Lessons From Finland: Building Co-Operative Economy
Above Photo: Roman Melnichuk/ Flickr
Ed Mayo: In a sparsely populated country with a short summer and long, hard winter, the idea of people working together for a common interest comes naturally. As a result there are more member-owners of co-operative enterprises in Finland than there are people. The average adult is a member of two co-operatives; those in a rural setting, such as farmers, are likely to be a member of four.
From Finland’s high-tech businesses through to an extensive network of regional co-ops that ensure that there are banks, stores and other services within two miles of residents throughout the year, there are co-owned services in every sector stretching right across a country 40% larger than the UK.
We have much to learn from countries like Finland and, across Europe, there has been a welcome strengthening of trade relations and contact between the 160,000 co-op enterprises which provide jobs for 5.4 million European citizens.
My recent trip to Finland coincided with the start of the Lapland tourist season: the plane that brought me there boasted a seven metre high picture of Santa Claus on the tail. But I was there for a more prosaic reason, visiting some of the country’s leading co-operative enterprises.
It was mid-afternoon and already dark in the capital city of Helsinki by the time I met Taavi Heikkilä, chief executive of the SOK Corporation (also known as the “S Group”), who filled me in on his organisation’s progress towards creating a co-operative economy.
As in the UK, there are employee-owned co-ops and customer-owned co-ops in Finland. The S Group’s retail co-ops are customer-owned, with 1,646 food and grocery stores and 42,000 staff. Over the last 30 years the S Group has grown from around 20% market share and the third largest retailer in the country to be the market leader, with just over 45% market share. Co-operatives in the group now cover an unusually wide range of consumer services, from cars and fuel through to department stores, hotels and restaurants.
My counterpart Sami Karhu, of the Pellervo Society, reports that the co-operative business sector more widely includes 161 co-operative banks, 20 co-operative insurance companies and a range of water, forestry and farmer co-operatives. The longest running of these date back close to the start of the first co-ops in Finland in 1899, launched as part of a movement to strengthen Finnish society in the face of threats from Russia. From these humble starts, co-op banks, diaries and shops opened in almost every community in the country. The movement’s founder Hannes Gebhard described it as “the peaceful endeavor of the underprivileged to improve their lot by their own efforts, joined together.”
Finland was later described by its Nobel Prize winning scientist A I Vertanen as an economy based on mutuality: “We have no Rockefellers or Carnegies, but we do have co-operatives,” he said. This tradition continues to spread some seven decades later.
The lessons for the UK are encouraging. At a time when the closure rate for rural shops and banks is increasing, the Finns have developed and sustained vibrant community-owned model for sustainable rural outlets that integrate different services, including food, petrol and banking. By combining services in a format that is shaped by local communities and responds to local needs, but with the scale and distribution of a national chain, Finnish co-ops are finding new ways to sustain more distant regional economies.
Finnish customer-owned retailers have won market share by making membership something that is meaningful, rather reproducing another consumer loyalty scheme. They are using data and new technologies to support the close relationship, and give a sense of ownership.
The S Group’s Heikkilä explains: “In the past a retailer knew all its customers and their needs personally. Today, customer proximity means new solutions.” Customers want easy and smooth shopping and a quick interactive service and the S Group has focused on digital services to offer just that. “We see digital mobile retail as the customer’s remote control to the co-operative”, he adds.
Today, the number of co-operative enterprises in Finland stands at 4,626. While Nokia, the leading Finnish company, has been knocked back and the economy has the strains shared by Eurozone nations, there is a fresh wave of co-ops: one new co-operative enterprise starts up every working day of the year. These organisations extended the co-operative model of member to include non-traditional areas such as woodlands, energy supply, consumer and business broadband and telecoms.
Here in the UK, the Lincolnshire Co-operative Society is looking to try something similar, with experiments that combine libraries, pharmacies and post offices – each of which might be a marginal business, but together could attract sufficient footfall to sustain a village outlet. In Waddington, the library is nested within a pharmacy and operates with 15 volunteers, including one local author.
Although many retail consumer co-operatives in the UK are owned by millions of their customers, most people wouldn’t know it. Over time, the relationship between co-ops and their members and consumers has become a far more thin connection than when dividends were high and the decision makers were all local.
The larger co-operatives, such as Co-operative Group, Central England and Scotmid, are now talking actively about member engagement and so-called meaningful membership. Let’s hope we take a leaf out of the Finnish book.