2011-06-28

Co.Exist

The Rise Of Shared Ownership And The Fall Of Business As Usual

A new model in Cleveland—in which workers own companies that are supported by the city's big businesses—has the potential to change the economics of the city and its workers.

There are two things in which I believe strongly: that business is at the root of our economic challenges and that business is at the heart of the solution to those challenges. I don’t know whether that makes me a pessimist or an optimist—but I like to think it makes me an ideals-driven pragmatist.

That’s why I’m excited about a new way of doing business that’s not just good in theory, but has proven itself to be a workable solution in reality. It’s happening right now, right here in the United States. Business is realizing the power of placing ownership in employee hands. Instead of fixing a broken system, a few innovative communities are creating a whole new system altogether, one that‘s profitable, sustainable, people-focused, creates good jobs, and rebuilds dying communities. Say hello to Evergreen Cooperatives, the economic model of our future: the worker-owned business built upon the predictable revenue flow of place-based anchor institutions.

The location of this innovation may surprise you: Cleveland, Ohio, a city that has lost more than 50 percent of its population in the last few decades. It’s a city where storefronts downtown are boarded up; a city where unemployment hovers at around 25 percent. And like many other Rust Belt cities, we’ve turned our backs on it through a mix of failed industrial policy, a tax system that rewards companies that export jobs overseas, regulations and public policy that reward financial gambling, and business that creates no real value at the expense of business that makes products that people can actually use.

But, in Cleveland’s Greater University Circle—with neighborhoods that are home to 43,000 people whose median household income is less than $18,500—the Evergreen Cooperative is springing to life, birthed out of a highly unusual partnership between the cities "anchor institutions": Cleveland Foundation, the Democracy Collaborative at the University of Maryland, the Ohio Employee Ownership Center at Kent State University, and a group of major place-based institutions in the area.

Together, these organizations collaborated on a business model that is designed to create community wealth in the city’s poorest neighborhoods. They do this by committing to invest in businesses not with venture capital, but by purchasing services from them. These purchasing decisions by large institutions fund the development of a network of sustainable, community-based businesses that are partially owned by the workers themselves, which develops a workforce skilled at democratic and participatory management and creates a new generation of leaders committed to rebuilding their communities.

Many aspects of the Evergreen Cooperatives are modeled on the Mondragon Cooperatives, created by an activist Catholic priest in 1956 with the goal of lifting the Basque region of Spain out of the poverty it experienced in the aftermath of the Spanish Civil War. Today, Mondragon is a network of more than 120 worker-owned cooperatives generating more than $20 billion in annual revenue and employing 100,000 workers, making it Spain’s fourth largest industrial and seventh largest financial group.

A number of trips to Mondragon were organized by the Cleveland Foundation to give community leaders a chance to observe first-hand how a successful large-scale cooperative operates. Now, Mondragon calls Evergreen the "point of reference for all cooperative development in North America."

So how is this new system working? Recently, I had the opportunity to visit the first two Evergreen businesses that were launched in October 2009: the Evergreen Cooperative Laundry, a cutting-edge green business, and Ohio Cooperative Solar.

Ohio Cooperative Solar (OCS) was profitable in its first five months in operation; current annual revenue is projected to be $1.3 million. At the end of the fiscal year, a portion of profits will be allocated to each OCS employee owner’s capital account, furthering the idea of people-focused business.

The Green City Growers, a hydroponic greenhouse, expects to break ground on the construction of a four-acre greenhouse this summer, with its first crop ready for harvest in the spring of 2012. When fully operational, it will produce 5 million heads of lettuce and 300,000 pounds of herbs annually and employ between 30 to 40 workers year-round.

"Cleveland is a leader in local food initiatives," said CEO Mary Donnell. "Green City Growers will be part of that exciting food production and consumer purchasing trend."

Mechanisms for long-term sustainability are built into Evergreen’s structure: "The history of worker coops is a mixed bag," says Gar Alperovitz, cofounder of the Democracy Collaborative. "They have often tended to break down, exploit the environment, or they get taken over if they are successful. The Evergreen model builds in worker ownership and control but under the umbrella of broader democratizing and green principles."

A 15-member board of directors will govern Evergreen and be the keepers of the vision and have the right to veto any cooperative’s attempt to exit the Evergreen system, or to engage in activities that might put the entire system at risk.

In a world of partial solutions, incremental progress, competition for resources, small-minded ideas and the fear of big, bold possibilities, Cleveland has designed a solution that embraces all of its challenges at once and dares to say we can solve them. More so, Evergreen, Mondragon, as well as The Cooperative Group in the U.K. and Legacoop in Italy, prove that values and economic interests cannot only co-exist, but be leading principles in the effort to create a sustainable economy.

This is the true potential of business—a force strong enough to create a sustainable, just and equitable world for all.

Jeffrey Hollender is cofounder and former CEO of Seventh Generation. He is the author of the best-seller, How to Make the World a Better Place, a Beginner’s Guide, as well as five additional books, including The Responsibility Revolution and Planet Home. He is a board member of Greenpeace US and Verite and also co-founder of the American Sustainable Business Council. Visit his blog to learn more. He can also be found on Twitter (@jeffhollender) and on Facebook.

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