Six Reasons Why Foundations Should Invest in Worker Cooperatives

Written by: Caitlin Duffy

Date: May 12, 2015

If you’re a coffee lover, you’ve likely enjoyed beans cultivated by farmers from a fair trade worker cooperative. If you haven’t yet, sip a delicious brew of fair trade coffee in the spirit of this past Saturday’s World Fair Trade Day, which celebrates fair trade as a “tangible contribution to the fight against poverty and exploitation, climate change and the economic crisis that has the greatest impact on the world’s most vulnerable populations.”

When fair trade comes to my mind, instead of coffee and other ethically-sourced products, the first thing I associate it with is worker cooperatives – defined by the U.S. Federation of Worker Cooperatives as “business entities that are owned and controlled by their members.” Whether rural or urban, philanthropy can look to worker cooperatives as a way to reduce poverty and inequality, empower workers and anchor jobs and wealth in a community.

Here are six reasons why foundations need to consider investing in worker cooperatives as a way to ensure that their grantmaking and investment dollars benefit underserved communities:

1. Worker cooperatives help build resilient local communities. The Democracy at Work Institute writes that worker cooperatives are “an effective tool for creating and maintaining sustainable, dignified jobs; generating wealth; improving the quality of life of workers; and promoting community and local economic development, particularly for people who lack access to business ownership or even sustainable work options.” With the cooperative model, women, immigrants, economically disadvantaged and historically marginalized racial communities have the potential to overcome barriers that limit their economic opportunities. In March, Truthout reported on the benefits of worker cooperatives for low-income women.

2. Cooperatives are found in practically every industry. The Democracy at Work Institute recently conducted an analysis of the field and found cooperatives in nearly every sector of the economy, concentrated in manufacturing, retail, food, administration/waste management and professional services. This past week Grist reported on the growth of agriculture cooperatives in the U.S., including well-known companies such as Ocean Spray, Organic Valley and Sunkist. As a local example, Takoma Park, MD is home to a food co-op and a cooperative nursery school. There are likely democratically-run businesses in your community, including credit unions!

3. There is potential to scale. Last year, the Democracy Collaborative – whose executive director, Ted Howard, helped launch the Evergreen Cooperatives and the Metropolitan Washington Community Wealth Building Initiative – released Worker Cooperatives: Pathways to Scale. The report shares how allies such as foundations can help grow worker-owned business in the U.S. by catalyzing more investment to build infrastructure and capacity, developing a friendlier ecosystem for cooperatives and increasing available capital through grants, loans and equity.

4. Investment in worker cooperatives amplifies impact beyond grantmaking. Foundations make mission (or impact) investments to achieve their philanthropic goals and generate both a social and a financial return. Mission Investors Exchange writes that “foundations of all types and sizes make mission investments in order to make capital more available to initiatives and enterprises that will create positive benefits for the communities they serve.” A worker cooperative is a clear example of an impactful investment that enables local workers to access the wealth they create.

5. Cities are already doing this work. Last summer, New York City allotted $1.2 million for the development of worker-owned cooperative businesses in 2015. Inspired by New York City, the city of Madison, Wisconsin will invest $5 million in worker cooperatives over the next five years. Foundations can partner with cities and local governments to provide funding, resources and policy advocacy.

6. Foundations are already doing this work. Most notably, the Cleveland Foundation, an NCRP Philanthropy’s Promise signatory, partnered with local grantmakers, banks and the municipal government to seed a revolving loan fund for Evergreen Cooperatives, a coordinated network of employee-owned enterprises that launched in 2008. Evergreen Cooperatives has been so successful that it is now referred to as the Cleveland Model. The Surdna Foundation, through its Strong Local Economies program, supports alternative business models such as employee-owned cooperatives to benefit “communities that have been most impacted by inequitable economic policy,” such as people of color, women and immigrants. In addition, in 2011 the Washington Regional Association of Grantmakers convened local foundations and supported a feasibility study for an initiative similar to the Cleveland Model. They were instrumental in founding the Metropolitan Washington Community Wealth Building Initiative, which incorporated its first worker-owned business last year.

The Washington Regional Association of Grantmakers will be holding a briefing about the impact and vision of the Community Wealth Building Initiative on May 18 – register here to learn more. While you’re at it, sign up for a webinar on May 20 to learn more about the Next System Project and join a broader conversation on new economic institutions and approaches for systemic change.

Foundations can bring new resources, expertise and business opportunities to this burgeoning field. What are other success stories and reasons to support worker cooperatives? How does your foundation leverage its philanthropic capital?

Caitlin Duffy is the project associate for Philamplify at the National Committee for Responsive Philanthropy (NCRP). Follow @NCRP and @DuffyInDC on Twitter and join the #Philamplify conversation.