PERFORMANCE · measuring performance follows from this. What reporting and measuring performance...

SimplyPERFORMANCE

A guide tocreating membervalue by aligning

co-operativestrategy,

performancemeasurementand reporting

AcknowledgementsSimply Performance has been co-written by Philip Monaghan and Eve Sadler of Infrangilis. Forcontributing case studies and sharing other insights thanks go to Clarke Willis (Anglia Farmers), MikePeirce (Cambridge Programme for Sustainable Leadership), Sonja Novkovik (Canadian CooperativeDifference Network), David Aeron omas (Forum for the Future), Philip Donnelly and Chris Symons(Greenwich Leisure Limited), John Scade (MAS Business), Steve Ridler (Midcounties Co-operative),Maryann Denfhy and Jim Watts (Midlands Co-operative), Jeremy Nicholls (SROI Network), BobCannell (Suma), Carol Adams (Sustainability Accounting, Management and Policy Journal), Derick deJongh (e Albert Luthuli Centre for Responsible Leadership), Barry Clavin (e Co-operative Group)and Fergus Lyon (ird Sector Research Centre). We would also like to thank Ed Mayo and EmmaLaycock of Co-operatives UK for setting the project direction and their constructive feedback of the text.

Simply Performance: A guide to creating member value 1

1 Introduction ............................................................................................................................................................ 2

2 The benefits of measuring and reporting co-operative performance ........................................... 6

Case study: Greenwich Leisure Limited .......................................................................................................... 9

3 How to approach the alignment of strategy, measurement and reporting ............................. 12

4 Financial indicators ........................................................................................................................................... 17

Case study: Suma ................................................................................................................................................ 18

5 Non-financial indicators ................................................................................................................................. 21

Case study: Anglia Farmers ............................................................................................................................... 22

6 Sustainability indicators ................................................................................................................................. 27

Case study: Midlands Co-operative ............................................................................................................... 29

7 Next steps ............................................................................................................................................................. 33

Appendix: Sources of further information ........................................................................................................... 34

Further reading and guidance ................................................................................................................................. 36

Contents

What this guide aims to achieveis guide has been developed for co-operativeswishing to measure and report their performanceas a clear statement of member value creation,including their financial, non-financial andsustainability impacts. is guide forms part ofCo-operatives UK’s established ‘Simply’ series.

Measuring and reporting performance on valuecreation for members is not a new concept formany co-operative enterprises. ese co-operatives understand the benefit of beingbetter able to reflect and influence memberopinions in their decisions and actions, but alsoinform their members about their collectiveimpact through this process. e Co-operativeGroup in the UK and Van City Credit Union inCanada have been recognised through numerousawards as global pioneers in ‘triple bottom line’reporting – a statement of an enterprise’sfinancial/economic, social and environmentalperformance. For some other co-operativeenterprises however, particularly new start-ups orsmaller organisations, the measurement of theirnon-financial or sustainability performance maybe a new concept compared to their financialperformance.

e production of this guide follows arecommendation by the Co-operatives UK Co-operative Performance Committee (CPC).e CPC brings together accountants and otherprofessionals from all parts of the co-operativemovement to provide recommendations andguidance to its members on best practice foraccounting standards including financial, non-financial and sustainability performance. etiming of this guide is critical as the 2012 ‘UNInternational Year of Co-operatives’ provided ahuge platform to help make the transition to aco-operative economy. According to the Co-operatives UK Co-operative Economy 2013,more than 6,169 co-operative enterprises in theUK already contribute £36.7 billion to the UKeconomy and operate across all business sectors.


Co-operatives UK works to promote, develop and unite co-operative enterprises. It has a unique role as a trade associationfor co-operatives and its campaigns for co-operation, such as Co-operatives Fortnight, bring together all those with a passionand interest in co-operative action.

1. Introduction

Simply series is a suite of resources including:

• Simply Start Up • Simply Legal• Simply Governance • Simply Buyout • Simply Finance

There are many examples of goodpractice in specific aspects ofperformance measurement tools,ranging from Greenwich LeisureLimited’s development of a form ofbalanced scorecard through toLincolnshire Co-operative’s applicationof a local multiplier tool (LM3) to gaugetheir local economic impact of the co-operative pound.

Who is this guide for?e target audiences for this guide are thoseresponsible for measuring performance in co-operative businesses, and co-operative businessadvisors. e intention is that the guide will beuseful for a variety of functions involved increating value such as member relations, strategy,governance, resource management, auditing andaccounting, and public affairs.

How to use this guidee guide is split up into different sectionsrelating to the different stages of the performancemeasurement journey from: making the businesscase to take action (Chapter 2); approaches toaligning strategy, performance measurement andreporting (Chapter 3); and a brief overview ofindicators to measure financial, non-financial andsustainability performance (Chapter 4, 5 and 6).e learning from each of these is then broughttogether to propose the next steps to planningand taking action (Chapter 7). e Appendixprovides a summary of sources of additional toolsand information. Figure 1 sets out your routethrough this journey according to your particularcontext.


Mainstreaming the co-operativeway of enterprise requires buildingthe sector’s capacity to measure itsperformance to drive improvementand allow benchmarking so that theco-operative sector can furtherdemonstrate its enormous value tothe nation.


Starting positionDo you measure how youperform as a co-operative?

Take a look at the benefit of tracking performance

Go to Chapter 2

Figure 1: A decision-making path for measuring performance on member value creation

FinancialGo to Chapter 4

Non-financialGo to Chapter 5

SustainabilityGo to Chapter 6

Develop your approach tomeasuring and reporting

Go to Chapter 3

Member value

Be clear on why your co-operative is in business

Pay dividends

Net profit is a key signal

Global ReportingInitiative

Select indicators that are relevant for you

Keep prices low or wages high

Retained income is a key signal

Scope

Consider premises,products and

suppliers

Employee owned

Worker representationand voting are

key signals

Customer owned

Trading, satisfaction and voting are

key signals

Enterprise owned

Trading and voting are key signals

Mixed-ownership

Signals vary bystakeholder group

No Yes

Social andenvironmental success

Do you know your wider impact?

Member control

How well does yourownership form delivereffective governance?

Sharing the gains

What do you do withyour money?

But what does Co-operatives UK mean when itrefers to ‘financial’, ‘non-financial’, and‘sustainability’ impacts? Essentially this meansthe different ways that a co-operative createsmember value in terms of:

• Sharing profits (financial) e.g. distributingdividends or retained income to keep priceslow

• Member ownership and control (non-financial) e.g. number of members andcustomer satisfaction

• Wider social and environmental successes(sustainability) e.g. staff engagement, suppliercare, community development or reducingconsumption of natural resources.

Chapters 4, 5 and 6 provide further descriptionsof financial, non-financial and sustainabilityperformance measures.

Critically, each of the sections share and drawupon real world examples of co-operativeenterprises measuring their performance – thisincludes primary case studies derived frominterviews with Co-operatives UK membersoperating with a variety of models and acrosssectors (as detailed in Table 1 below).

e case studies are complemented by insightsfrom other instances of good practice from theLincolnshire Co-operative, Midcounties Co-operative, e Co-operative Group and e Wine Society.

In each section the guide also providesinstruction and signposting for the user torelevant tools and learning resources, such as theGlobal Reporting Initiative (GRI), LocalMultiplier (LM3) and Social Return onInvestment (SROI) (as detailed in Box 5 inChapter 6).

Just as importantly, in compiling this guide andproposing indicators to measure and compareperformance, Co-operatives UK has workedclosely with the CPC and the Practitioners’Forum to understand what works well and lesswell. is included a desktop analysis of studiesexamining the merits of various approaches tomeasuring co-operative process, consultingmembers on the original terms of reference forthis project and sharing initial drafts with them,and convening a review group of external expertsto feed back on the later drafts. is approachensures this guide is applicable across all forms ofownership and sectors, practical, relevant andevidence based.


Table 1: Member case studies from across the co-operative movement

Page

22

9

29

18

Member

Anglia Farmers

Greenwich Leisure Limited

Midlands Co-operative

Suma Wholefoods

Ownership

Enterprise

Multi-stakeholder

Consumer

Worker

Sector/Sub-division

Agriculture

Leisure

Retail

Food

ese are tough times, in terms of society, theeconomy and the environment. With businessplaying a more influential role in local, nationaland international life, it is not surprising thatthere is an interest in holding enterprises toaccount for their overall impact. is started as achallenge to businesses to come clean, frominvestment funds in the 1970s in relation toapartheid through to oil giants and clothingfirms. It has now been taken up more widely, asbusinesses are asked about the full costs and truevalue of their ‘doing business’ and to measure,report and share their progress. Over recentdecades this has led to new mandatoryrequirements in several countries on greatercorporate disclosure to rebuild trust, rangingfrom stock exchange listing obligations in SouthAfrica through to annual reporting obligationsfor large companies in the UK.

Co-operatives start from a good place, becausethey were set up to meet the needs of theirmembers and operate on a democratic basis thatgives a voice to those involved with the business,rather than external investors. Why do we exist?How do we know whether we are achieving that?For co-operatives, this is about creating value formembers by working together in a fair and

effective way. However that does not mean thatco-operatives do not have the same responsibilityto consider wider issues, such as environmentaland community factors, in line with internationalco-operative values and principles.

Measuring and reporting performance is not firstand foremost about compliance though; it isabout business improvement. For manyenterprises, the business case for measuring andreporting on performance is linked to drivingvalue creation. at is why many enterprises gobeyond the mandatory minimum reporting. Co-operatives are no different in this regard. ebest co-operatives are clear about member valuecreation as it demonstrates how co-operativeprinciples are running throughout the business(rather than tokenism or ‘green washing’) –measuring performance follows from this.

What reporting and measuringperformance can offer your enterpriseere are a variety of reasons for your co-operativeto measure and report on its performance, asdetailed in Figure 2 and detailed in Table 2.Ultimately, this added value can be summed upas positively influencing both internal andexternal opinions, decision-making and action – of your members, management and staff,customers, local communities and otherstakeholders – which are invaluable to securingthe standing and continued viability of yourco-operative.


e story behind the call for enterprises to measure and reportBefore even thinking about what and how to measure your co-operative performance it is vital to first understand why youshould commit to taking action.

2. The benefits of measuringand reporting co-operativeperformance

By 2012, according to CorporateRegister.com,over 5,500 enterprises around the world reporton their triple bottom line performance.

e co-operative movement has a proud historyas a champion for a fair deal for its members,surrounding communities and internationalsuppliers. So it makes perfect sense that robustlyand openly reviewing your progress and sharingthis with your stakeholders should be a coreactivity and one that is clearly entirely aligned tothe co-operative mission. As one of the primary

objectives of your co-operative is to satisfymember needs, regular interaction with membersis crucial – measuring and reporting onperformance can make a massive difference tothis. It gives members reliable information and,crucially, the trust, accountability and ownershipthey need to be fully engaged with and in controlof the co-operative.


Benefitsof

reporting

Changesmanner of

communications

Supportsresource

allocationdecisions

Stimulatesinnovation

Provides comparison with

competitorsProvidesincentive tocontinuously

improve

Benchmarks non-financial and

sustainabilityinformation

Reflectsinterdependence withcustomers, members

and society

Shows how you use the resources

you rely on

Demonstratesrelationships

with stakeholders

Figure 2: Potential benefits for measuring and reporting co-operative performance

Shows how suppliers interact

with your priorities


Type of benefit

Changes the manner in which youcommunicate (i.e. it demonstratesthat you are doing more than justmeeting compliance objectives, byshowing the positive impact youhave beyond pure financial returns).

Provides the information to supportresource allocation decisions that areconsistent with long term economicviability.

Highlights opportunities forimprovement and helps to stimulateinnovation.

Compares your performance tocompetitors within the same sector(sets out a challenge to rivals); as well as raising the bar amongst otherco-operatives.

Offers members working within theco-operative a measure ofperformance (and thus desire tocontinuously improve).

Benchmarks non-financial andsustainability performance as well asfinancial results, so you can see theimpact of your hard work. Alsohelps to keep members informedabout this crucial element of yourimpact.

Reflects interdependencies betweenthe success of the co-operative andthe value it creates for members,customers and society more broadly.

Presents the use of, and effect on, theresources which the co-operative isdependent upon.

Enterprise example

Measuring and reporting has enabled Co-operative Food(part of e Co-operative Group) to show that the vastmajority of its customers believe that its ethical policy hasmade the business more appealing (88%).

Greenwich Leisure Limited’s development of a triplebottom line form of balanced scorecard that is usedthroughout its internal and external performancemanagement.

By seeing the interconnected nature of their activities,McVitie’s (part of United Biscuits) reformulated their biscuits,resulting in a significant reduction in salt and saturated fat (aswell as 40% less palm oil). is was accompanied by a 9%increase in sales of HobNob and Digestive lines.

rough measuring and reporting, Adnams were able toshow their environmental impact was under half of that oftheir competitors – using only 3.2 pints of water to maketheir beer in comparison to the industry average of 8 pintsof water.

Midcounties Co-operative was able to demonstrate amassive fall in the turnover of colleagues (down from 31%to just 3.4%) through their participation in an organisation-led community volunteering project.

‘Grow with Esh’ is an Esh Group initiative aimed at helpingyoung people to develop horticultural projects. Bymeasuring the benefits of this activity, the group were ableto see that this had delivered them over £30,000 worth ofpositive press coverage.

Lincolnshire Co-operative apply a local multiplier tool(LM3) to gauge the local economic impact of its co-operative pound.

Adnams were able to show their investment in a new eco-efficient distribution centre reduced energy use (58% lessgas and 67% less electricity per square metre compared tothe old warehouse) and improved environmental impact.Energy efficiencies saved Adnams £50,000 per year.

Table 2: Examples of co-operatives and others benefiting from performance measurement


Type of benefit

Demonstrates the relationships and human capital on which the co-operative depends (namely, the relationships with its members,community and other stakeholders).

Supports supplier engagement bycommunicating and collatinginterest in how suppliers interactwith the priorities you identify(e.g. re-investment in the localeconomy).

Enterprise example

rough measuring the impact of their SustainabilityFramework and Ethical Model Factories, Marks andSpencer (by working in partnership with the factories toimprove process efficiency as a means to increase wages,reduce working hours and protect the quality of products)were able to see that staff turnover reduced from 10% to2.5% and absenteeism reduced from 10% to 1.5%.

Pachacuti’s fair trade panama hats are produced by women’sco-operatives in the Andes mountains of Ecuador. ecompany was able to demonstrate improvements inrelationships with suppliers, increased knowledge of theirentire supply chain and production process through themeasuring and reporting process. It resulted in a 45%reduction in quality problems.

Case study Greenwich Leisure Limited

Legal form:

Community benefit society and

exempt charity

Organisational type:

Mixed ownership co-operative

Website: www.gll.org

Established in 1993, Greenwich Leisure Limited (GLL) describes itself as a social enterprise whoseoverarching aim is to deliver sustainable and affordable provision of facilities and services for publicbenefit for recreational, sporting and other leisure time occupation, in the interests of social welfare,healthy living and education. By 2011 GLL had a turnover of £109 million, employed more than6,000 staff and managed more than 110 public leisure centres – attracting 35 million visits fromusers – in partnership with 30 local councils and other organisations.

GLL is governed by a board of trustees which includes representation from a number of stakeholdersincluding customers, local authority members, skilled professional individuals, and most importantlythe workforce. All eligible staff in GLL are encouraged to join the Society as voting members andcurrently 70% of staff have opted to do so. This leads to a high level of empowerment, commitmentand motivation resulting in an improved quality of service to the community.

e learning from Greenwich Leisure Limited is explored in more detail in the following case study.

What are the Key Performance Indicators(KPIs) you use to measure your organisation’sperformance and how is this integrated withinthe business?The range of KPIs that reflect our social differenceare made up of both marketplace oriented andinternally focused ones. In terms of marketperformance, our clients are mainly localauthorities who require us to report to them bothon financial results for example sales turnover andcost to income ratio, and service delivery resultsincluding social impact for example provision ofconcession fares, serving the full spectrum of thecommunity (i.e. ethnic minorities, women and girls,the elderly and disabled), offering localemployment and training programmes. Withregards to internal performance, we benchmarkquality against other services, and this includes ourenvironmental impact for example electricity andgas consumption and waste minimisation.

These KPIs reflect the four pillars that support anddrive our overarching aim to provide:

• Service excellence

• Strong business

• Motivated, engaged and well trained staff

• Social impact.

We have mainstreamed these KPIs within ourbusiness by using a balanced scorecard to trackprogress and ensure our charitable objectives arecontinuously met. This is supported by a single andcentral reporting system that acts as anadministrative database for our risk register,management accounts and audited annual financialaccounts. In addition to a Finance andAdministration department we have an establishedEnergy and Environment department and a Skillsand Development department to ensureoperational implementation of these plans.

How have you determined the priority/material issues to measure?We set a 5-year corporate plan based on the fourpillars that drive our overarching aim. From thisflows our annual plans. Critical to developing bothis engagement with our key stakeholders. Mostcritically, this involves listening to GLL’s WorkerBoard to understand what staff priorities are andBoard Member breakfast roadshows to glean newideas from staff and secure ownership for futuredirection. We then balance and ‘marry this up’ withwhat our client local authorities are saying is mostimportant to them. These priorities then feed intoour balanced scorecard.

How are member value and other stakeholderbenefits being enhanced through measuringperformance?We understand that if we do not measureperformance then we cannot demonstrate value toour stakeholders – this does not make it easy togauge however! Motivating, engaging and trainingstaff is one area where it is clear that measuringperformance is tremendously useful for us. Throughour attainment of Investors in People status andbiennial staff surveys we know that staff who areaware of our social enterprise objectives also valuebeing part of the Society. This translates intoperformance: we have low sickness-absence andstaff turnover against the industry norm and ourtrack record shows that when we have taken over apartner’s leisure facility staff productivity increases.The value for staff is not necessarily driven bymoney however – yes, we offer benefits for staffwho opt-in to the Society – but more important toour workforce members is their ability to governthe business.

How are you benchmarking performance andcommunicating performance statements toyour stakeholders?External benchmarking is not alwaysstraightforward as we trade in a competitiveindustry with commercial sensitivities. So we utilisea national benchmark scheme for sports and leisureproduced by Sport England and Sheffield HallamUniversity. Issue-specific standards or labels arealso valuable here – the Social Enterprise Mark (forour social impact), the Carbon Trust Standard (forthe energy efficiency of our estates) and ISO 14001(for the quality of our wider environmentalmanagement systems). These inform managementdecision making and position the GLL brand as the‘fairtrade’ leisure and sports facility provider in thecountry. We also attempt to track the effectivenessof the communication of our performancestatements, as challenging as this is to do. Thisranges from regular staff surveys and an annualcommunications day (e.g. to determine if staff readnewsletters) through to Google analytics onwebsite traffic and marketing campaign evaluationsto determine how this translates into product sales.


Extra value of integrated reporting:handling trade-offs and synergiese past half decade has seen the emergence of,and interest in, so-called ‘integrated reporting’,on the basis that this provides new and additionalbenefits to performance measurement. Integratedreporting brings together material informationabout an enterprise’s financial, non-financial andsustainability progress and impacts in one place –with the goal of providing a clear and conciserepresentation (and, crucially, a more simplifiedaccount) of the enterprise’s entire performance.

e reason for this is twofold – firstly, reportswere becoming longer and longer which made itcumbersome for report users; and secondly, asreporting had evolved in separate, disconnectedstrands, critical interdependencies (i.e. synergiesor trade-offs) were not being made clear throughthe production of separate financial, non-financial and sustainability reports.

Led by new multi-stakeholder coalitions such asthe International Integrated Reporting Council(IIRC), the move towards an integrated reportbeing an enterprise’s primary reporting vehiclehas been widely welcomed. For example, 84% ofinvestors and analysts state that it is either veryimportant or important for companies to displaylinkages between different aspects of performance(GRI and A4S, 2012). e extra value of anintegrated approach to reporting for co-operativesis detailed in the Figure 3 below.

“In the past, we focused on economic factors forthe Annual Report. Since deciding to dointegrated reporting, we have started to collectmore information and to change the way wecollect it, particularly how the sustainabilityreporting process can be more ‘integrated’ with that of the annual reporting process. e assurance process has helped to increaseawareness of how we need to continue tomanage our non-financial data well into thefuture and how it may evolve over time.Integrated Reporting has also spurred us tothink more about how to communicate theconnections between our business strategy,processes and performance, as well as how toreflect our overall strategic objectives in a moreholistic fashion.”

“Clp Holdings (as quoted in BlackSun, 2012)

Given this, in formulating your business case formeasuring and reporting on co-operativeperformance, it is important to consider the extravalue that integrated reporting might bring. ebeauty of the co-operative principles is that, forinstance, they allow an enterprise to deal withany trade-offs in a democratic way (for example acredit union deciding how to share profits interms of favouring both savers and borrowers).Doing so can enable the articulation of strategyand show how the co operative difference iscreating value over time.


88% of organisations which are alreadyundertaking or moving towards integratedreporting stated that it leads to improvementsin better decision making (BlackSun, 2012).

Improved co-operation

between departments

Use non-financial data to

gain clearer view of the co-operative

Shorter lengthreports

Makes your co-operative ‘story’ more accessible

to members

Reduces duplication

of information

Streamlinesdata

collectionacross the

co-operative

Ensurescommunication

messages are linked

Figure 3: e added value of integrated reporting


Measurement and reporting as a management process Once you have made the business case to measure and report onyour co-operative performance it is essential to establish a clearand effective management process to take action. Figure 4 sets outa five-step process for doing this. As you can see this is not alinear model, but rather, a cycle of continuous learning andquality improvement.

3. How to approach thealignment of strategy,measurement and reporting

Step 1:Leadership set outco-operative vision

and strategyStep 2:

Establish governanceand cross-departmental

/co-worker action plans

Step 3:Determine material

issues (priorities)

Step 6:External

verification

Step 5:Collect and analyseperformance data

Step 4:Select co-operative

indicators

Engagement with co-operative members

and other key stakeholdersthrough the process to

identify priorities and assessreporting effectiveness

Figure 4: Step process for co-operative measurement and reporting

(Source: author; Credit: GRIand IFC, 2010)

When measuring and reporting your co-operativeperformance it is crucial to remember that yourinformation is not just intended for onehomogeneous audience – the benefits to differentaudiences vary. e types of information whichwill be of use to members (e.g. proportionretained income distributed to co-operativemembers) may be different to that of suppliers(e.g. targets to reduce emissions or waste throughprocurement), for instance. However, all may beinterested in a spectrum of information thatspans financial, non-financial and sustainabilityperformance. Furthermore, different stakeholdergroups may be better engaged by a different mix

of communication pathways when it comes toreporting performance (e.g. annual report,website, member roadshows, customernewsletters etc), which is why engagement withyour stakeholders during the whole process needsto include understanding the impact of reportingitself, as well as what impacts you choose toreport on (CSR Europe & AccountAbility,2002).

Paramount to co-operative performancemeasurement is understanding how the impact ofyour actions relate to the Co-operative Values andPrinciples (as detailed in Box 1).


Co-operatives are based on the values of self-help, self-responsibility, democracy, equality,equity and solidarity. In the tradition of theirfounders, co-operative members believe in theethical values of honesty, openness, socialresponsibility and caring for others.

The co-operative principles are guidelines bywhich co-operatives put their values intopractice.

1. Voluntary and Open MembershipCo-operatives are voluntary organisations, opento all persons able to use their services andwilling to accept the responsibilities ofmembership, without gender, social, racial,political or religious discrimination.

2. Democratic Member ControlCo-operatives are democratic organisationscontrolled by their members, who activelyparticipate in setting their policies and makingdecisions. Men and women serving as electedrepresentatives are accountable to themembership. In primary co-operatives membershave equal voting rights (one member, one vote)and co-operatives at other levels are alsoorganised in a democratic manner.

3. Member Economic ParticipationMembers contribute equitably to, anddemocratically control, the capital of their co-operative. At least part of that capital is usuallythe common property of the co-operative.Members usually receive limited compensation, ifany, on capital subscribed as a condition ofmembership. Members allocate surpluses for any

or all of the following purposes: developing theirco-operative, possibly by setting up reserves, partof which at least would be indivisible; benefitingmembers in proportion to their transactions withthe co-operative; and supporting other activitiesapproved by the membership.

4. Autonomy and IndependenceCo-operatives are autonomous, self-helporganisations controlled by their members. Ifthey enter into agreements with otherorganisations, including governments, or raisecapital from external sources, they do so onterms that ensure democratic control by theirmembers and maintain their co-operativeautonomy.

5. Education, Training and InformationCo-operatives provide education and training for their members, elected representatives,managers, and employees so they can contributeeffectively to the development of their co-operatives. They inform the general public –particularly young people and opinion leaders –about the nature and benefits of co-operation.

6. Co-operation among Co-operativesCo-operatives serve their members mosteffectively and strengthen the co-operativemovement by working together through local,national, regional and international structures.

7. Concern for CommunityCo-operatives work for the sustainabledevelopment of their communities throughpolicies approved by their members.

Box 1: Co-operative values and principles

One generic approach to measurement is to testthe enterprise on its performance against each ofthe seven principles. In practice, this may notalways be straightforward to do, as there aremany different dimensions to each of theseprinciples. Examples of where the principles havebeen used as a checklist include, in the UK, theCo-operatives UK Worker Co-operative Code ofGovernance and a Co-operative Identity Auditdeveloped by the Co-operative College forschools. In Canada, the principles have been usedfor the development of an exhaustive andcomplex questionnaire driven assessment tool,the Co-op Index. e benefit of having the co-operative values and principles agreed by theInternational Co-operative Alliance is that it

provides a framework for understanding co-operative identity. It does not solve thequestion of measurement and reporting, but canbe a useful prompt for what matters as a co-operative.

Ultimately, it is about devising a managementprocess to measure and report co-operativeperformance that is effective given your particularcontext. What is appropriate for one co-operativeenterprise may not be useful for another. CDSCo-operatives is a good example of how to buildand operate a management process that workswell for management and stakeholders alike inthe housing sector.


CDS Co-operatives’ vision is to provide highquality, efficient and financially viable servicesthat enable and support resident control, byputting residents at the heart of its business. This includes the ambition to make a significantcontribution to solving the housing needs of thenation by developing housing co-operatives andother forms of mutual tenure.

The enterprise’s new Corporate Plan (CDS Co-operatives, 2012) sets out how it willoperationalise its key objectives for 2012/13 –2015/16, which are to:

• Provide great services

• Run a great organisation in terms of viabilityand value for money

• Be a great co-operative organisation

• Have a great service offer for potential clients

• Have a great board and staff team

• Contribute to a great environment.

Their Corporate Plan is to ensure that CDS Co-operatives refreshes its operational systems in order to better position itself to secure newbusiness opportunities and growth. This is basedon the understanding that CDS Co-operative’speople are integral to the successful delivery ofthis strategy. For CDS Co-operatives to becomemore efficient and effective it is changing the wayit works, including evolving information systemsand infrastructure to develop flexible, mobile,scalable technology solutions and ultimatelymore joined‐up information management.

One culture for CDS Co-operatives is consideredvital to help it to deliver this strategy. Inconsultation with staff and its client co-operatives it has identified the six pillars whichsupport its endeavours to achieve excellence in allit strives to achieve. These six pillars are:

1. Personal commitment to quality andexcellence of service

2. Motivated, well trained and committed staff

3. A commitment to developing peoples’ skills

4. Clear strategic goals and objectives

5. Policies and procedures to enable us to dothings right first time

6. Striving for continuous improvement.

Based on the recommendations arising from itsinternal audit programme, CDS Co-operativesconducts regular service reviews in which itassesses how to improve policy and proceduresand looks at ways to achieve better performance.The Resident Services Sub-committee initiates andscrutinises proposals for improvements. CDS Co-operatives regularly tests resident satisfactionusing a model satisfaction survey and mysteryshopping and also asks its key clients – co-operative management committees – whatthey think about the standard and format of itsservices. In order to establish how CDS Co-operatives compare in terms of standards,costs and effectiveness with other registeredproviders, it regularly benchmarks its performance,such as by using HouseMark services.

Box 2: Operationalising the CDS Co-operatives vision

Given the aim of this guide, it is particularlyimportant that determining material issues – i.e.what your priorities are and selecting appropriateindicators are approached in a thorough mannerfor your co-operative. After all, if you areprioritising the wrong issue or are selectingunhelpful indicators then your approach toperformance measurement will be less effective orfail in driving internal and external decisionmaking. ese two steps are explored in moredetail below.

Determining what your material issues areWhatever co-operative issue is being measuredneeds to be material to your enterprise’s localcontext i.e. sharing profits, member control,wider social and environmental success. at is,the choice of aspects and indicators arestrategically aligned to stakeholder priorities (e.g.financial stability, member happiness, protectingthe environment) and are sensitive to yourenterprise’s ability to respond to a concern givenits unique circumstances (e.g. local geographical,demographic, cultural and economic

characteristics; as well as data availability, sectorstandards or benchmarks and statutory duties,risk profile, available in-house resources).Essentially, a good materiality-determinationprocess is one that allows you to filter and funnela short list of the top priority issues from a longlist of all possible important issues.

One of the key reasons that e Co-operativeGroup has been at the vanguard of performancemeasurement and reporting is that it devised andhoned an innovative and highly effectiveapproach to materiality determination (detailedin Box 3).


‘Materiality determination’ is a process or test bywhich an enterprise can begin to account for itsimpact on stakeholders through the identification ofkey issues that are relevant to:

• Direct short-term financial performance• Ability to deliver on its strategy and policies• Best practice norms exhibited by peers• Stakeholder behaviour and concerns• Societal norms, particularly where there is a link to

possible future regulation (AccountAbility, 2006).

Member views and democratic participation• Ethical Plan• Issues raised at AGM/half yearly meetings• Issues raised via regional boards and area

committees• Issues raised via elected committees

(e.g. Values and Principles Committee)• Membership engagement strategy.

Other stakeholder views• Customer participation in The Co-operative

Bank Ethical Policy review• Employee surveys• Customer Satisfaction Trackers• Food customer panels• Customer Chip & Pin Insight surveys.

Business strategy• Ethical Plan• Key Performance Indicators (Annual Report

and Accounts)• Direct financial impacts as referenced through

the Annual Report• Sustainable Development Policy• Business-specific strategies

• Issue-specific policies and codes referencedthroughout the Annual Report.

Co-operative approach to business• Co-operative values• Co-operative principles

External reporting standards and benchmarks• Global Reporting Initiative (GRI)• Co-operatives UK social reporting indicators• Social reporting and performance benchmarks• Issue-specific benchmarks as referenced

throughout the Annual Report.

Societal norms and emerging issues• Emerging legislation/regulation/voluntary

compliance relevant to co-operative, social,environmental or ethical matters

• Research (e.g. The Co-operative EthicalConsumer Report).

This materiality determination process allows TheCo-operative Group to be inclusive of and respondto the six stakeholder groups on which itsbusiness is dependent – members, customers,employees, the Co-operative movement, suppliers,and wider society (The Co-operative Group, 2012).

Box 3: Criteria for determining materiality at e Co-operative Group

Selecting appropriate indicatorsIndicators are succinct measures used to driveimprovements and help co-operative enterprisesfocus their people and resources on what is mostimportant to them. Indicators communicatepriorities and provide a window on performance,ethos and ambition; all important principles foremphasising the co-operative difference too.Overall, the indicators chosen should reflect andsupport the various strategies for all aspects of anenterprise, including financial health, marketcompetitiveness, member and customersatisfaction, standards compliance, staff well-being and productivity, as well as other keystakeholder requirements and expectations.

e best indicators are those that are connectedto SMART targets – ensuring that they arematerial, better governed and more able topositively influence decision making. SMARTmeans that the chosen measure has a Specificpurpose for the co-operative enterprise; it isMeasurable to really get a value of the indicator;the defined norms have to be Achievable; theimprovement of an indicator has to be Relevantto the success of the enterprise; and finally itmust be Time phased so the value or outcomesare shown for a predefined and relevant period.

Appreciating the difference between a SMARTand a poor choice of measurement means alsoclearly distinguishing between inputs, outputsand outcomes.

By applying SMART principles to co-operativeindicators a long-term reporting structure that isresilient and flexible can be developed. Toillustrate this point, Figure 5 provides a sample ofpossible SMART indicators – financial, non-financial and sustainability – to supportintegrated reporting in a co-operative enterprise(more detailed proposals and a supportingrationale are set out in Chapters 4, 5 and 6).

Once more, the great advantage of the co-operative principles is that they allow yourenterprise to highlight conflicts throughintegrated performance measurement andnegotiate any trade-offs in a democratic way – forexample, is a focus on growing profits at oddswith a desire to minimise emissions and waste, oris there a happy medium whereby a responsibleway of doing business allows decoupling ofgrowth from the use of natural resources?

Communication of performance against SMARTobjectives is key to delivering change. How anindicator is reported is very important incapturing the attention and commitment fromdecision makers. If an indicator needs a lot ofexplaining then it is likely that it will not workeffectively to communicate a key message orpriority. erefore, it is always essential thatindicators are measured and reported in a way sothat it means something important to therelevant audience. An example of good practicehere is Midcounties Co-operative which, similarlyto Greenwich Leisure Limited, has developed aform of a balanced scorecard which is usedthroughout its internal and external performancemanagement. is allows the senior managementand board of Midcounties Co-operative to clearlysee how key performance indicators relate to eachother and are systematically driving value creationfor the business.

e first three chapters of this guide have set outa management process for measuring andreporting your co-operative performance, thenext three chapters provide a brief overview ofkey financial, non-financial and sustainabilitymeasures to indicate performance in terms ofmember value. From this, a detailed overview ofpotential co-operative indicators will be offeredfor each, these cover commonly used indicators(some will be more relevant to certain co-operatives than others). ese are then refineddown into a shorter list of indicators which areapplicable to all co-operative contexts –ownership, sector, size and available resources,history and years of operation etc – and provide auseful measure to allow benchmarking andcomparison across the entire UK co-operativeeconomy. In recommending this refined list, it isappreciated that, rightly, additional indicatorswill be used by co-operative enterprises wherethey feel are relevant to their circumstances.


The balanced scorecard is a strategyperformance management tool – a structuredreport supported by design methods andautomation tools – that can be used bymanagers to keep track of the execution ofactivities within their control. The scorecardmonitors the consequences of actions from fourperspectives: financial, customer, internalbusiness processes, and learning and growth.


Co-operatives UK, in collaboration with theCPC, has developed the ‘Performance Monitor’framework, a tool which helps its members togauge their performance over time. e tool isbased on an enterprise’s like-for-like results,

external peer and national benchmarks, as well ascompliance with CPC recommended accountingand governance standards (as detailed in Table 3).Financial indicators can relate to profitability,financial stability and growth.

e spectrum of financial indicators you could use

4. Financial indicators

Financial indicator

Return on capital employed(ROCE) – includinginvestment property (%)

ROCE – excludinginvestment property (%)

Like-for-like value turnoverchange (%)

Annual turnover (%)

Net profit of member funds(%)

Trade profit afterdepreciation of sales (%)

Net debt (%)

Gearing (%)

Capital expenditure incomparison to net cashflow(%)

Net profit distributions tomembers (%)

Description

ROCE is used to prove the value an enterprise gains from its assetsand liabilities.

Comparing last year’s turnover to this year’s turnover derived fromactivities that were in effect from last year as well (i.e. it would excludenew mergers and acquisitions).

e change in annual sales volume of an enterprise net of alldiscounts and sales taxes.

A measure of the profitability of the enterprise after accounting for allcosts.

A measure of how much, out of every £, of sales an enterprise actuallykeeps in earnings (after accounting for depreciation of stock, forexample the reduction in the value of goods held in a warehouse forsome time).

A metric showing an enterprise’s overall debt situation by netting thevalue of an enterprise’s liabilities and debts with its cash and othersimilar liquid assets.

A financial ratio that compares some form of owner’s equity (orcapital) to borrowed funds. Gearing is a measure of financial leverage,demonstrating the degree to which an enterprise’s activities are fundedby owner’s funds versus creditor’s funds.

A ratio that measures an enterprise’s ability to acquire long-term assetsusing free cash flow (if an enterprise has the financial ability to investin itself through capital expenditures, then it is thought that theenterprise will grow).

A measure of the amount of profit (after accounting for all costs)shared by the enterprise amongst its members.

Table 3: Performance Monitor financial indicators

Suma is another good example of a co-operative enterprise that applies some of these financial indicatorsin the food sector to monitor and demonstrate member value.


Case study Suma Wholefoods

Legal form:

Co-operative society


Worker co-operative

Website: www.suma.coop

Suma was started in 1977 as a wholefood wholesaling co-operative to supply wholefood shops inthe North of England. Today, Suma is the UK’s largest independent wholefood wholesaler/distributorwith an annual turnover of £30 million, specialising in vegetarian, fairly traded, organic, ethical andnatural products. They have customers all over the world.

Unlike most UK companies, Suma operates a thoroughly democratic system of management that isnot bound by the conventional notions of hierarchy. As a workers’ co-operative employing around150 staff the business is jointly owned and managed by its workforce. Everyone is paid at the samerate and they emphasise intensive training and multi-skilling to be able to collectively do all the jobsthat need doing, whatever they happen to be.

What are the Key Performance Indicators(KPIs) you use to measure your organisation’sperformance and how is this integrated withinthe business?Our performance measures are primarily focusedon traditional signals of financial success: net profit,return on capital employed (ROCE) and thestrength of our balance sheet. This does not tell thewhole story however about what drives ourenterprise. We have a clear vision to protect peopleand the planet, but we are much less explicit abouthow we are making a clear statement ofperformance in this regard. For example, ourorthodox ROCE is 7%, which is low because, as aworker co operative, we are committed to payingwages well above the market rate and that showsup as a cost; if you add this wage premium to ourprofit line (it is effectively distributed profit) thenwe believe our ROCE is comparable to blue chipfirms such as Apple. Suma also provides exceptionalcareer security. You have a job for life if you want it.Our business model has proven to be resilient torecession for more than thirty years because weadopt a far-sighted and risk aware approach toenterprise planning. Traditional approaches toaccountancy fail to adequately recognise this kindof benefit and so it is not properly measured.

How have you determined the priority/material issues to measure?The priority issues for Suma are strongly shaped bywhat is relevant for our sector as a wholesalelogistics business such as stock turn, gross margin,and food safety. Our commitment to running anethical business also includes specificenvironmental, vegetarian, and fair tradeobligations. For instance, in terms of theenvironment, we use 100% renewable electricityand have energy efficient operations such asmotion sensors to switch the lights on and off; wetake back plastic and cardboard packaging from ourcustomers and what we cannot re-use, we recycle;food waste is composted; we have vehicle trackingto make every delivery mile count; we plant treeswith Treesponsibility as part of pursuing carbonneutral status; and have an appointed carbonchampion keeping a constant eye on our footprint.In addition, as a worker co-operative we have deepand prolonged conversations amongst ourselves asworker owners about issues that concern us, forexample, we decided not to supply to one of theUK’s leading supermarkets because of worriesabout that company’s poor ethical reputation. Wealso respond to customer requests in this regardtoo, for instance, by highlighting our choices on theSuma website.


How are member value and other stakeholderbenefits being enhanced through measuringperformance?Despite our success story, in many ways, valuecreation for Suma’s members is undervalued andeven taken for granted because we do not explicitlymeasure the non-financial benefits of our workerenterprise. At the same time we set impossibly highstandards for ourselves and are very self-critical, soperformance measurement would be reassuring asit would remind members we are very good at ourjob. For instance, although we have a 95+%industry beating fulfilment rate on customerorders, members are only happy if we are a perfect 100%.

How are you benchmarking performance andcommunicating performance statements toyour stakeholders?Benchmarking is important to us. We are very goodat examining our timeline business performance,year on year. We have decades of sales records. We

do not systematically benchmark against the sectordue to a combination of the unique nature of ourownership form for a logistics business and a lack ofsuitable peer equivalents, and the cost of sharingthis data in the marketplace. We are able to garnersome sector benchmarks in certain parts of thebusiness such as transport planning and throughcustomer feedback on relative costs and service. Wealso use a number of standards to both drivequality and communicate our performance to ourstakeholders – this ranges from the voluntary Co-operatives UK Worker Co-operative Code ofGovernance, which we co-developed, through tocompliance with ethical standards for organic andfairtrade products that are legally certified by theSoil Association, Fairtrade Foundation and others. Asa food business we must also comply with stringentUK food safety legislation and, indeed, thatreassurance underpins the success of our exporttrade to the Middle East and China.

Short list of financial indicators and their applicationIt is appreciated that generating a profit may notbe the primary motivation for all enterprises, yetretaining income is essential for re-investing inthe business to allow the enterprise to grow itsinfluence, achieve the co-operative values andprinciples, and to drive member value. So, forinstance, for Midlands Co-operative one keysignal of financial success is the net profitgenerated that it can share with its membersthrough a dividend, whereas e Wine Societyretains income in order to keep the prices of itsproducts as low as possible for its members andSuma does the same to pay its workforcepremium wages above the market rate. Giventhis, it is recommended that the three financialindicators detailed in Table 4 are measured andreported for all co-operative enterprises. esemeasures indicate the enterprise’s growth,profitability and how is shares these gains withtheir members. (ey are drawn from the long list of indicators above but have been de-jargonised).

Critically, much (if not all) data needed tocompile the measures will be produced as part ofthe normal way of ‘doing business’ by theenterprise, as they are either required for statutoryaccounts under company/industrial providentsociety law or for regular reporting to annualgeneral meetings (AGM). As such, they are notsector specific or excessive for smaller enterprisesand so are applicable across the spectrum of theco-operative economy.

It is understood that, again rightly, many co-operative enterprises will want to maintainadditional financial measures according to theirparticular context as it relates to trade profit,cashflow, debt and other financial andmanagement accounting needs. Yet, not allenterprises will own property, nor incur debt, andcashflow ratios are very much sector specific(building thousands of homes across the countryis quite different from running a local vegetablebox scheme), and so these are not universalmeasures that resonate with all parts of the co-operative economy.


Sources ofguidance andbest practice

Suma case study(Chapter 4)

Simply Finance(Co-operativesUK, 2011a)


Simply Finance(Co-operativesUK, 2011a)


SimplyGovernance (Co-operativesUK, 2011b)

Table 4: A short list of financial indicators for co-operative enterprises

Indicator

Annualturnover (%)

Return oncapitalemployed(ROCE) (%)

Net profitdistributedamongst co-operativemembers (%)

Description

e change inannual sales orincome volumeof an enterprise(net of alldiscounts andtaxes)

A measure ofthe value anenterprise gainsfrom its assetsand liabilities.is measure isinclusive of anyinvestmentproperty.

A measure ofthe amount ofprofit or, in anon-profit co-operative,retained income (afteraccounting forall costs) sharedby the enterpriseamongst itsmembers as adividend, lowerprices orpremium wages.is may bereported as apercentage oftotal profit –or a monetaryfigure wheremoreappropriate to the co-operative.

Rationale(relevance andapplicability)

Alignment with CPCaccounting standards

Core measure forPerformance Monitorpeer benchmarks

Required for annualaccounts



Required for annualaccounts

Virtuous circlelinking values andprinciples tocommercial success



Common reportingrequirement forAGM

Collecting data

End of yearaudited annualaccounts andreport preparedby an accountantand financemanager




Advocates of co-operation both in the UK andinternationally constantly scrutinise the pros and cons of different types of non-financialperformance measures for all kinds of co-operative enterprises. As, whilst there may be greater consensus on financial measures(which tend to be shaped by national and globalaccounting standards), for many members, non-financial measures may be the ultimate measureof member value creation and so may attractmore debate. Co-operatives UK has developed aWorker Co-operative Code of Governance(2012) and a set of co-operative non-financialindicators (co-operative, environmental andsocial performance indicators, CESPI) and inCanada, the Canadian Co-operative Associationhas developed the Co-op Index and establishedthe Measuring the Co-operative DifferenceResearch Network (2012) and the Centre for

Excellence in Accounting and Reporting for Co-operatives is also developing non-financialmeasures (CEARC, 2011).

Table 5 provides a detailed list of non-financialindicators that aim to measure member economicinvolvement, member democratic participationand customer satisfaction.

e spectrum of non-financial indicators you could use

5. Non-financial indicators

In 1884 the Rochdale Pioneers set out a goodexample of a clear statement of member valuein the rule book drawn up when the co operativestarted – “The objects and plans of the Societyare to form arrangements for the pecuniarybenefit, and improvement of the social anddomestic conditions of its members”.

Non-financial indicator

Satisfaction rate in member surveys

Number of members

Rate of new members over lapsingmembers (%)

Amount of £ trade with membersof sales or income (%)

Members’ wages in comparison tototal wages (%)

Hours of member training provided

Description

Asking members about their satisfaction with ownership andcontrol in terms of their economic involvement, democraticparticipation or overall enterprise performance in meeting theco-operative principles.

An indication of absolute growth in member numbers.

Membership churn.

e monetary value of sales or income to customers who aremembers, as an indicator of economic involvement (for thoseactivities where the enterprise is able to trade with members).

Clarifying members’ economic involvement through the ratioof wages paid to all of the workforce.

An indication of the value the enterprise attaches to buildingmembers’ technical skills and specialist capabilities tocontribute to the success of the enterprise.

Table 5: Long list of non-financial indicators


Non-financial indicator

Record of votes for/againstresolutions at the AGM

Average number of members voting in elections compared tototal membership (%)/averageattendance of members at generalmeetings (%)

Demographic profile of members

Satisfaction rate in customer surveys

Description

A measure of democratic participation in the form of strong leadership.

A measure of democratic participation by membership in anenterprise’s decision making process.

Understanding the breakdown of member representation interms of gender, age, ethnicity, disability, education andlocation to ensure the diversity of the membership assists theenterprise to develop and represent the community.

Asking customers about their satisfaction with the areas/issuesthat are most important to them (e.g. customer service,product quality, pricing).

Case studyAnglia Farmers

Legal form:



Enterprise owned agricultural

co-operative

Website:

www.angliafarmers.co.uk

Anglia Farmers (AF) is the largest agricultural purchasing group in the UK with a buying power inexcess of £250 million, purchasing almost 1/10th of the UK’s key farm inputs. The group continuesto grow, providing a highly professional procurement service for more than 3,500 members who arecollectively farming over a million hectares of land in the UK.

With more than 50 years of experience working with farmer-members, AF’s expert buyers securesavings across an extensive portfolio of products and services. AF members can expect to makesignificant savings on the main farm inputs as well as a wide range of goods and services, fromvehicles and building materials to telecommunications and animal health products.

Co-operative enterprises such as Anglia Farmers have devised their own, tailored approach toassessing member value creation as this case study shows.


What are the Key Performance Indicators(KPIs) you use to measure your organisation’sperformance and how is this integrated withinthe business?As an agricultural buying group we act as theprincipal agent in sourcing transactions formembers with the primary goal of keeping prices aslow as possible. We are not motivated byprofitability, we aim to breakeven, with anyretained income being returned to members or setaside for contingencies. The price AF buys at is theprice we sell to our members at. Our businessmodel is to charge a levy ranging from 0.05% (fuelcards) to 5% (mobile phones) through frameworkagreements according to the type of product orservice and size of member turnover. We do notimpose a credit limit on member transactions, somember registration is a long and rigorous process– prospective members must be proposed by anexisting member, we then carry out detailedfinancial due diligence. Once a member joins theyare able to access 50 specialist buyers in differentareas ranging from electricity to wheat seed, thusensuring we secure the best purchasing deals.

How have you determined the priority/material issues to measure?The commitment of members to our group buyingis key – AF aims for a commitment rate of 80-90%.We report to the board on a monthly or annualbasis on member commitment in five areas:

• Member penetration across all products andservices (insurance, electricity, telecoms, etc.)

• Member churn (ensuring 20 members join eachmonth to compensate for those who leave or die)

• Satisfaction (annual member survey)

• Member queries (tracking invoice errors with anunderstanding of who was at fault)

• Debt ratio (failed direct debits with a resolution,as if this happens 3 times then the member isasked to leave).

Whilst AF only deals with its members, thesemembers have also requested that AF help widerrural communities. Consequently, AF Affinity hasbeen established as a spin-off business, for instanceworking with rural charities on fuel buying.

How are member value and other stakeholderbenefits being enhanced through measuringperformance?Some member value is difficult to quantify. So forAF it is primarily about money and time savings.Each of our members typically makes a saving ofbetween 0.25 to 0.50 of a person (full timeequivalent FTE) per annum. An example of this is usfronting customer queries with a supplier, acting onbehalf of the member if a product is broken. Giventhis, every time a new member joins we estimatetargeted savings – e.g. mobile phone bills (30%reduction), electricity (15% reduction), agriculturalinput (4% reduction), and fuel (2-3% reduction).

How are you benchmarking performance andcommunicating performance statements toyour stakeholders?

There is no easy comparator for AF. Farmers Weeklymagazine publishes average weekly fuel priceswhich we use as a like-for-like benchmark for oneproduct. However there is less quality data for apeer equivalent. There are similar agriculturalbuying groups but they all operate slightlydifferently to us.

Short list of non-financial indicators and their applicatione CPC has recommended that the non-financial indicators directly related tomembership should, as a minimum, relate to:

i) number of members; and

ii) amount of £ trade with members aspercentage of sales or income (as not allmember related measures are applicableacross forms of ownership).

For example, whilst measuring averageattendance of members at meetings may be useful for a mixed ownership co-operative such as Greenwich Leisure Limited (which needs tomobilise member attendance), it is less helpful fora worker co-operative such as Suma (whosemember workers will always be present). isguide also recommends that, as part of nurturinga virtuous circle that links co-operative values andprinciples to your enterprise’s commercial success,customer satisfaction is a crucial key measure too.



e UK Co-operativeEconomy 2013(Co-operativesUK, 2013)

e Co-opIndex (CCA,2008)

Worker Co-operativeCode ofGovernance (Co-operativesUK, 2012b)

Table 6: Short list of non-financial indicators for co-operative enterprises

Indicator

Memberprofile(number ofmembers)

Satisfactionrate inmembersurveys

Description

An indicationof absolutegrowth inmembernumbers, yearon year – withthe option ofadded data ongender anddiversity.

Askingmembers about theiroverallsatisfactionwith the co-operative –with the optionof added dataon satisfaction,in terms oftheir economicinvolvement,democraticparticipation orthe overallperformance ofthe enterprisein meeting theco-operativeprinciples.


Primary signal of‘strength throughnumbers’

Core measure for the annualCo-operatives UK Co-operativeEconomy

Commonreportingrequirement for AGM

Establishesnormativeoutcomes against the co-operativeprinciples

Non-sector orownershipspecific, souniversallyapplicable

Collecting data

Register of Members

ere are two options:1. If there is a large

number ofmembers then aquestionnaireapproach will beneeded, possiblyrequiringprofessionalsupport. ‘NetPromoter’ is anexample of astandardised metricfor customersatisfaction andloyalty

2. For enterprises witha small number ofmembers or withless resources: oneon one or groupfeedback sessionstimed to coincidewith boardmeetings or AGM



Anglia Farmerscase study(Chapter 5)

Midlands Co-operativecase study(Chapter 6)

GreenwichLeisure Limitedcase study(Chapter 2)

Suma casestudy (Chapter 4)

Traidcraftwebsitewww.traidcraft.co.uk fordetails of AGM

Indicator

Amount of £trade withmembers aspart of sales orincome (%)

Satisfactionrate incustomer oruser surveys

Description

e monetaryvalue of sales tocustomers orincome toworkers whoare members,as an indicatorof economicinvolvement(for thoseactivities wherethe enterprise isable to tradewith members)

Askingcustomersabout theiroverallsatisfaction –with the optionof added dataon satisfactionwith theareas/issues that are mostimportant tothem (e.g.customerservice, productquality, pricingand living upto co-operativevalues)


Virtuous circlelinking valuesand principles tocommercialsuccess

Commonreportingrequirement for AGM

Virtuous circlelinking valuesand principles tocommercialsuccess

Variety of low-tech as well as highlysophisticatedtechniques tosuit differentneeds andbudgets

Not requiredwhere there is ahigh degree ofoverlap betweencustomers andmembers

Collecting data

ere are three options:1. If all customers are

members, take totalsales or income figure

2. Use the dividend cardsystem to distinguishmembers’ from non-members’transactions

3. Survey to estimateproportion ofcustomers that aremembers as anindication of salesattributable tomembers

ere are three options:1. If there is a large

number of customersthen a questionnaireapproach will beneeded, possiblyrequiring professionalsupport. ‘NetPromoter’ is anexample of astandardised metricfor customersatisfaction andloyalty.

2. For enterprises with a small number ofmajor contracts:customer service levelagreements alongsideregular customercontact sessions

3. For smaller enterpriseswith less resources: oneon one or groupfeedback sessions timedto coincide with boardmeetings or AGM

A uniform approach to satisfaction ratingsis guide recommends the standardisation of satisfaction ratings of member, customer or staff satisfaction to aid comparison andbenchmarking in the co-operative economy (as detailed in Box 4).


There are a number of scoring systems in usefrom the most crude three-point scale throughto more sophisticated eleven-point scales.

A simple scoring range from 1 (lowest) up to 5(highest) would provide a consistent measurefor member, customer and staff satisfactionwith co-operative performance. As follows:

5 – Very satisfied

4 – Quite satisfied

3 – Nether satisfied or unsatisfied

2 – Quite unsatisfied

1 – Very unsatisfied.

Given this, overall satisfaction is a score of 4 upto 5 in terms of being ‘satisfied or very satisfied’about performance.

Box 4:

It is appreciated that some co-operativeenterprises will also want to apply indicators fromthe detailed list of possible measures, as befitsspecific contexts. It is important when choosingindicators relating to membership in particular,they are reported in context – for instancereporting by customer owned and enterpriseowned enterprises on membership turnover andrecord of votes for/against resolutions at an AGMshould be done in a manner that communicateshow these measures positively contribute totransparency and accountability.


In response to concern about the ethical conductof business expressed by the media, civil societyand investors (as referred to in Chapter 2) a suiteof new sustainability codes, standards and toolshave emerged over the past two decades toprovide guidance to businesses on what to reporton, how to measure what needs to be reportedon, and how to verify such reports onsustainability performance (Box 5 details some of these leading initiatives).

Numerous co-operative enterprises are makinggood use of these tools. In addition, the co-operative movement has been a leader in theestablishment and governance of many of thesenew initiatives, helping to both set an exampleand shape how the rest of the businesscommunity can behave more responsibly (forinstance e Co-operative Group was a foundingmember and supporter of AccountAbility).

e spectrum of sustainability indicators you could use

6. Sustainability indicators

AA1000AccountAbility’s AA1000 series are principles-based standards to help organisations becomemore accountable, responsible and sustainable.They address issues affecting governance,business models and organisational strategy, aswell as providing operational guidance onsustainability assurance and stakeholderengagement.

DEFRA greenhouse gas reporting protocolGuidelines issued by the UK government to showorganisations how to measure and report on theirgreenhouse gas emissions. It is intended to helpthe UK reduce its contribution to climate change.

GRIThe Global Reporting Initiative (GRI) is acomprehensive sustainability reportingframework that enables organisations to measureand report their economic, environmental, socialand governance performance. The GRI includesSector Supplements that provide extra guidelinesfor specific industries including apparel andfootwear, automotive, construction and realestate, electricity utilities, financial services, andfood.

ISO26000Developed by the International StandardsOrganization, ISO 26000:2010 is a qualitymanagement standard that provides guidance on

how organisations can operate in a sociallyresponsible way. ISO 26000:2010 providesguidance rather than requirements, so it cannotbe certifiable unlike some other well-known ISOstandards.

London Benchmarking GroupAn internationally recognised framework forenterprises to measure, manage and report thevalue, and the achievements, of their corporatecommunity investments.

LM3Local Multiplier 3 (LM3) was initially developedby the new economics foundation (nef) as a wayof understanding the local economic impact ofprocurement contracts and regenerationschemes. LM3 is a tool to create a figure for anorganisation’s contribution to the local economybased on an analysis of financial records and asurvey of staff and suppliers.

Social Return On Investment (SROI)SROI is a framework based on social generallyaccepted accounting principles (SGAAP) that canbe used to help manage and understand thesocial, economic and environmental outcomescreated by an organisation. SROI seeks to includethe values of people that are often excluded frommarkets in the same terms as used in marketsthat is money, in order to give people a voice inresource allocation decisions.

Box 5: e variety of sustainability codes, standards and tools

At the same time the co-operative movement has discussed broadening the principles of co-operation to include sustainability.

Co-operatives UK has been working to developsustainability indicators that resonate with

co-operative enterprises of all kinds. Table 7provides details of sustainability measures relatedto staff well-being, ethical supply chains, localcommunity development and environmentalprotection.


Sustainability indicator

Staff satisfaction (%)

Staff engagement

Number of staff

Hours of staff trainingprovided

Demographic profile of staff

Equal remuneration forwomen and men

Occupational health and safety

Amount invested in orbenefiting localcommunities and co-operative initiatives (£)

Business units analysedfor risks related to childlabour or corruption (%and total number)

Contribution tobiodiversity

Reduction in greenhousegas emissions and waste(%)

Description

Asking staff about their satisfaction with the issues that matter most tothem (e.g. pay, working conditions, quality of management etc).

A measure of staff’s willingness to contribute, intent to stay, and referralbehaviour (i.e. recommending by word of mouth that theirfriends/family should engage/trade with their enterprise) – all drivers ofa successful enterprise.

An indication of absolute growth in staff numbers

An indication of the value an enterprise attaches to building staff’stechnical skills and specialist capabilities to contribute to the success ofthe enterprise.

Understanding the breakdown of staff representation in terms of gender,age, ethnicity, disability, education and location to the enterprise

Ratio of basic salary and remuneration of women to men by employeecategory, by significant locations of operation. Percentage of significantsuppliers, contractors, and other business partners that have undergonehuman rights screening, and actions taken.

Rates of injury, occupational diseases, lost days and absenteeism, andtotal number of work-related fatalities, by region and gender.

An indication of how an enterprise is giving back to surroundingcommunities and like-minded co-operators.

Demonstration of an enterprise’s commitment to anti-corruption andnon-use of child labour in its supply chain.

Description of significant impacts of activities, products, and services onbiodiversity in protected areas and areas of high biodiversity valueoutside protected areas.

A measure of how an enterprise is minimising its use of scarce naturalresources and the adverse effects of pollution, whilst reducing operatingcosts through resource efficiency.

Table 7: Long list of sustainability indicators


Midlands Co-operative is a good example of an enterprise well adept at monitoring and managing itssustainability footprint in this regard and realising the business benefits of eco-efficiency.

Case studyMidlands Co-operative

Legal form:



Consumer co-operative

Website: www.midlands.coop

Midlands Co-operative is one of the largest independent retailers in the UK with an annualturnover of £993m. The Society’s principal business activities are food, fashion, home retailingand funeral services. In addition, the Society has interests in travel, motor dealerships, specialistvehicle construction, florists and farming, and it manages a significant investment propertyportfolio that underpins the returns from trading activities.

Although independent from The Co-operative Group, Midlands Co-operative works with it andother enterprises in the co-operative movement to strengthen its buying power througheconomies of scale.

What are the Key Performance Indicators(KPIs) you use to measure your organisation’sperformance and how is this integrated withinthe business?As a high street retailer key signals of financialsuccess include gross sales and trading profit. At thesame time, as a co-operative the Society aims tooperate its business in accordance with co-operative values and principles and use tenperformance indicators, as previously defined byCo-operatives UK, to monitor our year on yearperformance as a responsible business, owned byour members (with the latest figures disclosed inour annual report).

We believe that corporate responsibility (CR) isintegral to the long term sustainability of MidlandsCo-operative. During 2012, the Society put in placeplans to build on existing environmental, social andethical projects by developing a new CR Policy andby continuing to work in partnership with Businessin the Community (BiTC). As an ethical retailer, theSociety has chosen to adopt the leading UKcorporate responsibility standard, BiTC’sResponsible Business Framework, to help manageand assess four environmental and social impactpillars:

• Workplace

• Marketplace

• Environment

• Community.

We have now established a CR Delivery Frameworkto ensure the new policy is properly embedded. Thisincludes an executive CR steering group that ischaired by the Society’s CEO and is comprised ofheads of departments, under which there areworking groups across each of the four impactpillars.

How have you determined the priority/material issues to measure?Our aim is to focus our efforts on areas of real needand where we can have the greatest impact and/orinfluence across the four social impact pillars. So forinstance, in terms of the environment, since ‘Zero toLandfill’ was achieved in all of the Society’s foodstores in June 2011, the initiative has been rolledout across the entire Retail business and theBusiness Support Centre in Lichfield is planned to be‘Zero to Landfill’ by Spring 2013. In addition to the‘Zero to Landfill’ initiative, waste prevention has

been identified as a key objective for the Society.Preventing waste not only helps to preserve naturalresources it is also far more cost effective to preventwaste occurring in the first place. As part of this,Midlands Co-operative has been working inpartnership with one of its key fresh food suppliers,Fyffes, on preventing waste in the supply chain via across industry project led by the Institute of GroceryDistribution (IGD) in collaboration with the WasteResources Action Programme (WRAP). Working onthis project has delivered a number of benefits tothe Society: finding innovative solutions for wasteprevention; preserving natural resources; reducingimpact on the environment by reducing carbonemissions from waste; reducing costs and sharingbest practice across the grocery sector. It is intendedto roll out the key learnings across the Society’sfresh produce supply chain throughout 2013.

How are member value and other stakeholderbenefits being enhanced through measuringperformance?It helps us to achieve our aim to focus our effortson areas of real need and where we can have thegreatest impact and/or influence, especially inrelation to actions that affect surroundingcommunities.

How are you benchmarking performance andcommunicating performance statements toyour stakeholders?BitC’s Responsible Business Framework includesaccess to a Corporate Responsibility Index thatallows us to benchmark the Society against thesector and other best practice. Peers include theJohn Lewis Partnership, Kingfisher, Sainsbury’s andThe Co-operative Group. We also look to learn fromleading neighbours in the mid-counties region ofthe UK, such as Jaguar Land Rover, because they arelocal and we are able to speak with them directly.


Short list of sustainability indicators andtheir applicationCo-operatives UK believes that given emergingconsensus on sustainability reporting standardsthrough the GRI (referenced in Box 5) that itsmembers should be encouraged to use GRImeasures or equivalents to report on their generalsocial and environment impact, instead ofdeveloping or maintaining individual or specificindicators in this area. at said, the GRIsustainability reporting guidelines list more than50 indicators in total and so it is helpful toprovide a steer for a smaller list of measures.



GRI –Indicator LA1and LA13(2013)

Suma casestudy (Chapter 4)

Guidance onmonitoringstaff diversity isavailable fromthe EqualitiesCommission.

GRI –Indicator EC1(2013)

LondonBenchmarkingGroup andSROI toolkits

LM3 –evaluating thelocal economicimpact of theco-operativepound (Co-operativesUK, 2012d)

Table 8: Short list of sustainability indicators

Indicator

Staff profile(number ofpeople)

Amountinvested in or benefitinglocalcommunitiesand co-operativeinitiatives (£)

Description

Total number ofemployees – withthe option ofadded data on themale/female ratioand the ethnicbackground ofemployees – andof governancebodies. Wherepossible datashould be furtherbroken downaccording tooccupationalgrade, althoughthis may beinappropriate for smaller co-operatives.

An indication ofhow an enterpriseis giving back tosurroundingcommunities andlike-minded co-operators,including howthey do thingsdifferently in theirdaily business toenhance positivesocial impacts andprevent negativesocial impacts.


e diversity and scaleof an organisation’sworkforce can be apositive force forequality andperformance

Co-operative Women’sChallenge affirms thegoal of gender equalityin the workforce, onthe board and in thewider economy

Equalities legislationhelps to frame a rangeof obligations in termsof employee diversitythat a good businessneeds to consider

Co-operativesemphasising the co-operative differenceby investing in yourneighbours and peers

Virtuous circle linkingvalues and principlesto commercial success

Variety of low-tech as well as highlysophisticatedtechniques to suitdifferent needs andbudgets

Collecting data

Internal records

Where staffsurveys arerequired, usecomparablequestions tonational surveyse.g. census data/Labour ForceSurvey.

e amount of pre-tax profits that a co-operativedonates or investsinto thecommunity;and/or in other co-operatives overa one-year period

ere are furtheroptions to look inmore depth at theimpact of coreoperations andprocurement,including ananalysis offinancial recordsand a survey ofstaff and suppliers

It is appreciated that for some enterprises,measuring and reporting on sustainabilityperformance is a well-established discipline,where deeper alignment with the full GRIguidelines is the norm. However for others,especially new or smaller enterprises, it can be adaunting challenge. Learning from your peersand testing and experimentation of the variety ofsustainability tools in the marketplace is

recommended. Lincolnshire Co-operative is anexample of a co-operative enterprise alreadyapplying some of these measures but also triallingthe use of new tools such as LM3, whichcalculated that for every £1 spent by a customerthe enterprise generates an additional 40 pencefor the Lincolnshire economy, equivalent in justsix months to £50 million.



GRI –IndicatorsEN16(emissions),EN22 (waste)plus relevantSectorSupplement

Refer toMidlands Co-operativecase study(Chapter 6)

DEFRAgreenhouse gasreportingprotocol

Carbon Trust(energy) andWRAP (waste)checklists onresourceefficiency

Indicator

Resourceuse:reduction ingreenhousegasemissionsand waste(%)

Description

A measureof how anenterprise isminimisingits use ofscarcenaturalresourcesand theadverseeffects ofpollution,whilstreducingoperatingcoststhroughresourceefficiency.is is acombinedmeasure oftwocomponentsof equalweight –emissionsand waste(but can beseparatedout ifpreferred)


Co-operatives setting thestandard by focusing on aresource minimisationapproach to prevent waste oremissions being created in thefirst place (e.g. reducing theneed for recycling)

Virtuous circle linking valuesand principles to commercialsuccess

Benchmarking performanceagainst oneself over time oragainst the sector norm ishelpful, especially if anorganisation already has lowlevels of emissions or waste(i.e. narrative to accompanythe figure that explains thecontext)

Variety of low-tech as well ashighly sophisticatedtechniques to suit differentneeds and budgets

Each enterprise will need toprioritise primary footprintareas given the sector orbusiness model, i.e. ownpremises (Tier 1), products(Tier 2), or supply chain (Tier3). E.g. for a bank a majorimpact area is lending policy,whereas for a grocer it is themanufacturing supply chain

Collecting data

Carbon dioxide(CO2) is a proxyfor greenhouse gasemissions andcalculated fromkWh energyconsumed i.e.electricity and gas(meter readingsused forstandardisedconversionfactors)

Waste reductioncan be measuredby weight orvolume (Kg orm3). Minimisationsignals can includethe amount ofproduct packingor office stationaryused, the numberof local authoritywheelie binscollected etc.

Where possible,specify thebreakdown of thisindicator into theseparate elementsof greenhouse gasemissions andwaste.


e best co-operatives have a clear understandingof how they generate value for members, andperformance measurement follows from this. e guide has set out how your enterprise canmeasure and report performance as a clearstatement of member value creation in terms offinancial, non-financial and sustainabilityimpacts. is includes managing yourperformance in an integrated way that allows youto identify synergies and handle trade-offs.

is guide also recommends a short list ofindicators that all enterprises – regardless ofownership form, sector or size – should use as aminimum to allow benchmarking across the UKco-operative economy to demonstrate itscollective strength. ese indicators aresummarised in Figure 5.

7. Next steps

Financial

Annual turnover

Return on Capital Employed

Co-operative distributions

Integrated performancemeasurement for co-operatives

Figure 5: Complete short list of co-operative performance indicators

Sustainability

Staff profile

Community investment

Resource use

Non-financial

Member profile

Member satisfaction

Trade with members

Customer satisfaction

AccountAbilitye AA1000 series is a principle-based standardto help organisations become more accountableby providing guidance on stakeholderengagement and sustainability assurance.www.accountability.org

Accounting for Sustainability (A4S)Set up by HRH e Prince of Wales to developpractical guidance and tools for embeddingsustainability into decision making and reportingprocesses to help build a sustainable economy.www.accountabilityforsustainability.org

Carbon Truste Carbon Trust Standard helps organisations toaccelerate the move to a low carbon economythrough carbon reduction, energy-savingstrategies and commercialising low carbontechnologies.www.carbontrust.com

CEARCe Centre of Excellence in Accounting andReporting for Co-operatives (CEARC) wascreated out of the identifed needs of the Masterof Management – Co-operatives and CreditUnions program at Saint Mary’s University.www.coopaccounting.coop

Department for Environment, Food and Rural Affairs (DEFRA)e UK government produces a number ofguidelines and related publications to helporganisations improve their environmentalperformance, including a greenhouse gasprotocol.https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/69282/pb13309-ghg-guidance-0909011.pdf

Forum for the Futuree Sustainable Business Model Tool helpsorganisations to identify potential impacts(positive and negative) associated with a newbusiness idea in the supply chain and in the end-user stage.www.forumforthefuture.org/project/sustainable-business-model-tool/overview

GRIA sustainability reporting framework to helporganisations measure and report on their social,economic, environmental and governanceperformance.www.globalreporting.org

InfrangilisEstablished to help organisations embedresiliency thinking into their policies, strategiesand performance frameworks to accelerate thetransition to an inclusive and green economy.www.infrangilis.org


Appendix Sources of further information


IIRCe IIRC Pilot Programme underpins thedevelopment of the International IntegratedReporting Framework on value creation forbusinesses and investors.www.theiirc.org

London Benchmarking GroupAn internationally recognised framework forenterprises to measure, manage and report thevalue, and the achievements, of their corporatecommunity investments.www.lbg-online.net

Measuring the Co-operative Difference Research Networke Network is committed to conductingresearch on the social, economic andenvironmental impact of co-operatives onCanadians and their communities.www.cooperativedifference.coop

new economics foundationLM3 was initially developed by NEF to helporganisations under the local economic impact ofprocurement contracts and regenerationsschemes.www.neweconomics.org

ISO26000An ISO quality management standard thatprovides guidance to help organisations operatein a socially responsible way.www.iso.org/iso/home/standards/iso26000.htm

SROI Networke SROI Network has developed the SROIframework to help organisations around theworld understand and manage their social,economic and environmental outcomes.www.thesroinetwork.org

ird Sector Research Centree centre aims to enhance knowledge of thesector through independent and critical academicresearch and to better understand the value of thesector and how this can be maximised.www.tsrc.ac.uk

WRAPSet up to work with organisations to understandand manage waste as an asset with value that isused more sustainably, devising resource strategiesto prevent waste.www.wrap.org.uk

ACCA (2012) Re-assessing the value of corporatereporting, London.

AccountAbility (2006) e materiality report:aligning strategy, performance and reporting,London.

Business in the Community & e DoughtyCentre for Corporate Responsibility (2011), e Business Case for being a responsible business,London.

BlackSun Plc (2012) UnderstandingTransformation: Building the business case forintegrated reporting, London.

Canadian Co-operative Association (2008) e Co-op Index,www.cooperativedifference.coop/page/44-atlantic-a2-coopindex, website accessed April2013.

CDS Co-operatives (2012) Corporate Plan 2012-2016.

CEARC (2011) Co-operative non-financialreporting, Nova Scotia.

Co-operatives UK (2011a) Simply Finance.

Co-operatives UK (2011b) Simply Governance.

Co-operatives UK (2012a) CESPI report.

Co-operatives UK (2012b) e UK co-operativeeconomy 2012.

Co-operatives UK (2012c) Worker Co-operativeCode of Governance.

Co-operatives UK (2012d) Sticky money –evaluating the local economic impact of the co-operative pound.

CSR Europe & AccountAbility (2002) Impacts ofreporting: the role of social and sustainabilityreporting in organisational transformation,Brussels.

Forbes (2013) ‘12 Companies considered best forthe world’,www.forbes.com/sites/susanadams/2013/04/17/12-companies-considered-best-for-the-world/,website accessed May 2013.

GRI & A4S (2012) e value of extra financialdisclosure: What investors and analysts said,London.

GRI & IFC (2010) Getting more value out ofsustainability reporting, Washington, DC.

GRI (2014) G4 – Sustainability reportingguidelines, Amsterdam.

e Co-operative Group (2012) Inspiring throughCo-operation – Sustainability Report 2011,Manchester.


Further reading and guidance

Co-operatives UKHolyoake HouseHanover StreetManchesterM60 0AS

Tel: 0161 214 1750www.uk.coop

© Co-operatives UK 2013

Design: www.wave.coop

Simply Performance: A guide to creatingmember value by aligning co-operative strategy,performance measurement and reporting

Date post:	16-Jul-2020
Category:	Documents
Upload:	others
View:	4 times
Download:	0 times

PERFORMANCE · measuring performance follows from this. What reporting and measuring performance...

Documents