In response to a number of national requests, the International Labour Organization (ILO) and the International Cooperative Alliance (ICA) have published a brief to clarify how cooperatives relate to profit.
Traditional economic activity is often framed in binary terms as either “non-profit” or “for-profit”; the brief – titled Cooperatives: Beyond the dichotomy between non-profit and for-profit – argues that cooperatives sit inbetween and represent a distinct “limited-profit” model.
Cooperatives are enterprises that generate income and, when profitable, share or reinvest their surplus — but do so in a manner grounded in democratic control, solidarity, and community values rather than investor returns. Because of this, the brief calls for greater clarity in how societies, regulators and policymakers recognise and regulate cooperatives. They should not be shoe-horned into charity frameworks simply because they emphasise community and social values; neither should they be judged by the same metrics as standard investor-owned capital-maximising firms.
The cooperative values and principles also inform this argument, says the brief, as they shape how cooperatives operate: capital contributions belong to members, but decisions are made democratically — irrespective of how much capital each member has contributed. Economic returns (surpluses) are typically distributed according to members’ actual use of the cooperative (e.g., their transactions), or reinvested in the enterprise or community.
In this sense, a cooperative is “a firm” — an enterprise — but one with a fundamentally different purpose from traditional profit-oriented companies. The aim is not the maximisation of external investor returns, but the fulfilment of members’ needs, social solidarity and long-term sustainability.
In practice, this hybrid model allows cooperatives to combine economic viability with social values. They can generate revenue, create jobs, invest in operations, and pay fair returns to members — while preserving democratic governance, community orientation, and equitable distribution. However, for cooperatives to realise their full potential, this “limited-profit” approach must be properly understood — and protected.
The concept of cooperatives as “limited-profit” institutions offers a more precise and realistic understanding of their nature, says the brief, and offers a stronger basis for public recognition and support. But the report underscores the need for legal and regulatory frameworks that recognise cooperatives as a distinct type of enterprise, neither charity nor standard company - and acknowledges that this requires policy-makers, lawmakers, financial regulators and markets to account for the hybrid logic of cooperatives when designing laws on taxation, business registration, access to finance, competition, and social protection.
