Where’s the Evidence?

Summer 2023 #42
written by
Phil Tulba, Ubele & Chris Cowcher, Plunkett Foundation & Campbell McDonald and James de le Vingne, Ownership at Work & Suzanne Orchard, Co-operative Development Scotland
illustration by
Carl Godfrey

Democratic business ownership has recaptured the interest of policymakers, business, and communities over the last half-decade, but those promoting it still rely on a narrow evidence base that currently limits its political and public influence across the UK.

As part of a commitment to strengthen the case for democratic business, we’re working with the wider business movement to ask what kind of evidence will:

∙  Secure more support for democratic business growth?

∙  Challenge preconceptions and barriers in public institutions and business?

∙  Demonstrate the unique characteristics of democratic business within a range of current policy agendas?

For this interview – part of our Democratic Business Summit series – we speak to a range of advocates in local government, business federations, foundations, and think tanks to get their perspective on the evidence gap and how we can make a stronger case for transforming business.

Democratic Business – Where is the evidence?

The Ubele Initiative

Democratic businesses are central to the social and economic infrastructure accessed by Black and racially minoritised communities, providing significant social value to the communities they serve. However, democratic business growth for our communities is limited by the historical and persistent barriers that they face in accessing funding and business support. While evidence is needed to secure support for a democratic business growth that is inclusive, it needs to not only address the inequalities our communities face but provide recommendations that are translated into concrete actions for change.  

The Ubele Initiative have long engaged in research that identifies the need for targeted support for our communities. Our seminal report, A Place to Call Home (2015), identified the threat to African diaspora community assets and revealed a lack of targeted support. More recently, The Adebowale Commission Report (2022) provided evidence on the inequalities and barriers Black-led social enterprises face in accessing social investment. Similarly, research by Locality and Spark Insights highlighted the funding barriers experienced by marginalised community businesses (2023). 

The disproportionate impact of COVID-19 on Black and racially minoritised communities has affected many democratic businesses, who have struggled to recover before being hit by the effects of the cost of living crisis. Ubele’s most recent research, ‘A Place to Call Home 2.0’ (2023), takes these factors into consideration alongside changes in policy and legislation to assess where our communities are now and how important asset ownership and sustainability are for them. Intentional action against the recommendations brought forward by such evidence will secure and broaden support for democratic business growth amongst more communities. 

The recommendations from our own research have informed Ubele’s strategic objective in strengthening our communities through enterprise and asset development. As part of our commitment to community wealth building, Ubele has developed and led a number of initiatives including the Enterprise Development Programme, the National Community Wealth Building Strategic Alliance, and Gida Housing Co-operative. These initiatives are vital to advancing community wealth building initiatives amongst our communities and in turn benefit democratic businesses as part of a progressive and inclusive economy. 

Ubele have also engaged with a range of national and local policy agendas to ensure our communities are heard and considered in the decision-making process. In October 2022, we submitted a response to the government consultation on the Dormant Assets Scheme for England, in which we included the interests and voices of Black and racially minoritised communities after hearing from them directly. Our respondents highlighted the need for targeted support through dormant assets funding in social investment and community wealth funds. This also brought light to the unique characteristics of democratic businesses within our communities and the need for policy makers to engage with them. We have also carried out research into the Community Ownership Fund and the UK Shared Prosperity Fund as part of the Levelling up agenda. We have found that the geographic priorities of this policy mask the diverse reality of places with large Black and racially minoritised communities and their opportunity to level up along with the rest of the UK. Levelling up needs to target both geographical and racial equity. 

While there is much evidence for the value of democratic business ownership among Black and racially minoritised communities, it needs to be utilised by local authorities, social investors and intermediaries, and policy makers to ensure that growth is even and equitable. 

The Ubele Initiative is an African diaspora-led infrastructure plus organisation, and we believe in empowering Black and minoritised communities in the UK, to act as catalysts for social and economic change.

To achieve this, we work with community leaders, groups, and organisations in the UK and beyond to strengthen their sustainability, resilience, and voice.

Plunkett Foundation

The majority of community businesses supported by the Plunkett Foundation are in rural areas, in communities often perceived as affluent, with no real ‘need’ worthy of support from policy makers or funders. This is not the case. There is an evidence gap on rural deprivation that is masking an opportunity for investment to grow a movement which has the potential to transform the face of the countryside. 

We know that a network of over 700 community-owned businesses are actively addressing hidden needs that exist in the countryside, helping the most in-need locally. They create employment and training opportunities for those excluded from the labour market, and offer inclusive social spaces which benefit everyone and provide affordable, accessible services locally. These businesses are having a positive impact in rural communities UK-wide. 

There needs to be a more nuanced view of how to assess deprivation and bring about social change in rural areas, otherwise there will be no change whatsoever. Community-owned, democratically run local businesses can open up access to the countryside, and now more than ever this business model needs universal backing to achieve this.

At present IMD (the Index of Multiple Deprivation) is the most commonly used data source by funders prioritising their support and grant allocations. As acknowledged by OCSI (Oxford Consultants for Social Inclusion), however, this can be problematic because area-based measures such as IMD have limitations in terms of measuring rural deprivation. The reality is that rural populations are dispersed, resulting in ‘pockets of need’ which tend to only be revealed at smaller geographical scales.

The Government’s Rural Affairs Secretary of State, Therese Coffey, recently announced that they would “review how deprivation in rural areas is measured so that it is better understood and taken into account in decision making – ensuring the interests of rural communities are better represented”. This is a positive step forward, but it highlights the lack of existing evidence to articulate the needs of rural residents.

We know from studies, from organisations such as Action with Communities and Rural England, that the cost of living crisis has been compounded in rural areas, where the cost of transport and living in “hard to heat, hard to treat” properties have meant that residents have endured additional financial burdens on their households budgets as a result of the crises. The ONS estimates that rural households pay £27 a week more on transport and £4 a week more on food than people in urban areas. These higher costs, coupled with limited and often lower-paid rural employment opportunities, risks unfairly creating disadvantages for people simply because of where they live. 

To help us to persuade policy makers, funders and other influential stakeholders in our sector to look past the vision of a “green and pleasant land” when we talk about rural communities, we need the evidence to articulate rural needs and therefore the meaningful differences being made by community businesses. Through empowering this network we have an opportunity to break the cycle of dormancy affecting large swathes of the countryside, and where only the rich and affluent will flourish.

Campbell McDonald, Chief Executive, Ownership at Work (independent think tank) & James de le Vingne, Chief Executive, Employee Ownership Association (trade body)

Democratically owned businesses can help us tackle some of the most fundamental challenges we face today in our economy and society. But they are still a niche choice. How do we change that and unleash the full potential of this remarkable way of doing business? One answer must be better data.

To dramatically scale up the numbers we need to make more people aware of the ownership model, demonstrate why it is attractive, and make it easier to put in place. The key to raising awareness is evidence: data that shows beyond doubt why the model should be of significant interest not just to exiting business owners, but also to investors and policymakers (who in turn can make the model more attractive and easier to introduce). Our focus is the all-employee owned sector, businesses where over 25% of the business is held by or on behalf of all employees and they have meaningful opportunities to influence critical decision-making. Here we find incredibly rich anecdotal, firm-level data about the economic and importantly the social impact of the model. But we need a greater volume and quality of data.

Whilst we have evidence that UK employee owned businesses (EOBs) tend to be more productive and profitable than their non-employee owned counterparts, there is far less fundamental baseline research on the long-term effects of employee ownership on economic growth and job creation; or studies that highlight how selling to employees can keep a business rooted in its local community, protecting the recycling of wages and spending into the local economy.

We need stronger proof points to underline how much further EOBs tend to go in investing in employee skills and learning, protecting employee health and wellbeing, and providing secure, good quality work. We need more work on confirming that EOBs seem to be more likely than non-EOBs to commit to additional contributions to their communities and to the environment. Furthermore, if policymakers want an economy which protects the ability of people to stay economically active for longer, we need an industrial strategy that prizes not just certain sectors but specific business models that will generate the kind of responsible, sustainable growth they are looking for.

There are specific actions that policymakers can take to support this. The public sector spends roughly £400M with suppliers every year, bringing with it huge opportunities to direct growth opportunities at businesses that can prove their business model generates additional economic and social value in the economy beyond simply delivering a core product or service. We know from much more comprehensive US data that EOBs can start to tackle fundamental inequalities around wealth and income, and bring the opportunity of business ownership to groups in society who typically don’t access those benefits. We won’t see this as starkly in the UK without the Office for National Statistics starting to collect and publish much clearer data on how companies are owned across our economy.

The sector is doing its part to address this evidence gap, including funding a large national baseline project called the EO Knowledge Programme (report due in October 2023) that aims to show the differential socio-economic impact of EOBs. Nonetheless, there is a profound need for more funding to address further research gaps, not least in highlighting EOB impact on long-term company sustainability and wider economic resilience. 

Our ultimate goal is to create a virtuous circle: strengthening our evidence data, using that data to help grow the sector, and, as the sector grows, harvesting ever more data to drive support and scale up both growth and impact. 

Co-operative Development Scotland

Co-operative Development Scotland (CDS), part of Scottish Enterprise, supports economic development across Scotland through employee ownership and co-operative business models. The range of practical support CDS provides is closely aligned with the Scottish Government’s ambition to create a fairer, stronger, wellbeing economy as outlined within their National Strategy for Economic Transformation. 

Operating within an enviably positive policy landscape for inclusive models in Scotland, CDS is nevertheless the only statutory provider of dedicated co-op support, supporting an economy where the measurement of success tends to be dominated by GDP considerations. As a result, the social, health, wellbeing and community impact of key economic activity can often be overlooked. Therefore, a focus on these impact indicators exclusively (such as GDP) provide only part of the evidence on the wider beneficial impacts of the co-operative sector to the economy. Two of the main challenges include:

  1. The limitations to the opportunities to record the full range of positive impacts that co-operatives make to our wider economy. For a wellbeing economy, economists should now start to build in a broader set of economic measures rather than relying on a narrow (more traditional) view of monetary success only – this would provide critical levers to better demonstrate the economic value and potential of the sector. 
  1. The perception of the co-operative sector, which is often misunderstood, including assumptions that co-operatives are a subset of the broader but prevalent ‘profit for purpose’ movement. Many people don’t understand that co-operatives have distinct dividend and ownership structures that differentiate them from social enterprises, which reinvest their profits into a social mission.

These embedded assumptions often make influencing a delicate task, so we very much welcome Scottish Government’s commitment to undertake a review this year that will develop a plan to significantly increase the number of co-operatives in Scotland 

What kind of evidence will assist CDS to address these challenges:

  1. Currently the sector faces a challenge of accessing evaluation tools that specifically demonstrate the broader impact of co-operatives. We are interested in following the route taken by the Social Enterprise sector in Scotland, by developing our own indicators to demonstrate the co-operative advantage across key industry sectors. However, we appreciate this takes significant resource and sector input. Nevertheless, we believe that stronger evidence of the ‘co-operative advantage’ can then be used to continue to influence policy and raise awareness, strengthening the case for more co-operative development as a tool in achieving Scotland’s wellbeing and sustainable development goals. A further ambition would be to publish a Co-op Economy report specifically for Scotland. The performance data available is hugely positive and shows sustained growth but, as it is currently only available on a UK-wide basis, it has limited value in conversation with our stakeholders. 
  1. The co-operative sector often gets bundled into the broader ‘business for social good’ bracket and therefore inadvertently loses one of its key characteristics – commercial viability. Co-ops provide and/or pass on their benefits to members, ensuring that it is the customers, staff or communities who are the recipients of the positive outcomes such as fair pay, working conditions, savings on products and collective wealth. To secure more support for the growth of the Scottish co-operative sector we are strengthening the narrative around what a co-op is and is not. More evidence to demonstrate that co-ops are not exclusively lifestyle, profit for purpose, or charitable ventures would be powerful. In addition to this, some supporting evidence to demonstrate the funding patterns and general financial resilience of co-ops alongside other models such as social enterprises could be beneficial.
  1. Knowledge of policy agendas can be an important tool for all businesses and support organisations. We find that many businesses don’t always appreciate the value that knowledge can bring when required to demonstrate their value to public sector funders and support providers aligned with national policy goals. The evidence gap here is probably more of a ‘knowledge gap’, and so supporting businesses to better demonstrate their awareness of policy and ability to link their unique characteristics, accordingly, will invariably aid both their relevance to our Scottish economic goals and their own viability. 

Summer 2023 #42

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