Mutuals – companies owned by their customers and staff – can meet growing public demand for business to do more for society and the environment, a new report shows today.
Research from the Social Market Foundation shows that the public largely thinks that business is falling short on its social responsibilities and putting profits ahead of purpose.
Yet people have strongly positive views of the way that mutually-owned firms can prioritise members and employees as well as supporting local communities, polling for the SMF found.
The cross-party think-tank is publishing a study of Britain’s mutual sector in partnership with leading mutual businesses Nationwide Building Society and Royal London. The SMF retains editorial independence.
The report finds that despite meeting public appetite for more responsible business, the mutuals sector faces significant challenges. Politicians should change rules to make it easier for mutuals to raise capital. The sector itself should step up its work to explain mutuality and its benefits to the public, the SMF said.
There are around 31,000 mutuals in the UK, including co-operatives, insurers, building societies and credit unions. Up to 18 million people are members of at least one such mutual, although a number are unaware of this.
For the report, the SMF commissioned Opinium to ask a representative sample of 1,500 members of the public (GB, March 2023) what they think about business and society.
The poll found significant public demand for business to put social impact ahead of profit: 44% of respondents think businesses should have responsibility for tackling key social issues including the cost of living, climate change and the state of local communities.
Yet the public think that most businesses are failing in their social obligations: only 17% think business benefits workers; 16% see business as good for communities; and 16% think companies are doing a good job of limiting environmental harms.
By contrast, 48% said companies prioritise profits for shareholders.
The SMF found that, because mutuals do not have traditional shareholders, their structure and operations have strong appeal to the public:
- 63% supported the core mutual principle of members benefitting when business does well
- 57% supported mutuals’ role in ensuring sustainable development in local communities
- 57% also backed mutuals’ fundamental commitment to social objectives
The SMF said the gap between business action and what people want could present a key opportunity for mutuals to flourish, as well as encouraging traditional businesses to compete to do better on issues the public cares about.
However, SMF highlighted challenges for mutuals.
Poor access to capital is a key challenge that not only prevents mutually-owned organisations from growing, but also heightens their risk of demutualisation – when the organisation can no longer maintain the unique principles of being mutual.
The SMF said whilst the Co-operatives, Mutuals and Friendly Societies Bill making its way through Parliament currently could address some risks that mutuals face, there is a need to go further to empower the sector with access to capital. The Government should introduce better financial regulation that can enable mutuals to access capital without having to sacrifice their principles (See notes).
Another key challenge for the sector is low awareness – only 20% of adults understand what ‘mutuality’ is and what it entails. About 40% have heard of the term but are unsure what it means, and 40% have not heard of it at all. That said, the majority of people (54%) believe that government should do more to help mutuals grow, and that mutuals can make a big difference in society (54%).
Jake Shepherd, Senior Researcher at the Social Market Foundation, said:
“The public increasingly want businesses to do better on sustainability, social responsibility, and ethical sourcing, and not just prioritise profits for shareholders. Mutuals are built to satisfy that appetite for a better way of doing business and our research shows that people strongly value the mutual approach.
“Anyone who cares about public faith in the market economy should take an interest in mutuals, which are perfectly placed to satisfy public desire for more responsible, more caring business practice.
“Unfortunately, not enough people are aware of mutuals, and mutuals tend to have less firepower in the market compared with proprietary firms. Meanwhile, financial legislation and regulation makes it difficult for some mutuals to thrive. To capitalise on the opportunities mutuals present to members, the economy, and wider society, these challenges should be addressed.”
Kevin Parry OBE, Chairman, Nationwide and Royal London, added:
“Mutuals are a valuable part of a thriving economy. They offer genuine consumer choice and a model distinct from shareholder-led companies. The decline in the UK’s mutual sector has left the UK lagging behind other nations where the sector represents a much more significant part of their economies.
“As the report shows, for a more balanced economy and to encourage choice, we need the sector to grow by encouraging smaller mutuals to scale up and larger mutuals to continue to thrive. Ultimately, this can only be achieved through new financing models. We hope politicians from all sides will put their full support behind the mutual sector.”
Notes
- The SMF report will be published at https://www.smf.co.uk/publications/modern-mutual-sector-uk/ on Thursday 22nd June 2023.
- SMF’s recommendations for sector and government:
- The sector launches an information campaign for mutuals, enhancing brand recognition. This could be achieved through a mutual kitemark scheme, public information campaigns, or mutuality support networks.
- The Government should introduce legislation that can enable mutuals from raising funds without having to compromise on their business model
- To create a better policy understanding of mutuals, mutual organisations and the government should collaborate on the creation of comprehensive data that monitors UK mutuality.
- The report is sponsored by Nationwide Building Society and Royal London. The SMF retains full editorial independence.
Notes about mutuals:
- Mutuals are organisations owned by their members, who may be customers, employees, or suppliers.
- Members have a direct stake in the business and can have a say on how the organisation is run.
- Mutuals do not answer to shareholders, instead prioritising the interests of their members.
- Mutuals tend to have a strong sense of social purpose, extending their impact beyond members to local communities.
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with assets under management of £147 billion, 8.7 million policies in force and over 4,200 employees. Figures quoted are as at 31 December 2022.
Contact
- For media enquiries, please contact press@smf.co.uk