This is the firstÂ in a three-part blogÂ designed to explore opportunities for cooperatives toÂ thrive in the newly emerging sustainable energy sector.Â In Part 1, I discuss the basic principles of cooperative formation and outline an initial niche-based value-opportunity for cooperative activities in the sustainable energy sector.
There are inherent difficulties in establishing the place of cooperatives in theÂ bioenergy commodity retail environment.
Historically, regardless ofÂ niche or product,Â cooperatives have operated under the three guiding principalsÂ of Â user-benefit, user-owner, and user-control.
The user-benefit principle alludes to the concept that a consolidated group can better leverage market access, group pricing, services and supply operational integration, and overall decreased market risk.Â The large group can more effectively negotiate pricing and create solutions that serve all of the members utilizing pooled resources, lowering distribution costs and enhancing the ability for members to deliver products that have greater appeal and value to purchasers.
The user-owner principle conceptually marries the idea of maximizing (within the boundaries of law) business proceeds to members. This is foundationally different in philosophy than the tradionalÂ corporate Â approach of maximizing profits (and consequently shareholder returns). This facet of the cooperative paradigm is often viewed as something of a double-edged sword. Many mature cooperatives have recently privatized in efforts to gain access to investment capital. Several states have adopted changes to state cooperative statutes, allowing cooperatives to take on private equity investments from non-members. These investments can be made legally allowing the investor to assume voting rights and return rates that are appropriate to the level of investment.
This change directly affects the last facet of the triumvirate user approach common to most cooperatives, that of democratic user-control. Cooperatives operate strategically on using a distributed leadership approach that is democratic and focused on member equality. Generally, regardless of differences in stakeholder investment, each member in a cooperative is entitled to one and only one vote. This is one reasonÂ why the adoption in some states of statues that create “equity-ready” cooperatives is dramatic.
It is a fact for every business, regardless of entity form, that the global marketplace is fiercely competitive. In response to the rapidly changing environment, many businesses are narrowing their focus and concentrating on creating sustainable niche markets for delivery of their products and services.
I believe the sustainable energy sector is ripe for cooperative participation. Although what I have termed “equity-ready” cooperatives may seem initially ideal, traditional cooperativesÂ can perform well in this sector as long as the membership makesÂ decisions that are consistent with the long termÂ mission of cooperative stability.
In Part 2 of thisÂ discussion I will further discuss the core opportunity as well asÂ whatÂ sort of approach might be necessary to align the memberships desire to maximize proceeds with maintaing long term cooperative stability.