Cooperative Law as a Contribution to Sustainable Development
Nobody denies the causal effect of using non-renewable resources and of overburdening nature with non-degradable waste on climate change. It is of great concern to many … but mainly to the more affluent parts of societies. Those whose human dignity is denied by the effects of the growing social disparities are more concerned about their economic security. That, in turn, is jeopardized by political turmoil fuelled by social unrest.
This is the scenario, which the universal consensus on the aspects of the sustainable development goal tries to address: Social injustice leads to political instability; political instability leads to economic insecurity; economic insecurity must leave those affected by it indifferent as concerns the state of the biosphere.
Realigning cooperative law on the universally recognized cooperative principles may be seen as a contribution to sustainable development. However, as from the 1970ies cooperatives and cooperative law disappear from the research and education agendas, mainly of economics and legal sciences; they disappear from political programs, as well as from the agendas of regional and international governmental and non-governmental organizations. One of the main reasons for this disappearance is linked to the denial by mainstream economists at the time to recognize that the use of non-renewable, limited resources must lead to a collapse of the economies. The subsequent disconnection of finances from the real economy and that of the latter from the needs of people led to a generalized financialization of the economies and the establishment of financial performance as a measure for the competiveness of enterprises. Cooperatives, which are not centered on capital and whose primary objective is not to maximize the financial return on invested capital, had to gradually lose out.
As of then we may observe a turn in cooperative law from distinguishing cooperatives from capital-centered companies towards an ever more pronounced alignment of their legal structure on that of these companies (companization), as far as the nature and structure of their capital, management and control mechanisms are concerned. This alignment of the legal characteristics of cooperatives on, mainly on those of stock companies takes away the comparative advantages of cooperatives as regards sustainable development.
The explanation is this: Organizational enterprise law differentiates enterprise types by their different objectives. The legal form of an enterprise is a mere function of the objective it has. Therefore, a change of its form will lead to a change of its objective. The alignment of the form on that of another enterprise type leads, hence, to a reduction of the diversity of enterprise types, hence to a reduction of cultural diversity, the complementary aspect to biological diversity as a source of development, hence sustainable development. These effects of the companization are exacerbated by recent further changes through regulation. They aim to impose the same governance structure on all types of (banking) enterprises to ensure greater economic security as part of sustainable development (convergence). As these changes further reduce the diversity of enterprise types, they contradict their own aim. This might help however to reconsider the cooperative enterprise form.
And, indeed, cooperatives and cooperative law are reappearing on the above-said agendas. This might be due to the mentioned contradiction and it has to do with the necessity to review the tacit pact that for many decades decided the question of who would bear the social costs of enterprising and regenerate social justice, namely the labor market partners and the welfare state. The factors of globalization destabilize the mechanisms these actors have relied on, namely democratic participation in the decisions, if not on what and how to produce, at least on how to distribute the produced wealth and how to spend taxes paid on the income of enterprises. Digitalized production and distribution render labor market negotiations difficult and as they make the unity of political and economic orders fall apart, political participation becomes also difficult. In addition, the factors of globalization, mainly digitalization and its leading to the weight of capital and labor decreasing in relation to the new means of production, which is knowledge produced out of data, weaken the capacity of the state to compensate social injustices because its capacity to levy taxes is diminished through three reasons: Firstly, global actors act outside the reach of national, regional and international law; secondly, the number of employment diminishes significantly, and thirdly, the informal sectors grow.
The changing character of the Corporate Social Responsibility (CSR), from a political or moral to a legal obligation and the extension of its scope to include societal aspects (CSSR) must be read in this context as a search for a new pact on the distribution of the social costs of enterprising. The internationally recognized cooperative principles go beyond that. They hint to legal structural differences between cooperatives and other types of enterprises. This additional responsibility may be called Cooperative Social and Societal Responsibility (CoopSSR). CoopSSR signifies the establishment of functional links between the aspects of sustainable development and the structural features of cooperatives through law and the statutes of the cooperatives.
The main feature in this context is democratic participation. Being that mechanism, which regenerates social justice, democratic participation is central to sustainable development and it is a distinctive feature of cooperatives. Given that the spaces where democratic participation could be organized – labor markets and political orders – are becoming dysfunctional, enterprises of the cooperative type will increasingly have a political role to play, namely that of citizens. However, it is not enough to include the cooperative one member/one vote rule in the cooperative law or in the statutes of the cooperatives. Participation is a wider concept. Participation must permeate all organizational and operational aspects. Its translation into legal rules is a challenge, especially in new type, multi-stakeholder cooperatives with heterogeneous memberships where private law and public law mix and in cooperatives, which integrate into global value chains, not only operationally, but also organizationally. In these new arrangements the participants, the loci and the modes of participation need redefining.
Dr. Hagen Henrÿ is Adjunct Professor, Research Director at University of Helsinki.