Opening the Aperture: Where Circular Meets Ownership

How Widening the Lens Can Fast Track the Circular Economy

The Circular Economy seeks to move away from the industrial ‘take-make-waste’ linear economic model, and instead create a more closed loop system where products and materials are kept in circulation for as long as possible, gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system.

Transitioning to a circular economy is also essential to achieving net zero emissions and preventing further climate destabilisation, as while the clean energy transition is critical to cutting our greenhouse gas (GHG) emissions, 45% of global GHG emissions can be attributed to the production of materials, products, and food, and to land management.

One of the debates around circular economy concerns the often missing social and human dimensions.

Materials do not exist disembodied from the social and cultural milieu in which they are used. People use materials, people work the jobs which process and manage materials, people consume the materials. It is the economic constructs of people that decide the value of materials.

Circular economy business models tend to be focused on how to unlock business growth and further consumption, often defaulting to concepts such as product service systems or rental or sharing of products between members of the public or businesses. These are all valid and necessary, but they are still not getting to the ‘operating code’ level of business and economic systems. There have also been many studies on how the circular economy can create jobs. What kind of jobs? Are they precarious or secure? Well paid or minimum wage? Easily offshored, or not?

The circular economy mission will fall short if it attempts to build a circular materials economy that is sitting on top of — and disembodied from — a linear extractive economy, where people and nature are exploited.

A genuine circular economy would ‘open the aperture’ of its circular lens, expanding the definition of the circular economy to one where its operating system is regenerative instead of extractive, and not only towards nature, but people. A truly circular economy would mean that the circular ethos is also reflected in our social systems, including our financial services, our business structures, and the political frameworks and cultural norms that influence human behaviour.

The way business operates, and the economic assumptions and social and government systems in which it is embedded, is a powerful dynamic. Since the mid 20th century, we have seen both the benefits, and the drawbacks, with government left to intervene to ameliorate and rebalance the latter.

In recent years, there have been efforts to explore and reinvent these structures in response to increasing concerns about the negative effects, from climate destabilisation and biodiversity loss, to extreme inequality and systems that benefit fewer people.

This shift includes the rise of ‘purpose first’ business, ranging from social enterprise and B Corporations to social procurement, ethical investment (and divestment), and more recently a focus on Environmental, Social and Governance (ESG) initiatives.

While some have an emphasis on certification and reporting, they don’t necessarily change the ‘operating code’ at the very core of how business works: how a business is owned, and to whom the benefits flow.

What if employee ownership could deliver on both circular economy goals with respect to materials, and a range of social and community policy objectives?

What is Employee Ownership?

Employee Ownership (EO) has been emerging as a new economic force in recent years, driven by business leaders who recognise its value.

EO can be part ownership, where employees make up a percentage of the owners of the company, or full ownership, where the employees effectively own the company:

There are a number of pathways to employee ownership, including

• Employee Ownership Trusts (EOTs)
• Employee Share Ownership Plans (ESOPs)
• employee share/options schemes
• worker cooperatives

Employee ownership can be leveraged to assist with employee engagement, employee involvement, motivation and retention, and offer a succession planning option where the founder of the business intends to retire or sell their business.

The Nexus of Circular and Ownership

‘Ownership’ is expressed in many forms of business, spanning worker co-operatives to employee ownership trusts (EOT). Employee Ownership Trusts are not a mainstream model in Australia, with only a handful of businesses having transitioned.

In Australia, there is an existing movement of employee (and other stakeholder) ownership via the peak body, the Business Council of Co-operatives and Mutuals (BCCM), which advocates for these models and documents case studies:

Co-ops and mutuals are member-owned businesses that trade for surplus to fulfil their purpose. They are social businesses because they put people, not profit, at the centre of the enterprise.

The BCCM has established a community of practice to support co-ops and mutuals with respect to ESG and sustainability, and have also developed an internationally accredited training program.

One South Australian example of a successful consumer-owned co-operative is The Barossa Co-op — a member owned purchasing co-operative, who in 2014 engaged Ernst and Young to undertake a study which showed that for every dollar spent at The Co-op Foodland, an additional 76 cents of total value is created for the Nuriootpa region.

Research shows that employee-owned firms have shown ‘significant commitment to improving environmental standards and sustainable business practices compared to peers’.

Circular Economy and Net Zero are essential policy objectives.

Expressing them through local ownership, which helps to both retain and distribute wealth in communities, would hit multiple policy targets.

One stellar example of where circular meets ownership is the Industrial Commons and Carolina Textile District (US):

Molly Hemstreet of Morganton, NC, a small city in the area with a population of 17,500, [said] the broader metropolitan region “had lost 40,000 jobs in our community, a decline over about an eight year period.” All told, roughly half of the manufacturing jobs in the region had disappeared.

In response, Hemstreet first created Opportunity Threads in 2008, a cut-and-sew worker co-op that sought to take advantage of the region’s textile manufacturing history and create the basis for local economic revitalization. The co-op itself reportedly employs 32 people. But Hemstreet, working with Sara Chester and others, later expanded the co-op into the seed of a much larger industrial strategy: two central elements of which are the Industrial Commons and the Carolina Textile District.

Since its founding, the Industrial Commons has grown from two staff members to 29, with initiatives that range from worker co-op incubation to the conversion of existing businesses to worker ownership. Other programs include a community land trust to support a housing co-op, programs that support workforce development, and the building of an economic development “innovation hub” to support emerging manufacturing and arts businesses.

In terms of incubating new cooperatives, there have been a couple of success stories: Material Return, a worker co-op specializing in textile reuse, and Good Books, a worker co-op accounting firm. In both cases, the businesses were founded out of Industrial Commons to meet identified ecosystem gaps.

Industrial Commons is also developing over 38 acres dedicated to the planned worker education and training “innovation campus,” and a 55-unit limited equity housing cooperative.

Since 2015, Industrial Commons estimates that they’ve helped train 2,850 workers while supporting 62 businesses and helping directly create 85 jobs.

This is how to build an employee owned business and community ecosystem with an equitable, inclusive and circular ethos.

In 2023, I orchestrated the Adelaide visits of Michael Shuman, local economics expert, and Dr Katherine Trebeck, wellbeing economics expert, as ‘Green Economy Catalysts’. They were respectively billed as ‘Where Circular Meets Local’ and ‘Where Circular Meets Wellbeing’. Both presented to State and local government policymakers on how economic localisation can be the engine of prosperity, meaningful work, circularity and social inclusion.

Shuman’s approach to economic development emphasises locally owned business, community self-reliance, high labour and environmental standards, and self-financing economic-development programs. Locally owned businesses don’t tend to offshore jobs, and there is more accountability for social and environmental performance than there is with absent owners and shareholders.

Trebeck’s approach via the wellbeing economy agenda is to get the economy to do more of the ‘heavy lifting’ so it delivers human and ecological wellbeing, rather than generating harm that necessitates ameliorative and corrective action. Shorthand for this is the concept of ‘failure demand’ — spending by governments in response to negative externalities generated by the current economic system.

The foundational concepts of both — local business, purpose-first business, placemaking, designing equity in to the front end of how economies and business works — are all captured in the approach of democratising business ownership, which is also well placed to deliver on circular and net zero policy objectives. Small to medium enterprise is the backbone of South Australia’s economy, which makes it an ideal candidate for testing employee ownership.

QUESTIONS

What kinds of policy objectives can employee ownership support?

How can employee ownership be encouraged?

Who needs to take what action, and what is needed to enable this?

Further Reading & Resources

Employee Ownership Australia
https://employeeownership.com.au

Business Council of Co-operatives & Mutuals (Australia)
https://bccm.coop

Assets in Common: Stories of Business and Community Leaders Remaking the Economy from the Ground Up
www.assetsincommon.org

Vermont Employee Ownership Center
www.veoc.org

The Vermont Employee Ownership Center is a statewide non-profit whose mission is to promote and foster employee ownership in order to broaden capital ownership, deepen employee participation, retain jobs, increase living standards for working families, and stabilize communities.

Mondragon (Spain)
www.mondragon-corporation.com/en

The Mondragon Corporation is a corporation and federation of worker cooperatives based in the Basque region of Spain. As of 2023, Mondragon could boast 92 autonomous companies that collectively employ 70,500 workers and earn annual profits of €593 million.

John Lewis Partnership (UK)
https://en.wikipedia.org/wiki/John_Lewis_Partnership

The public limited company is owned by a trust on behalf of all its employees, known as Partners, who share the responsibilities and rewards of ownership. JLP has around 74,000 employees as of 2024.

Scott & Fyfe (Scotland)
www.scotsman.com/business/why-taking-ownership-is-win-win-for-all-involved-4766779

Employee ownership is also a win-win for our team with 20% of operating profits shared equally among, with the option to purchase shares in the business. As the business thrives, employees have seen tangible increases in share price, empowering them to achieve personal financial goals and secure a more stable future for themselves and their families.

Obran Co-operative (USA)
www.obran.coop/news/what-is-obran-cooperative

Obran is a worker-cooperative formed as a Limited Cooperative Association, or LCA. What makes them unique is that they are a conglomerated holding company. The holding company owns businesses, and the workers in those businesses own and govern the holding company. This is distinct from similar structures, like Mondragon’s federation of worker-owned businesses, in that each individual worker-owner owns a piece of the holding company rather than solely the business they work in.

Pathways to Democratic Business: What Two Co-op Networks Can Teach Us

https://policyoptions.irpp.org/magazines/november-2024/local-net-zero

Local ownership, democratic control, and a balanced distribution of wealth can play a critical role in advancing Canada’s net-zero objectives.