Converting existing businesses to more ethical structures

In a previous feature article (Imagining a world without corporate power), we identified six changes which could help challenge the rise of corporate power, and take us in the right direction. 

One of these was to make it easy to convert current for-profit corporations into not-solely-for-profit companies instead. This article explains how this might be possible.

Other countries have more co-ops and social enterprises than the UK

In this time of multiple crises, fundamental change to the way our businesses are run is required. Ethical Consumer is promoting a new vision where:

• most enterprises are co-ops or social enterprises
• public and community ownership is thriving
• other stakeholders sit alongside shareholders on corporate boards everywhere.

Unfortunately, in the UK we are starting from a low base, because co-ops and social enterprises make up only about 3% of the UK economy.

When compared with some other European countries, we can see that these more beneficial forms of company structure are more prevalent. For example, in Germany, co-ops and social enterprises make up about 12% of the economy.

Source: Social Enterprise UK: Ending the monoculture 2024

Finding a corresponding figure for state-owned enterprises in the UK is difficult but it may be around 2% of the economy. 

This means that profit-seeking business models could be said to generate around 95% of UK economic activity.

(Note that according to the ONS, the NHS accounted for 11.1% of GDP in 2024, but this not always included in such calculations.)

Could supermarkets be owned by their workers?

The climate, nature, and inequality emergencies mean there is a need to move towards this vision quickly. 

Perhaps something of the pace of the now well-known “net-zero by 2050” idea might be appropriate.

This new economy cannot be built in this time by setting up new co-ops or social enterprises which will grow to fill the space. 

The conversation needs to move towards changing the way existing institutions are run. We like to joke that this would mean converting Barclays into a charity, converting Google into a consumer co-op, and selling Aldi to its workers! 

Of course this is not likely to happen any time soon, but other developments outlined below can happen more quickly.

Learning from B Corps

The B Corporation movement encourages companies to change to a less shareholder-focused business model.

They use the language of crisis and argue that new business models are vital. However, they do so in a way that resonates with mainstream business. Here is just one example:

"Our most challenging global problems cannot be solved by governments and nonprofits alone. By harnessing the power of their business, B Corps commit to positively impact all stakeholders – workers, communities, customers, and our planet."

Not only has the movement certified well known ethical businesses like Triodos and Patagonia, but they have also persuaded other more mainstream brands like Danone and Unilever (Australia) into the fold.

And although Ethical Consumer and others have been critical of elements of the B Corp certification process, what B Corps do well is demonstrate that the desire for change reaches well into the mainstream.

The B Corporation certification process is rumoured to be struggling to keep up with demand and they have commissioned research to explore this subject. In one report they noted: "A survey by the British Academy in 2019 found that 40% of business leaders wanted the UK Government to change company law and regulation to encourage purpose within UK firms. A survey of directors by the Institute of Directors in 2021 found that 62% of directors believe that businesses should not exist solely to make money and generate shareholder profits."

It’s possible that much of this is “purpose washing” (pretending to have a social purpose beyond profit maximisation). However, giant businesses contain many ordinary people as alarmed as the rest of us about a future of climate chaos and rampant inequality, who feel trapped in a destructive cycle, and who are looking a rational solution too.

A place for co-ops and social enterprises

2025 is the UN's International Year of Co-operatives, with the theme that 'Cooperatives Build a Better World'.

In the UK co-ops and social enterprises are long-established movements, and are doing great work promoting their business models.

Indeed, the co-op movement secured a manifesto commitment in 2024 from the Labour party to double the size of the co-op economy. However, given the urgency of current crises, (and of a vision of a future where 60% of the UK economy is provided by such organisations, see table below), it is arguable that this manifesto pledge is not ambitious enough. After all, doubling 3% would only be half of Germany's current level. 

By not really focusing on converting existing businesses, both co-ops and social enterprises are potentially missing an opportunity in this moment of crisis. They could potentially achieve much more if they were, like B Corps, to:

(a) use language placing themselves more centrally as a solution to current crises; and
(b) to focus more resources into persuading existing businesses to convert.

High profile conversions do take place: Aardman Animations in 2017 and Riverford Organic Farms in 2023 are but two companies to recently become worker co-operatives. Promoting these as good examples would certainly be a start.

The notion that alternative business models are a place where innovation can take place could also do with more attention. It might, for example, be more attractive to some existing businesses to consider multi-stakeholder co-op models where democratic representation from workers, shareholders, and customers might all mix on a board. At least one company we know of has a board seat for nature too.

What co-ops and social enterprises arguably need is conversion more central to their narratives and more open minds as to how they might be structured.

Incentivising conversions to co-ops

One of the attractive elements of making conversions easy is that it can make progress without the support of ideologically opposed or just uninterested governments. And there are one or two of those around at the moment! 

Encouraging consumers concerned about climate and quality to buy from alternatively constituted business has always been core to Ethical Consumer's work, and all the organisations discussed above do some work in this space too. B Corps and co-ops are also relatively effective at encouraging companies within their movements to buy from each other.

But imagine what might be achieved with government support? 

As baby steps, governments might subsidise legal advice for this kind of move. 

But bolder ideas, such as raising VAT to 21% for all businesses except B Corps, social enterprises and co-ops would certainly focus some minds! It would arguably go some way to compensating for some of the commonly socialised costs created by more profit-seeking business models.  

Going it alone

Of course, a business does not need the permission of B Corp, or the co-op or social enterprise movements to innovate its form into something less damaging. It just needs the permission of its current owners to change its rules. It can be cheaper this way too. 

At Ethical Consumer, we think that five things should be considered as a minimum:

• an explicit undertaking (like B Corps) to consider other stakeholders than shareholders
• an explicit recognition of the need of businesses to be regenerative and of their specific role
• democratic representation of at least one other interest group on its board (customers, workers, etc.)
• an undertaking to provide training to staff and managers around regeneration and democratic business management
• an undertaking to report annually against these non-financial goals.

Do contact us if you want to learn more about this.

Visions of a reformed economy?

If we were to ask ourselves what an ideal reformed economy might look like then the following approach is one way of challenging how we think.

Although at first sight this might look hopelessly naive, if we look around at other economies and eras, we can see that different arrangements can work too.

We know for example, that the economy of the Emilia-Romagna region of Italy is one third co-operative and, as a result, has very good wellbeing indicators. We also know that state-owned enterprises play very different roles in different economies – from an estimated 47% in China (an obvious outlier) to 12% in Sweden.

Of course there is lots of complexity here, and categories can blur into one another, but describing what we want is an important first step. Do you have a different balance? Tell us about it.

We are planning a session on this theme at the next Ethical Consumer conference in November, so do come along if you want to take part. 

We will end with the words of US journalist William Greider.

"The process of conversion happens in many, many different ways, but is always difficult. It is not really the financial arrangements that are the most difficult part, or getting the legal papers for ownership trusts.

"The difficulty is that conversion requires people to change themselves. This includes everybody involved ... Managers ... Workers ...

"To me that is the most valuable piece in the whole story. Life in a corporation could become another channel for self-realization, instead of top-down confinement. I have seen enough living examples to believe this is possible."