This 7th Principle of working for "the sustainable development of their communities" also requires that co-operatives accept responsibility for making a contribution to tackling poverty and wealth inequality, not only between developed and emerging economies, but also the growing wealth inequality in nation states and in the local communities within which co-operatives operate. Co-operatives are excellent at tackling poverty reduction and combating wealth inequality because their nature is to create wealth for the many not the few.
Persistent poverty, deepening unemployment following the global financial crisis, and the growing social gap between rich and poor which has been deepened by a globalised economy and the global financial crisis raises sensitive policy issues related to wealth distribution and is increasingly attracting global concern. the Preamble to ILo recommendation 193 explicitly recognises "that globalization has created new and different pressures, problems, challenges and opportunities for cooperatives, and that stronger forms of human solidarity at national and international levels are required to facilitate a more equitable distribution of the benefits of globalization".
The UN World Summit for Social Development in 1995 reached a consensus on the need to put people at the centre of development. It pledged to make the conquest of poverty, attaining the goal of full employment, and fostering social integration, as overriding objectives of sustainable development. A background paper for the summit recognised that, if co-operative members and their dependents, and employees and their families are taken into account, over half the world's population depends on co-operative enterprise to improve their basic standard of living.5
The summit attracted the attention of governments to the role played by co-operatives in wealth creation and poverty reduction strategies. It was followed by biennial resolutions in the UN General Assemblies leading to the declaration of the International year of Co-operatives 2012 with the slogan that "Co-operative enterprises build a better World". In his message at the start of the International year, the UN General Secretary-General, ban Ki Moon, said: "Co-operatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility". In the rio+20 Summit in 2012, the final report recognised the actual and potential role of co-operatives in helping to achieve sustainable development and contributing to poverty reduction and employment creation.6
The global economic crisis triggered by the financial crisis of 2007/8 shed light on the capacity of co-operatives to sustain local communities by showing the resilience of co-operative enterprises at times of economic crisis. the economic activities of co-operatives are centred on meeting their members' needs. this tends to keep them away from financial speculation that, when combined with an excessive pursuit of profit, led to devastating global financial consequences in 2008.
Member-control and deep local roots also helps co-operatives to avoid the excesses that can take place in investor-owned businesses, the systemic nature of which is to seek to obtain the greatest possible profit for investors often at the expense of the community in which the business operates. In looking at the resilience of the co-operative form of enterprise at times of economic crisis, academics Johnston birchall and Lou hammond Kettilson noted that:
"The general advantages are derived from membership. Co-operatives are uniquely member-owned, member controlled and exist to provide benefits to members as opposed to profit and this has an impact on business decisions. When the purposes of a business are aligned with those of members who are both investors and consumers of the co-operative, the results are loyalty, commitment, shared knowledge, member participation, underpinned by strong economic incentives." [7]
This inherent resilience does not mean that co-operatives are immune from the effects of financial and economic crises. Some co-operatives followed the practices of their investor-owned competitors, with equally devastating consequences. Being deeply rooted in local communities and concerned for their sustainable development does not guarantee immunity from economic failure through poor governance and management. Co-operatives can and have failed too from bad governance and poor management. they are at risk of doing so when they ignore the precepts of this 7th Principle and their commitment to ethical business practice.
Economic viability of co-operatives is key to economic, environmental and social sustainability. Without it a co-operative will not be able to-operate in a way that helps tackle poverty and wealth inequality.
The capacity of co-operatives to work for the sustainable economic development of the communities in which they work is clear, but how can they apply this 7th Principle to achieve that in practice? They do so by applying their ethical values to their trading operations, such as ethical supply chain contracts and fair trade, prompt payment to suppliers, Coop2Coop trade and support for other co-operatives.