ministries.
“A significant proportion of the time is spent building an understanding of this business model and the businesses themselves to change their underlying misconceptions.”
She believes this is required before we can even start to consider the opportunities they present.
Henry believes co-ops are purpose led businesses, who prioritise people and planet over profits. These will be key enablers to driving change to support delivering against environmental, social and governance (ESG) reporting requirements (which are starting to be mandated by consumers).
“Along with delivery on the UN’s Sustainable Development Goal’s (SDG) goals, which have become critical in today’s environment,” she adds.
So, why are co-operatives facing challenges like misinformation?
Henry puts this down to fundamentally the lack of education and understanding about the model.
She says policy makers subsequently put in place blanket policy that has the potential to stifle the ability of these businesses to compete.
Henry believes a riskbased approach to their operation, given they are far more resilient than many of their counterparts, would be a better approach.
“Compliance costs – like fair pay, carbon emissions and environmental, social and governance (ESG) – are coming thick and fast with little insight into how this is pushing many of these co-op members businesses to financial brink,” she says. “Instead, the government should offer up incentives to enable investment into innovation and R&D, i.e. more carrot and less stick.”
“Our larger members in the agri sector are taking a leadership role to get ahead of the regulatory environment, in particular around carbon emissions. Given the long-term focus on sustainability and the alignment between the co-op businesses and their owners’ objectives, this is viable.”
Henry notes that many of these businesses’ boards are made up of member directors voted on democratically by their shareholders.
“Given this, there is always the potential for individuals to be voted on without the pre-requisite skills.
“Also, some in the lending community have little appreciation of the model, so when it comes to accessing funds, they are not always recognised as low-risk investments.
“A particular challenge which is not solely relevant to the co-operative sector is the need to change on farm practices at speed,” Henry adds.
“New Zealand is a leader in the primary sector and our farmers are some of the best. However, we need to keep pushing for change to remain competitive in the current climate.”
A Big Part of Agri Sector
One cannot talk about the New Zealand ag sector without discussing co-operatives – they go hand-in-hand.
Nearly 75% of NZ co-operative and mutual businesses are directly involved in the primary sector. The list is impressive: Fonterra, Tatua, Dairy Goat Co-op, MG Marketing, Alliance, Silver Fern Farms, Zespri, Marlborough Grapes Co-op, NZ Blackcurrants, Boysenberries NZ, Primary Wool Growers Co-op and NZ Hops.
Then there are those businesses providing the wrap-around support such as LIC, Farmlands, RuralCo, Ballance, FMG, Eastpack, Ravensdown, Birchwood Packhouse, irrigation co-op’s, SBS Bank, The Co-op Bank, Credit Unions and Rabobank.
Roz Henry points out that during the pandemic these businesses were all classified as essential services.
“They are fundamental to our food supply. Not only here in New Zealand, but also for our key trading partners.”
She says when compared to other business structures, they are highly resilient, especially during times of adversity such as Covid and our recent weather events.
“Due to the shareholders having skin in the game, they tend to hunker down and support each other to ride out the tough times.
“This is because their fundamental values ensure thinking longer term horizons, that is, maximising profits is secondary to prioritising their member’s needs, so the peaks and troughs are shallower.”
In the second article we will talk to former Fonterra director and co-op model champion Nicola Shadbolt.
