Developing Social Reporting in Co-operatives (1997)

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This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
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April, 1997
(Source: ICA Review, Vol.90 No.1, 1997, pp.72-78)


Developing Social Reporting in Co-operatives
by Kai Blomqvist*
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Aim of the Paper
--------------------
To develop social reporting in co-operatives, I think there is a need to
elaborate what was called Basic Co-operative Practices for the various ICA
specialized organizations as stipulated at the ICA Tokyo Congress in 1992.
I also think there is a need to develop educational activities - a major issue in
co-operative social reporting - based on "learning by doing" to be able to
recreate the co-operative logic in the minds of members and employees.
 
The aim of my paper at the ICA Research Committee conference in Tartu in
September 1996 was to present a summary of three studies that can help to
realize these two recommendations. This shorter version highlights some
points in the paper.

Collaborative Research Project
------------------------------------
The International Co-operative and Mutual Insurance Federation (ICMIF) is
one of the specialized organizations of the International Co-operative
Alliance. It represents more than 150 insurers belonging to 82 member
organizations in 52 countries.

In early 1996 a new collaborative research project was suggested: Annual
reports - Audit of social effects: How can we measure and promote what we
do for customers/society?

It was decided to make a short survey: Annual Social Activity Reporting. As
a first step it was decided that I should review annual reports of ICMIF
members and prepare an outline of next steps to be taken in developing a
possible project. 

Perspective and Method
-----------------------------
I have chosen to call the subject "Social Reporting", departing from the idea
that the co-operative/mutual member is a subsystem interacting with the
surrounding social and environmental system. This interaction has social,
ethical, political, environmental, etc. implications, depending upon the
outputs and inputs of the interacting agent. There are many general
questions that can be asked about the effects of the actions taken by an agent
in such a relationship. What effects do the actions of a company have on
society and the physical environment? How do they affect equity
considerations between various groups in society? What possible impact do
 they have on the situation of future generations? How do they contribute to
form a sustainable future? 

In my pilot survey of the social activities described in member annual
reports, the ambition is more modest. I have compiled lists of social activity
items that have some bearing on the values, principles and codes of
practices, that the co-operative/mutual insurer presents in the annual report
as a kind of Policy Statement. The simple idea is that the various stake
holders of the member organization have a right to know to what extent the
organization complies with this policy. That is the main point of social
reporting.

Findings
-----------
The complete lists of the items of social activity that I found in member
1993 and 1994 annual reports are not presented in the Tartu paper. Here I
will even further summaries the findings.

Policy Statement
---------------------
As I mentioned, social reporting presupposes some kind of policy statement
from the organization making the report. Otherwise, you do not know
which activities to report or what to measure to show how and to what
degree you comply with the purposes and the intentions of the organization.

In the majority of the member reports, policy statements are present, though
under different names: Vision, Mission, Core values, Principles,
Management Principles, Corporate Philosophy.

These terms are often used to describe different levels of guidelines, like the
categories used in the recent ICA study of co-operative principles: Basic
values, Principles and Basic Procedures. In some cases, a reference is only
made to "our mutual heritage" or "being a part of the social economy sector"
or "the co-operative sector". Some annual reports include the whole policy
statement of the member organization. In others, parts of it are quoted by
the Chairman of the Board or by the President or appear in other sections of
the report. Sometimes the policy statement is published in a separate booklet
and referred to in the annual report.

The connection between the policy statement and reported activities and
events is sometimes openly indicated, e.g. that something has been done
"on our basis of co-operative trading": dividends to co-operative societies
have been distributed in relation to the premiums for insuring their own
risks. Otherwise, it is implied that there are certain values and principles
behind the decision to do something: limiting premium increases for a
particularly "weak" category of policyholders, or catering to a market which
is not very profitable and thus poorly served by conventional underwriters.

In some cases, principles, goals, etc are monitored and measured in relation
to the results of performed activities. There are also examples of member
presentations of strategies, plans and goals for the immediate future.

Compliance with Goals
----------------------------
The key area in social reporting is trying to answer the question: How does
the organization report activities and events that have occurred during the past
year, and which are derived from the policy statement?
 
As I see it, the most important area to be reported is the business-related
activities that spring from the values, principles and goals presented in the
policy statement. What is at stake for the co-operative/mutual insurer, is to
operationalize and report the type of basic co-operative/ mutual insurance
practices that the various ICA specialized organizations were requested to
develop further by the ICA congress in Tokyo 1992.

In this section of my Tartu paper, I shortly describe the reported business-
related activities that openly are related to specified goals concerning
products and services, distribution of dividends, treatment of employees,
loss prevention and those social activities that are closely related to the
business-side of the operations. According to some annual reports, new
monitoring  methods have recently been introduced, e g persistency rates and
statistics on times taken to complete processes and handling complaints.

Another new development in some annual reports is the presentation of
results from surveys on customer attitudes and employee satisfaction. Some
members also present trends over the last five years by including key
statistical figures in the report.

One member mentions that a permanent internal audit for social reporting
has been introduced. Another interesting feature is the introduction of
special organizational set-ups to monitor and follow how compliance to
policy statement is achieved, e g  an Office of Ethics and Compliance, a
Center for Corporate Public Involvement and a Committee for Corporate
Public Involvement.


Lobbying and Community 
-------------------------------
Items of lobbying activities show that members are involved in a wide range
of issues. They voice their opinion on tax deduction proposals, reform
proposals on co-operative law, new directives for insurance operations, etc.
They also express preferences for state health and pension schemes,
concern about unemployment and the economic situation of the country,
criticism of government's lack of preventative measures against accidents
and major catastrophes, such as earthquakes and flood damages. In some
cases these types of lobbying activities are presented more fully in separate
booklets.

Various ways to be involved in community work are presented: Investing in
the community, e g housing, day-care, energy; research; money to
employment creation measures; participation in projects aiming at the
development of the community; encouraging employees to civic leadership
and voluntary work.

Collaboration with Others
-------------------------------
Collaboration with other organizations is common. Besides being member
of various industry and loss prevention organizations, members co-operate
with government agencies for safety and health issues, and sponsor and
form relations with research institutes. There are also examples of members
collaborating nationally and internationally in projects, involving partners
 both from the ICMIF membership and outside this group.

Democratic Organization
-----------------------------
Decision-making bodies and various fora for communication with
policyholders and others are often presented, sometimes in detail, giving
names of elected representatives. These bodies represent "sponsor
organizations", the "social base", "partners", etc. and have many names
besides the Annual General Meeting (AGM) and the Board, e.g. advisory
councils, liaison committees, appeal committees, working groups.

The primary importance of the democratic system is in some cases indicated
by having the report of The Chairman of the Board as the first item of the
annual report.

Employment and Education
---------------------------------
There is a tradition in some countries to include a special section of the
annual report, giving facts about employees and education, often called the
 "social balance". Figures on the composition of the work force are
presented, e.g. age, gender, educational activities. Other information might
also be included: introduction of some new fora for communication between
management and the employees, profit-sharing schemes, equity measures,
treatment of redundancy, internal job agency activities, social counseling,
nutrition and food education for employees, etc.

The education of members/policyholders/consumers is an important
traditional principle for co-operative/mutual insurers. The development of
competence is also emphasized in many reports. Special stress is in some
cases given to the reproduction of co-operative/mutual values through
education: "Our mutual values are reflected at all corporate levels". But how
this is done, is seldom indicated.

Loss prevention, health campaigns, research, rehabilitation
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A long list of loss prevention activities are presented in the annual reports,
focusing on: traffic accidents, drugs, alcohol, fraudulent claims, measures
to prevent litigation, promotion of safe working places, crime, burn victims,
handicapped persons, back ailments, domestic accidents, unsafe toys, poisons, 
winter driving, whiplash accidents, auto theft, promoting healthy
life-styles.

Social & Development Activities
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A great variety of social and cultural activities are presented, e.g. raising
money for soup kitchens and family shelters, scholarships, camps for
children, speech contests for youngsters, support to women movement,
sponsoring art exhibitions, concerts, local musicals, football contests, fairs,
town festivities, publishing, investing in old historical buildings, support to
day-care centers, cooking school, recreational facilities, environmental
issues support.

This area is, of course, hard to distinguish from public relations and
marketing, such as general sponsoring of sports events.

Other Features: the Way it is Presented
----------------------------------------------
In my paper I have indicated some of the methods used in presenting the
content of the various subjects covered by the annual reports. Some features
are worth emphasizing: In some annual reports, the Chairman of the Board
is the one who makes the main presentation of the events of the past year. In
others, the CEO is the key person. 

Various rhetoric methods are used to underline the message: photographs of
policyholders or events, slogans, aphorisms, citations, etc.  Measurements
and figures are given but not very often long-term trends or comparisons
with other insurers, averages for the industry, etc.

Some annual reports provide help for the reader and include a simplified
analysis of the economic results and word lists of insurance terms. In one
case, an article is included, written by an accountant, explaining the new
accounting principles that were introduced in the past year.

Recommendations and Proposals
---------------------------------------
On the basis of this study, I have made a number of recommendations for
the social reporting of the ICMIF members. 

In a short-term perspective, I have made a fairly simple recommendation, as
a first step, for individual ICMIF members to develop social reporting:
Bring together all the social information of the type compiled in my study
and put it into a single social report within the conventional annual report,
using the findings presented above, as a check-list for ideas that can
improve the present reporting!

In a longer-term perspective, I propose a collaborative project on social
reporting, giving special attention to some points. My Tartu paper focuses
on two of my recommendations for developing a model for social reporting,
suitable for co-operative/mutual insurers and, I presume, as well as for
other types of co-operatives. 

Basic Practices
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The first recommendation concerns the need to elaborate Basic Co-
operative/Mutual Practices for insurance operations, according to the
demand of the ICA Tokyo Congress that the specialized organizations
should develop a set of basic co-operative principles for directing the
operations in the various co-operative branches, e.g. concerning
democracy, organization, education, dividend distribution, investment,
efficiency/effectivity measures, etc. Such a branch-based definition of the
true co-operative applications would make it easier to defend and promote
the co-operative identity and, most important in this context, to monitor and
measure compliance with goals in a social report of activities.

Identity
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In a recent study, I have interviewed four  prominent retired consumer co
operative general managers about their experiences. In my paper, I have
summarized the viewpoints of one of them, a co-operative insurance CEO,
in order to illustrate the kind of perspective that could be helpful to clarify
the consumer co-operative identity and to elaborate Basic Co-
operative/Mutual Practices in the field of insurance, and, possibly, as well
as in other consumer co-operative branches.

To systematize the CEO's perspective, you can say that it consists of six
simple imperatives:

1.	Do have a broad perspective on consumer needs!
2.	Combine ideology with practice!
3.  	Be open to new ideas!
4.	Be independent of other interests!
5.	Co-operate!
6.	Inspire and delegate!

Further elaborated, this could be the basis for what I have called fragments of "a 
consumer co-operative theory of action". Such a theory concerns three areas:

I)  The persistent consumer perspective: The essence of this perspective is
the stubborn will to do things which will enhance the consumer interest; to do 
what is good for member and consumer households.

II)  The personal consumer co-operative disposition to act: It could also be
called "the consumer co-operative personality", as ingredients in this area
are parts of the personal characteristics of the consumer co-operator. In this
personality there is a union of certain values, certain tendencies to think and
act, certain ways of doing things, certain intentions behind the actions.

III)  Organisational prerequisites or `places' where I and II can regenerate 
IV)  and be developed further; places where the meaning of co-operation can be
formed, established and developed.

Mode of Operation
----------------------
At the various conferences of the ICMIF, papers have been presented,
discussing different aspects of the co-operative/mutual insurance mode of
operation. What are some of the characteristics that differentiate co-operative
mutual insurers from others? In product development, services, marketing
methods, claims handling, investment policy, loss prevention, system of
measurement of effectivity and efficiency, etc? 
 
To exemplify a way to develop Basic Co-operative/Mutual Insurance
Practices, I have made a study of statements of principles concerning
member economic participation in co-operative/mutual insurance societies,
that is, practices of surplus distribution and equity considerations. 

To summarize the arguments in various ICMIF conference papers, co-
operative/mutual insurers translate the 3rd Principle of the Statement of the
Co-operative Identity into three mutually supporting principles concerning
patronage dividends:

-	Separation: Each branch should carry its own costs

-	Limited returns: All surplus to the policyholders

-	Equity: Dividends to each in accordance to their contribution to the surplus.

Co-operative Education
----------------------------
The importance of co-operative education is emphasized in many annual
reports but little is said about how the co-operative/mutual business logic is
recreated in the minds of the employees and the members/policyholders.
There is ample evidence that the education for co-operation is most
effective, if learning situations are provided in the normal day-to-day
functioning of the co-operative. In fact, this type of co-operative education
seems to be more effective than more formalized approaches. It has also
positive effects on the economic development of the organization as the
advantages of the co-operative principles are built into the daily running of
the enterprise.

An interesting example of this approach is given in a research report by
Gurli Jakobsen, presented in a recent issue of the Review of International
Co-operation (RIC Vol. 89 No. 2/1996, "A Study of Educational Processes
in a Co-operative). One of the cases of the study where the co-operative
learning is done by doing is an insurance co-operative. Some features of its
business routines are summarized in my Tartu paper to provide an example
of badly needed development work in insurance co-operatives and mutuals
which is my second recommendation to the ICMIF members.

I think that my two recommendations concerning Basic Practices and Co
operative Education, together with the kind of studies concerning Identity,
Mode of operation and Education of employees and members, described in
my paper, are good ways to further develop the social reporting, not only in
co-operative/mutual insurance societies, but in other co-operative branches,
as well.

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* 	Former member of the International Board of the Swedish Society
for Co-operative Studies and Secretary of the ICA Research Committee,
Mr. Blomqvist is now retired but involved in research together with
colleagues in a newly-formed Swedish Research Co-operative.