The Promotion of Cooperatives

ILO Recommendation No. 193





Mark Levin

ILO Cooperative Branch

(18/9/02)





The ILO's involvement with cooperatives



The International Labour Organization, a specialized agency of the United Nations, was established in 1919 to promote social justice and internationally recognized human and labour rights. Recognizing the importance of cooperatives to millions of people around the world, the ILO has been actively engaged in supporting cooperative development since the establishment of a cooperative technical service in 1920, deriving its mandate from the ILO's Constitution which provides for consultations with recognized non-governmental international organizations including those of agriculturists and cooperators. It is interesting to note that the first ILO Director-General, Mr. Albert Thomas, was a member of the Executive Committee of the International Co-operative Alliance, which as the global voice of the cooperative movement, maintains a consultative status with the ILO.



The ILO, then and now, has viewed cooperatives as important tools for improving the living and working conditions of both women and men. The ILO sees cooperatives as businesses that are based on a broad set of democratic and egalitarian values. Since cooperatives are owned by the users of the services they provide, they make decisions that balance the need for profitability with the welfare of their members and the community which they serve. As cooperatives foster economies of scope and scale, they increase the bargaining power of their members providing them, among others benefits, higher income and social protection. Hence, cooperatives accord members opportunity, protection and empowerment - essential elements in uplifting them from degradation and poverty. The ILO has thus always supported the development of cooperatives as important vehicles in meeting its goals.



Through the Cooperative Branch the ILO provides a variety of services to ILO constituents, by means of policy advice to member States, technical cooperation, documentation and information to increase public awareness about cooperatives, and the promotion of cooperative methods and approaches to resolve a variety of problems and issues. Technical cooperation activities cover a wide range of themes, including cooperative reform and legislation, human resource development and networking, job creation, poverty alleviation, and local economic development. The ILO has the largest technical cooperation programme on cooperatives within the UN system.



With the ILO's recent consolidation of its focus on Decent Work or the "promotion of opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and human dignity", the Cooperative Branch has placed greater emphasis on the employment creation activities of cooperatives and their capacity to provide social protection, especially to the marginalized sectors of society. The organizational flexibility of cooperatives to reach out to the informal economy provides a good opportunity to improve the conditions of work in this otherwise unprotected sector. It is noteworthy that the very values and principles on which cooperatives are based - self-help, self-responsibility, democracy, equality, equity, solidarity, social responsibility and caring for others - find congruence with the notion of Decent Work.



ILO Recommendation on cooperatives



The ILO promotes universally recognized human and labour rights primarily through its standard-setting functions. Its highest decision-making body, the International Labour Conference (ILC) debates and adopts standards on labour rights, employment, human resource development and other ILO concerns including, for example, small and medium enterprise and cooperative development. A labour standard can be in the form of a Convention or a Recommendation. An ILO Convention, once ratified by a member State, becomes binding for that country and compliance becomes mandatory. A Recommendation, as the name implies, serves as a policy guide for member States and compliance is not an obligation. In practice, however, many member States adopt the provisions of ILO Recommendations and frequently incorporate important provisions in their national laws.



Cooperatives are directly or indirectly referred to in various ILO Conventions and Recommendations but only one Recommendation focuses solely on cooperatives. This is the new Recommendation No. 193 on the Promotion of Cooperatives adopted at the 90th Session of the ILC in June 2002. This Recommendation replaces the Cooperatives (Developing Countries) Recommendation of 1966 (No. 127).



Reasons for adopting a new Recommendation and some remarks on the process



Since the time of the adoption of Recommendation No. 127, political, economic and social changes have affected the situation of cooperatives throughout the world. As a result, in March 1999, the ILO's Governing Body decided that a new universal standard could help enable cooperatives to develop more fully their self-help potential, placing them in a better position to meet current socio-economic problems such as unemployment and social exclusion, and help them compete in a global market place. At about the same time, the United Nations began debating new guidelines on cooperatives, which were adopted by the General Assembly on 19 December 2001. The ILO Governing Body's decision to revise Recommendation No. 127 was based on the following main reasons:



In common with most other ILO standards, Recommendation No. 193 was adopted as a result of two major discussions at the ILC. The first discussion took place in June 2001 at the 89th Session of the ILC which deliberated the "Proposed Conclusions" or the provisions proposed to be incorporated in the new instrument. These "Proposed Conclusions" were formulated on the basis of responses to a questionnaire circulated to ILO member States in January 2000. The 89th ILC adopted "Conclusions" which in turn were utilized by the International Labour Office as the basis for a proposed draft of the new Recommendation. The proposed text was circulated to member States in August 2001 and their responses were collated and incorporated in a new text which was the subject of a second and final deliberation at the 90th ILC in June 2002. This discussion paved the way for the adoption of a new ILO Recommendation on the Promotion of Cooperatives - Recommendation No. 193.



The main features of Recommendation No. 193



The main features of Recommendation No. 193 are as follows and will be discussed in detail below:



The importance of cooperatives in economic and social development



In a number of ways the text confirms the important role that cooperatives play in global and national economic and social development. Cooperatives are specifically seen as significant tools for the creation of decent jobs and for the mobilization of resources for income generation. With regard to economic and social development, cooperatives promote the "fullest participation of all people" (Preamble) and facilitate a more equitable distribution of the benefits of globalization. They contribute to sustainable human development and have an important role to play in combatting social exclusion. The text further states that "the promotion of cooperatives…..should be considered as one of the pillars of national and international economic and social development" (paragraph 7(1)).



Reaffirmation of the cooperative identity



In order to fulfill these roles cooperatives should be true to their identity, their principles and their values. The definition of a cooperative that appears in the Statement on the Cooperative Identity, adopted by the General Assembly of the International Cooperative Alliance in 1995, is incorporated in the text of the Recommendation, ensuring that there is only one, universally acceptable definition of a cooperative. The cooperative values, ethics and principles are cited and the full text of the principles appears as an Annex to the Recommendation. National policy and legal frameworks are to be guided by the cooperative values and principles, including most significantly, to protect and foster the autonomy of cooperatives.



Equal treatment



The International Labour Conference discussions in 2001 and 2002 generated a great deal of debate regarding the treatment of cooperatives vis-à-vis other types of enterprises and social organization. On the one hand, it was seen as important for cooperatives to "stand on their own two feet" and function as independent and autonomous enterprises in a competitive market situation, but on the other hand to be supported if they meet specific social and public policy outcomes. All cooperatives have social purposes but it was thought that cooperatives that have specifically social aims, particularly in favour of disadvantaged groups in society, could benefit from special measures. In addition, it was considered very important to stress the need to avoid discrimination against cooperatives because of their special character. Thus, the text states that "Cooperatives should be treated in accordance with national law and practice and on terms no less favourable than those accorded to other forms of enterprise and social organization" (paragraph 7(2)).



The role of government in cooperative promotion

The Recommendation places heavy emphasis on the role of government in establishing an appropriate policy framework within which cooperatives can survive and grow. As has been mentioned before, government actions are to be guided by cooperative values and principles. Specifically, they are expected to provide a supportive policy, legal and institutional framework, provide support measures when social and policy outcomes are met (i.e. support to cooperatives based on their activities and not because of their nature), provide oversight on terms equivalent to other forms of enterprise and social organization, adopt measures to improve access to finance for disadvantaged groups, and topically, to promote the formalization of the informal economy. The role of cooperatives in transforming marginal survival activities in the informal economy into legally protected work is recognized.



It is also recognized that government can contribute significantly to improving cooperative performance by facilitating access of cooperatives to support services. In particular, support to cooperative human resource development is considered to be key. Cooperative success can often be attributed to the success of comprehensive HRD programmes for all stakeholders in cooperatives - members, workers and managers - and this is reflected in a number of places in the text of the new Recommendation. Measures should be adopted to develop the capacities and knowledge of the values, advantages and benefits of the cooperative movement, and national policies should develop technical and vocational skills, entrepreneurial and managerial abilities, knowledge of business potential and general economic and social policy skills of cooperative members, workers and managers and improve their access to information and communication technologies. The promotion of education and training in cooperative principles and practices at all appropriate levels of the national education and training systems, and indeed throughout society, is further encouraged.



The text also makes reference to government's role in promoting safety and health, productivity and competitiveness in cooperatives, facilitating access to credit, markets and information, promoting best practice in corporate governance, strengthening gender equality, promoting workers' rights and facilitating vertical and horizontal linkages among cooperatives. On the issue of workers' rights there is a topical reference to the need to combat "pseudo cooperatives" through the application of labour legislation, and a call to promote best labour practices in cooperatives. The Preamble makes special reference to the ILO Declaration on Fundamental Principles and Rights at Work (1998) and a number of international labour standards.



Governments are urged to consult cooperative, employers' and workers' organizations in the formulation and revision of legislation, policies and regulations applicable to cooperatives. Governments are also encouraged to facilitate the promotion of the cooperative movement.



The role of employers', workers' and cooperative organizations



An active role in cooperative promotion is envisaged for employers', workers' and cooperative organizations, both individually and collectively. Employers' organizations are asked to consider extending membership and the provision of services to cooperatives wishing to join them. Workers' organizations are encouraged to assist cooperative employees to join trade unions, assist trade union members to establish cooperatives, participate in fora having an impact on cooperatives, participate in setting up cooperatives to create or maintain employment, promote productivity, equality of opportunity and rights of worker-members and undertake education and training. The reference to the special status of worker-members is of particular significance. Cooperative organizations are encouraged to promote an active relationship with the social partners to create a favourable climate for cooperative development, provide technical support services and commercial and financial services, invest in human resource development and represent cooperatives at the international level. In sum, the social partners and cooperative organizations are seen as critical agents in the task of cooperative promotion.



International cooperation



The text calls for greater international cooperation in information exchange on best practices particularly regarding employment creation and income generation, legislation, training methods and techniques, technology and product standards, and strengthening of linkages between national and international institutions involved in cooperative development. It also suggests exploring the possibilities of developing common regional guidelines and legislation on cooperatives.



Towards the future



The new ILO Recommendation No. 193 on the Promotion of Cooperatives will, we hope, be of great service to the cooperative movement and to the ILO's global tripartite constituency. We in the ILO's Cooperative Branch look forward to working closely with our partners to promote the new instrument. Already a number of ILO member States are considering revising their laws and national policies to take account of the provisions of Recommendation No. 193. The Cooperative Branch is now in the process of planning a follow-up campaign to promote the new Recommendation, including workshops and seminars on the national and regional levels, easy-to-read publications and tailor-made activities for ILO constituents. It is hoped that funds will soon be identified for a new technical cooperation project to assist member States to implement the Recommendation.



In conclusion, we believe that the cooperative methodology provides a proven response to many of the world's current economic and social problems and challenges, not least in the fight against poverty and social exclusion. The ILO believes that Recommendation No. 193 will serve as a useful tool in the struggle to promote Decent Work through cooperatives.



"Cooperatives empower people by enabling even the poorest segments of the population to participate in economic progress; they create job opportunities for those who have skills but little or no capital; and they provide protection by organizing mutual help in communities"



Juan Somavía, ILO Director-General, June 2002