Beyond the familiar divide between private business and government programs lies a rich landscape of alternative economic models. Social enterprises pursue social or environmental missions while generating revenue. Cooperatives are owned and democratically controlled by their members—whether workers, consumers, or producers. These models challenge assumptions about how economic activity must be organized and offer potential pathways toward more equitable and sustainable economies.
Understanding the Landscape
Social Enterprises
Social enterprises are businesses that prioritize social, cultural, or environmental objectives alongside or above profit. They generate revenue through commercial activity rather than depending solely on donations or grants, but reinvest surpluses in their missions rather than maximizing returns to shareholders. The category is broad, encompassing everything from nonprofit organizations running revenue-generating programs to for-profit companies with explicit social purposes.
In Canada, social enterprises operate across sectors. Some employ people facing barriers to conventional employment—those with disabilities, histories of incarceration, or mental health challenges. Others provide affordable goods or services to underserved communities. Some focus on environmental sustainability, fair trade, or community development. Their legal structures vary, including nonprofits, cooperatives, and conventional corporations with social purpose bylaws.
Cooperatives
Cooperatives are enterprises owned and democratically governed by their members, operating according to internationally recognized principles including voluntary membership, democratic control, member economic participation, autonomy, education, cooperation among cooperatives, and concern for community.
Different cooperative types serve different purposes. Worker cooperatives are owned by their employees, who share in governance and profits. Consumer cooperatives are owned by customers, from credit unions to food co-ops to housing cooperatives. Producer cooperatives allow independent producers—farmers, artisans, freelancers—to jointly market, purchase, or process. Multi-stakeholder cooperatives incorporate multiple member classes.
Canada has a strong cooperative tradition. Credit unions and caisses populaires serve millions of members. Agricultural cooperatives remain important in many regions. Housing cooperatives provide affordable homes. Worker cooperatives, while less common than in some countries, are growing.
The Case for Alternative Models
Democratic Participation
Cooperatives extend democratic principles into economic life. Rather than decisions being made by distant shareholders or appointed managers, members participate in governance through one-member-one-vote systems. This democratic structure can create workplaces and services more responsive to the people they affect.
For workers in worker cooperatives, this means having voice in decisions about their labour—wages, working conditions, strategic direction. For consumers in consumer cooperatives, it means shaping the products and services they receive. This participation can foster engagement, satisfaction, and connection that hierarchical organizations often lack.
Wealth Distribution
Conventional businesses concentrate wealth among shareholders, often far removed from operations. Cooperatives distribute benefits among members—whether through patronage dividends, worker profit-sharing, or simply better prices and services. This broader distribution can reduce inequality and keep wealth circulating in communities.
Social enterprises similarly aim to benefit communities rather than extract value. By reinvesting surpluses in their missions, they build community assets rather than enriching external owners.
Resilience and Stability
Research suggests that cooperatives may be more resilient during economic downturns than conventional businesses. Worker cooperatives in particular tend to maintain employment during recessions, with members accepting reduced hours or pay rather than laying off colleagues. This stability benefits both workers and communities.
Local ownership also creates stability. A cooperative or social enterprise rooted in a community is less likely to relocate in pursuit of lower costs or higher returns than an externally owned business optimizing for shareholders.
Social and Environmental Purpose
Social enterprises explicitly organize around social and environmental goals that conventional businesses may ignore or treat as secondary. This purpose-driven approach can address needs that markets alone do not meet—providing employment to marginalized people, serving unprofitable communities, pursuing sustainability beyond regulatory minimums.
Challenges and Limitations
Access to Capital
Cooperatives and social enterprises often struggle to access capital. Investors seeking maximum returns may find cooperative structures—which limit returns and diffuse control—unappealing. Social enterprises operating as nonprofits cannot issue equity. Even where capital is available, terms may be unfavourable compared to what conventional businesses obtain.
This capital constraint can limit growth, prevent scaling of successful models, and leave gaps in infrastructure and working capital. Various solutions exist—cooperative development funds, social finance intermediaries, community bonds—but the ecosystem remains underdeveloped compared to conventional finance.
Governance Complexity
Democratic governance takes time and skill. Involving members in decisions can slow action, create conflicts, and require consensus-building that hierarchical organizations avoid. Not all members may want to participate actively in governance. Balancing efficiency with democracy is an ongoing tension.
Social enterprises face their own governance challenges, particularly around mission drift. Pressure to generate revenue can gradually eclipse social purpose. Without clear structures maintaining mission primacy, social enterprises may evolve toward conventional business practices.
Scale and Visibility
Many cooperatives and social enterprises remain small, lacking the visibility and influence of major corporations. This can limit their impact, make them invisible to policymakers, and prevent them from achieving economies of scale. Building federations and networks helps, but the sector remains fragmented.
Policy and Legal Frameworks
Legal frameworks designed for conventional businesses may not fit alternative models well. Social enterprises often must choose between nonprofit structures (limiting revenue-generating activities) and for-profit structures (lacking explicit social purpose recognition). Some jurisdictions have created new legal forms—community interest companies, benefit corporations—but adoption varies.
Policy support for cooperatives and social enterprises also varies. Some provinces have cooperative development programs, social enterprise strategies, or preferential procurement policies. Others provide minimal recognition or support.
Canadian Examples
Canada's social economy includes significant players. The Desjardins Group in Quebec is among the largest cooperative financial institutions in the world. Mountain Equipment Co-op (now restructured) was a prominent consumer cooperative before its 2020 sale. VanCity in British Columbia operates as a values-based credit union. Numerous smaller cooperatives and social enterprises operate in every community.
Indigenous communities are increasingly using cooperative and social enterprise models for economic development, combining traditional governance principles with contemporary organizational forms. These enterprises can support self-determination while generating community benefit.
Future Directions
Interest in alternative economic models appears to be growing, driven by concerns about inequality, sustainability, and democratic deficits in conventional business. Platform cooperatives offer potential responses to gig economy exploitation. Community land trusts and housing cooperatives address housing affordability. Worker buyouts can preserve jobs when conventional owners exit.
Scaling these models will require improved access to capital, supportive policy frameworks, development infrastructure, and broader public awareness. Whether alternative models can move from the margins to the mainstream remains an open question.
Questions for Further Discussion
- What policy changes would best support the growth of cooperatives and social enterprises in Canada?
- How can alternative models access capital while maintaining their distinctive structures and purposes?
- What role should cooperatives and social enterprises play in addressing housing affordability, employment for marginalized people, and other social challenges?
- How can democratic governance be made efficient enough for competitive markets while remaining meaningfully participatory?
- Should governments preferentially procure from social enterprises or cooperatives, and how might this be implemented?