Communication, transparency and corporate social responsibility in European financial cooperatives, par Pauline Giroux

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Pauline Giroux, Master Management International, prix spécial de la recherche coopérative 2009


“A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise.” (EACB, nd a) Cooperatives exist in a large number of industries, but whatever industry they compete in they share common or at least close governance principles. Cooperatives are created and sustained to serve their customers’ interests, to ensure this goal most customers are members of the cooperatives , which means they are the owners of the cooperatives and thus have a direct impact on the decisions made in them, through the democratic system of governance based on 1 member = 1 vote. These principles differ from a privately owned company, where customers do not always own shares in the company and for those that do their voting impact corresponds directly to the number of shares they own.

Cooperatives are represented by several independent non-governmental organisations, at different geographical and economical levels. The International Co-operative Alliance (ICA), founded in 1895, represents independently 223 cooperatives coming from 87 countries (ICA, nd). The International Co-operative Banking Association (ICBA) is a branch of the ICA which aims is to contribute to the development of financial cooperatives by promoting their values and interests worldwide while underlying the impacts of their work on the economic and social levels (ICBA, nd). The European Association of Co-operative Banks (EACB), founded in 1970, is also an important representation body for European cooperatives. It acts as the main communicating link between the EU and cooperatives and between cooperatives themselves. Its main tasks include: informing member cooperatives of the EU decisions impacting the banking industry, coordinating communication and actions between members, lobbying on the European institutions and promoting the cooperative principles at the international level.

Financial cooperatives have been growing in size over the past thirty years in Europe and other developed countries. They have become serious competitors to private banks and are even dominating some markets nowadays. For instance in France, financial cooperatives collect 60 % of national savings, employ 280,000 people in 22,000 local agencies. In Europe, cooperatives collect 18 % of all savings and represent 160 million clients (Roux, 2008).

This has become the case as financial cooperatives have been expanding their customer basis: instead of staying focused on the historic market share (e.g. agriculture workers) they have opened their services to the whole banking sector. This has lead to the broadening of their services, in order to adapt to their new marketing strategy and to offer a proper alternative to their private competitors.

If this strategy has been a success in many countries where big financial cooperatives have emerged, it has a massive drawback for cooperatives. By growing, they have been going further away from their roots, and in the meantime have lost some of their credibility. Historic members have argued that by competing with private banks, cooperatives have lost their social and ethical touch. Cooperatives also face trivialisation from their new members and other stakeholders, who tend to appreciate financial cooperatives as similar to private banks. Most members do not know well financial cooperatives’ particularities, such as their corporate governance system, which is a huge problem as members are a key to that system. Other stakeholders, such as regulators at national and European levels tend to ignore that system as well, which means that legislation is mostly ill-adapted to non-private corporate governance system. Thus, cooperatives are threatened by the fact that their stakeholders (international bodies, governments, legislators, employees, current and potential members and customers, non-governmental associations etc.) do not understand their identity, model and values. In turn, these identity, model and values themselves are menaced and could even be harmed or disappear if cooperatives do not react.

This thesis will focus on the ways available to cooperatives to solve their trivialisation and credibility loss issues. The aim is to study what cooperatives are already doing to fight against trivialization, to explain what efforts they should do to get back to a healthy state and even to offer them a way of using their model and values to become leaders in sustainable development. Becoming sustainable leaders could help cooperatives not only to overcome the trivialisation state they are in through engaging into a two-way communication with stakeholders, but also to build on their particular model in order to build a strong and sustainable competitive advantage.

Therefore, the main question that we will try to answer here is: How can cooperatives overcome the trivialisation they face and build on their own identity, model and values in order to become better competitors? This thesis focuses mainly on big European financial cooperatives.

In order to fight the trivialisation and the loss of credibility they face, cooperatives should focus upon increasing their communication, especially towards members and legislators whilst simultaneously improving the transparency of their governance system and of performance monitoring. We will study the underlying communication and transparency issues behind the current problematic situation faced by cooperatives and the efforts they are making or should make to improve their communication and transparency policies in part I.

Recently, another way to fight the issues faced by financial cooperatives has emerged: the creation and implementation of a corporate social responsibility (CSR) strategy. CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission, nd). We will show throughout this paper how CSR is a wonderful tool that financial cooperatives can use in order to solve their issues of trivialisation and credibility. We will proceed to a review of literature on that topic and we will summarise and compare the CSR strategy adopted by some of the main financial cooperatives in Europe in part II. Finally in part III we will analyse the findings of previous parts, draw some conclusions about the current situation and offer a guide for cooperatives in order to become leaders in sustainable development.

The methodology chosen to conduct the research necessary for this thesis is an extensive review of academic and industry literature, which is the basis of part 1 and 2. The literature was condensed through personal research on academic databases and on the Internet. The choice of an academic review seemed quite natural and obvious for several reasons. A research project based only on interviews seemed unachievable, because cooperatives are spread all around Europe and the topic studied required interviews with top managers, who are quite hard to reach. I was lucky enough to manage to get several interviews, thanks to my research assistant job, but not enough to build a research project on. Moreover, I wanted to have both an outsider and an insider point of view on this topic. Managers have their own appreciation of the issues that their cooperative faces, but they lack some objectivity and often fail to ‘think out of the box’. Doing a review of all the research published in that field seemed to be a good way to get a variety of opinions from both academic scholars specialised in the cooperative sector and cooperative professionals working in the field. The fact that the literature studied here has been written by specialists from both worlds, academic research and cooperative baking industry, makes the literature review varied, interesting and more likely to show a broader, clearer and more accurate picture of cooperatives’ current situation.

This literature review is coupled with a practical study focusing mainly on the CSR side of the thesis. This practical study is based on the analysis of CSR reports, on information I got through participating in a meeting of the CSR working group of the EACB, and on some interviews that I conducted with representatives of the sustainable development departments within Crédit Mutuel and Crédit Agricole. The aim of this practical study is to closely study the CSR strategy adopted by four big cooperative groups around Europe to compare these together and then to draw some conclusions about the way cooperatives deal with CSR and how they could improve themselves.

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