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Why are Co-ops and Social Enterprises so Important to New Brunswick

Co-ops and social enterprises are critically important to the New Brunswick economy and communities.  They have a proven track record for job creation, particularly in rural communities, attract millennials and create opportunities for youth entrepreneurship, integrate marginalized populations into the socio-economic fabric of our province, and are a proven model for business secession – one of the most pressing economic issues facing Canada today. Learn more about how co-ops and social enterprises are changing our economy below

Job Creation and Economic Impact

Co-ops’ performance in job creation and economic development in Canada is not theoretical. With growth three times that of the economy in general, job creation nearly five times higher, and a lifespan twice that of conventional companies, co-ops have repeatedly shown they are more sustainable than any other form of business. According to the Parliamentary Committee on Co-ops,

One cannot overlook the fact that during the recent market financial crisis, co-operative shares did not lose any value, since they are owned locally by the people who use their products and services and have a long-term commitment to ensuring the success of the business endeavours. The higher survival rate of co-operatives, relative to conventional private businesses, attests to the inherent resilience and stability of the co-operative sector. Survival rates of co-operative enterprises were 74.9 % after 3 years, 62% after 5 years and 44.3% after 10 years. For other forms of business, the rates were 48.2% after 3 years, 35% after 5 years and 19.5% after 10 years.[1]

Co-ops have a huge impact on the New Brunswick economy. In 2014, CECNB conducted an economic impact study on 138 of our co-ops in partnership with the Shannon School of Business at the University of Cape Breton. It revealed that these co-ops:

  • Generated nearly $1.35 billion in annual revenues

  • Created the equivalent of 7500 full time jobs

  • Contributed $500 million to GDP and $330 million in employment income[2]

In addition to co-ops, there are more than 550 social enterprises in New Brunswick. A comprehensive survey completed by CECNB in partnership Mount Royal and Simon Fraser universities in 2014 revealed that the average social enterprise in NB “employs 16.5 FTEs and generates $738,000 in annual revenues from the sale of goods or services”.[3] Based on these findings, the co-op and social enterprise sector is responsible for the creation of nearly 16,000 jobs in our province.

[1] Survey of Social Enterprises in New Brunswick, Mount Royal University, Simon Fraser University, and the Co-operative Enterprise Council, Oct 2014

[2] Status of Co-operatives in Canada: Report of the Special House of Commons Committee on Co-operatives, Sept 2012

[3] The Economic Impact of Co-operatives and Social Enterprises in New Brunswick, George Karaphillis, Shannon School of Business, Cape Breton University, October 2014

Rural Communities

Co-ops and social enterprises operate in every sector of the economy from forestry and fisheries to health care, construction, transportation, retail, processing, housing, tourism, and more. They are strongest in rural communities, particularly in the local food and agricultural sector with one in four co-ops in Canada being food-related co-ops. In New Brunswick, these co-ops have a very long history and indeed the oldest ongoing agricultural co-op in the entire world is located in right in Sussex! Established by a group of farmers in 1871, the Sussex Co-op is still operating and employing local people 178 years later.

Co-ops and social enterprises play a critical role in rural communities in New Brunswick as they must be constantly innovative and creative to address the myriad of challenges they face with aging populations, out-migration, and increasing global competition. Co-ops and social enterprises provide a structure and business model that allows groups of people to pool their resources and invest in locally-owned enterprises that create jobs and provide products or services that would otherwise not be available in their community as companies whose interests are purely profit-driven rarely set up in small towns and villages.

For co-ops and social enterprises, as long as the business is financially sustainable and will create jobs or otherwise strengthen the local community, it is a viable option. That is not to say that they don’t strive to give an ROI to shareholders like any other business, as they most definitely do. However, the fundamental principles upon which co-ops and social enterprises are built – concern for the community, member economic participation, education and training, and democratic member control – means that people, and not just profits, control the enterprise.

When people own a business they are much more likely to support it. In co-ops and social enterprises, a huge part of their success is based on the fact that members have a say in the governance and major decisions, while leaving operational details to staff. This keeps the co-op closely connected and responsive to its customers’ wants and needs. When your customers are your owners, you have to be good!

Attracting Millennials

Millennials currently account for about one third of the Canadian population and by 2025 will make up 75% of the workforce. A significant study by the Stanford Graduate School of Business recently revealed that the vast majority want a job where they can have an impact:

90% of MBAs from business schools in North America and Europe prefer working for organizations committed to social responsibility. Ethics and integrity, it seems, win out over financial reward. Millennials are prepared to pay more for products that have positive social/environmental impacts, share products rather than buy, and take a pay cut to work for a responsible company. Having grown up in a world of globalization and economic disruption, Gen-Y holds a different worldview from their predecessors. They seek meaning, look for authenticity and like to rally around important causes.

This is an area where co-ops and social enterprises excel and many of those being established in New Brunswick are led by well-educated young people who want to create meaningful jobs and improve the quality of life in their communities. Local food, energy, forestry, student employment, sports and recreation, transportation, theatres, festivals, cultural centres, and housing are just a few examples of the co-ops and social enterprises thriving today that were created by young people in New Brunswick. CECNB and our Francophone partner, Coopérative de Développement Régional-Acadie (CDR-A) have helped create or scale up approximately seventy-five (75) of these co-ops and social enterprises in the last five years with most of them employing, or being led by, millennials.

As a demographic, millennials also have significant purchasing power and this will only continue to rise as they replace retiring baby boomers, both in the workforce and as business owners. Increasingly, companies are going to have to show how they are socially and environmentally responsible and co-ops and social enterprises are already well ahead of the pack in consumer trust.

Immigrants, First Nations, and Vulnerable Populations

30% provide employment development services and 20% provide training for workforce integration, helping to increase the employability of the people they are set up to serve (i.e. people with disabilities, low income persons, immigrants, seniors, etc). Nearly half also employ their target group members, creating thousands of jobs for people in NB who are often the least likely to be employed and most likely to be reliant on some form of government assistance.[1]

Many co-ops and social enterprises provide services to people who face barriers to employment. In the 2014 NB Social Enterprise Survey, it was revealed that:

Newcomers and immigrants are frequently familiar with the co-op business model because it is used across the globe for economic development purposes. There are more than 750,000 co-ops worldwide with more than a billion members. Immigrants who come to New Brunswick from countries where the co-op business model is commonly used, quickly gravitate to it as a way to pool their resources and establish businesses that create jobs for themselves and other immigrants.

First Nations communities also increasingly using co-op and social enterprise business model for economic development and indeed one of the largest co-ops in the country is Arctic Co-op. Established nearly 50 years ago, today Arctic Co-op owns 32 different Aboriginal businesses that employ 1000 people, generate annual revenues of nearly $200 million, and provide patronage rebates of over $8 million to its members.

In New Brunswick, First Nations communities are beginning to develop co-ops and social enterprises related to renewable energy, youth, eco-tourism, art and crafts, and other enterprises to create jobs and address cultural issues and opportunities. CECNB works closely with a number of Indigenous groups including the NB Aboriginal Peoples Council who we are helping turn an unused lodge and campground into an Aboriginal Village that will help build awareness of First Nations’ culture and capitalize on tourism opportunities. We are also working closely with Mawi’ Art, a collective of professional Aboriginal artists, who have established an online and pop-up to sell authentic Atlantic Aboriginal art in domestic and export markets. We also partner with the Joint Economic Development Initiative (JEDI) on various initiatives just received nearly a half million dollars from the federal government to establish the Netukulimk Tricultural Learning Centre for Youth in Dorchester, aimed at building cross cultural awareness and reconciliation, with a strong focus on youth entrepreneurship and social enterprise development.

[1] 2014 Social Enterprise Sector Survey Final Report, June 2014; Peter Elson, Peter Hall, Priscilla Wamucii; Institute for Non Profit Studies, Mount Royal University and Simon Fraser University

Proven Model for Business Succession

One-fifth of small businesses (250,000) with employees have owners aged 55 and over. This number has risen by 4% a year over the past decade, more than doubling the historical rate and close to 30% of current small business owners (310,000) will want to exit their businesses by 2017. Within a decade, 50% (550,000) will want to exit.[1]

The co-operative business model is a tried and tested means of business succession and is becoming increasingly popular in rural Canada as a way for small business owners to sell their businesses and ensure their legacies live on. According to a CIBC report in November 2013 

By using the co-operative business model, employees and/or community members improve their chances of success in assuming a business. By pooling knowledge, skills and resources, the costs and work involved in a business transition is shared among a group of people, increasing its changes for success.

The Co-operative Enterprise Council of New Brunswick and its Francophone sister organization, la Coopérative de développement régional-Acadie (CDR-A) are both actively involved in the development of business succession strategies and have developed services, produced resources, and sit on various committees related to best practices in rural business succession planning. CDR-A has helped save seven businesses in the last three years by succeeding them into co-ops and is currently developing a French incubator/accelerator with multiple partners to build communities’ capacity for co-operative business succession.

[1] CIBC In Focus, November 12, 2013