The UK ‘community shares’ business model

Investing in community shares engages communities in a ‘virtuous’ circle where it is in their interests as members and investors to also be active as customers, supporters, and volunteers. The same applies to other stakeholders, including employees and suppliers, giving new meaning to the term multi-stakeholder, where the same person engages with the enterprise through a multiplicity of stakeholder roles.

This is in contrast to the conventional business model, where the interests of shareholders are at odds with other stakeholders. Profit maximisation for shareholders is at the cost of customers, suppliers, employees and other investors. There is no incentive to volunteer, or to become an active supporter of an enterprise that works in someone else’s interests.

Community shares promote a different sort of business model, where it is in the interests of all stakeholders to work together to create wealth and to use their democratic rights to determine how that wealth is distributed. It is in the mutual interests of all stakeholders to become members and investors, not just when the co-operative is established, but on a continuing basis as the enterprise grows and develops. New customers, suppliers and employees can be encouraged to become members and shareholders, to replace the shares being withdrawn by older members when they leave the co-operative.

Issuing community shares relies heavily on community engagement – the involvement of people in the life of the enterprise. Co-operatives need to define and understand their target communities, and to develop a co-operative purpose that aligns with the identity of these communities. Most communities are geographic in nature, but it is not always obvious where the boundaries of geographic communities lie, and whether people within or beyond that geographical community have a shared identity.

Community identity can transcend geography and focus instead on shared interests, values, concerns, or beliefs. Examples include a shared interest in renewable energy, local food production, affordable housing, and support for a football club, or community services provided by a faith group.

Community shares can provide an enterprise with a competitive advantage by engaging stakeholders in new responses to the causes of market failure. For instance, many small businesses fail because the owner is unable to find a buyer willing or able to purchase the business. Communities can spread the cost and risk of acquisition across a large number of shareholders. A business might be failing through a lack of demand; communities can address this by aggregating demand and ensuring that the business serves the community. A business might be unable to control costs resulting in unaffordable prices; a community can reduce costs by volunteering, or by providing cheaper capital.

community shares