A new business model is on the rise. What makes this model unique comes down to its core organization: the business’s shareholders are its workers and its consumers. This model is called a cooperative, or co-op, and it is the integrative business format that some of the world’s leading companies have adopted. The central tenet of a co-op is that successful and responsible companies should be managed by the people most directly involved in them. 

In many ways, a co-op looks and acts like a traditional company. It can be as large as thousands of people and as small as a community-based grocery store. Co-ops exist in many different industries, bringing equity to business practices in the lab, farming, production, and consumption markets. Oftentimes, workers or consumers “buy in” to a company by buying low-cost shares that often come with equity and voting rights for company leadership. Such a system for more democratic decision-making and allows companies to be free of potentially corrupt external corporate influence. And, the power of a co-op remains in the hands of those most closely involved in its operations to establish a community-oriented feel.

One of the largest and most successful co-ops in the corporate world today is the outdoor and travel gear brand REI. The brand has six million active members in its co-op, and it generated $2.56 billion in annual revenue in 2016. How REI’s co-op system works is that shareholding members receive access to discounted products and have the chance to purchase a vote in the company’s Board of Directors elections for $20. Shareholders therefore have a direct say in REI’s corporate strategy.

“There’s a real sense of community that’s phenomenally important,” former REI CEO Jerry Stritzke told The Atlantic when interviewed in March 2017. He remarked that REI has been able to build such a large presence as a co-op due to being a specialty goods business – a clear opening in the demand market. Stritzke furthered that REI has successfully maintained a hybrid business model embracing both brick-and-mortar business and e-commerce. 

However, where REI truly shines is as a company that can use its profits to benefit the environmental causes that are most connected to its mission. Specifically, the company’s board has taken firm stances for the passage of laws protecting natural lands. As a result of this purpose-driven work and commitment to ethical business, REI has seen remarkable staff retention. “We hang on to our people,” Stritzke told The Atlantic, “which is kind of unusual in the retail market.” This politically conscious operations method is common for co-ops, as the tight-knit, purpose-driven community at each one’s center naturally leads to political action.

Still, a co-op does not simply make for a magical success story; many entrepreneurs who attempt to start one are not able to follow through with their vision. The reality of a co-op is that, while it supports mutual social benefits for producers and consumers, it must become a money-making capitalistic enterprise. Oftentimes, smaller co-ops like grocery stores can struggle to see their profitability come to fruition if they cannot balance shareholder benefits with profit. Furthermore, a successful co-op must promote strong sentiments of trust between its leadership and its shareholders. Otherwise, such a partnership can easily collapse.

It is now these exact problems that young entrepreneurs are trying to solve – how to turn companies into co-ops successfully and sustainably. One thinker working to piece together the solution is Greg Brodsky, founder of Start.coop. Start.coop is a business providing young entrepreneurs with counseling so that they turn their businesses into functional cooperatives. Brodsky remarked to Forbes in August 2019 that research shows  “around 76% of people would be more likely to support a co-op, everything else being equal, but only about 10% of people can accurately define it.” For this reason, Brodsky and his contemporaries see the need to demystify the co-op business model.

From there, the opportunities are endless. Many young entrepreneurs are now looking to cooperatives as a more viable option for company growth than the traditional model. With the right counseling and a slow, sustainable approach to growth, co-ops could truly better our economic society and our greater world.