“The impetus came through some of the city’s anchor institutions, including the Cleveland Foundation, Cleveland Clinic and University Hospitals and Case Western University,” says executive vice president Brett Jones. “They were looking at the impact on what’s called the Greater University Circle neighbourhoods – the neighbourhood of our anchor institutions – where people were economically disadvantaged. It was during the time that ‘buy local’ was getting going and they quickly realised that ‘buy local’ was awesome, but not awesome enough.”
Led by the city’s anchor institutions, who wanted to direct their buying power locally, the group realised the impact the cooperative model could have in the city. The idea was modelled on the Mondragon Corporation in Spain’s Basque Region – a network of employee owned companies. “They went to visit and came back absolutely convinced that this is what the vision should be,” says Jones.
Now, Evergreen employs more than 220 people and has succeeded in raising the average wage in the area from “one or two bucks above minimum wage to three or four bucks above it, in most cases.” Though he is quick to add: “folks talk about wage, but when you’re an owner, you either get it in wage, or you get it in profit share. You eliminate the dichotomy between workers and owners; between shareholders and employee wages, so it takes away the need to negotiate over pennies or dollars.” Evergreen employee owners pay $3,000 for their stake in the business, deducted from their wages at the rate of ¢50 an hour.
Jones says: “People think employee-ownership is some silver economic bullet – but you have to run a great company, otherwise you can’t fulfil the mission of profit sharing for employee-owners. Labour cost ratios have to be in line with the industry average – otherwise you can’t go to the bank and ask for a loan, because the bank doesn’t believe you can pay it back if your wage proportion is too high. You need that money to grow and operate the business in a normal fashion. The key lies in the ability to distribute profit after paying wages.”
It’s difficult to underestimate just how radical Evergreen’s approach is. More than half of its employees have had some interaction with the criminal justice systems; it is literally changing peoples’ lives. Employee owners also have the chance to buy affordable homes that they can pay off in four to six years. “We worked with a local developer on their lease purchase inventory, so that, when folks didn’t want to purchase a house after 15 years, they could sell to our employee owners. The developer had recouped a significant amount of their investment by then and, in the spirit of keeping them as affordable homes, we were able to develop a programme to make them available to our guys and gals,” says Jones.
“What’s important for us,” he adds, “is the ability to work within the current capital system. We don’t have to try to kill capitalism or try heavy lifts that take on the way our society operates – we have a new impact model that works within that. That’s what’s different about us.
“Worker ownership has been around since the beginning of time – but the difference is using the model as a targeted impact tool. When it comes to community development professionals, our goal is to help them understand how to use employee ownership as a tool. Evergreen is a tool that they’re able to use whenever they’re modelling, to increase and magnify impact – it’s a way to give the community a stake that’s economic, not just verbal. It’s important we’re at the table because those who we’re giving a stake aren’t at the table and wouldn’t be able to get the best deal themselves. Our role is to negotiate on behalf of existing and future employee owners – be at the table on behalf of someone I don’t know, but will maybe meet one day. Someone who’s not even born yet, who’ll then be able to eat, look after their family and the local community.”
Evergreen Cooperative Laundry
Evergreen launched in 2009 with Evergreen Cooperative Laundry, which is 100% employee owned; in 2019 it added Cleveland Clinic Laundry to the customer list. It combines state-of-the-art facilities with green innovations, working for the city’s hotels, hospitals and nursing homes. Getting local people behind the cooperative laundry idea was never an issue, says Jones. “You have economically disadvantaged residents with high unemployment and walk in and you say ‘we’ve got a job for you, and we’ve got some profit sharing for you…’ You don’t have to do a lot of work there. We haven’t had very much push back at all – having a job at a company that would partner with and be a vendor to the anchor institutions wasn’t a far-stretching notion,” he says.
Evergreen’s umbrella has spread from the Cooperative Laundry to encompass solar energy, hydroponic crop growing and, now, a fund for buying SMEs to convert them to employee ownership. “Those lightbulb moments all came in partnership with the anchor institutions,” says Jones.” They’d say ‘we want to spend more money locally – we want to spend it in this area… do you want to have a stab at developing a company that can meet our need in this area?’”
Evergreen Energy Solutions
Evergreen’s energy coop started life as Ohio Cooperative Solar. It was, says Jones “about connecting folk that had generally been disconnected from the green economy. The green economy disproportionately excluded African Americans in the US. It was an effort to create job opportunities and engage previously excluded populations. We started off as an installer, focusing on home modernisation and have moved into LED lighting and retrofitting. Construction and the trades have provided a solid middle class living, so we’re trying to reconnect this community.”
The project’s initial focus on training made it hard to run as a business – “training doesn’t make you a skilled craftsman,” says Jones. “It gets you on the ladder. It takes many years to become an awesome bricklayer, electrician or plumber – so it’s more difficult to get a business like this off the ground. Customers, quite rightly, don’t want to finance on-the-job training. They just want their plumbing done.” So, while the model initially proved tricky, EES’s focus has turned to LED lighting retrofitting, working for large industrial and commercial institutions. “Again, the anchor institutions were the primary customer, but not the only customer,” Jones says. “The vision for that company was that the anchor institutions represented 30-40% of the business, not any more. The goal was always to have customers beyond them…”
Green City Growers
Evergreen’s leafy offshoot is the largest hydroponic urban farming set-up in US, producing nutrient-rich, pesticide-free crops. It grows millions of heads of lettuce and specialty greens, alongside hundreds of thousands of pounds of herbs and micro-greens. Again, says Jones, the lightbulb moment came alongside the anchor institutions, “they had already worked out that there’s a large marketplace and we did the pencil work to make sure that it would work…. We were able to get that thing going, in partnership with them. It’s since grown beyond that partnership – although that’s the central pillar to how we design economic impact opportunities – and the reason behind starting the fund for employee ownership.”
Fund for Employee Ownership
Launched in November last year, Evergreen’s Fund for Employee Ownership Allows it to “purchase existing businesses from retiring owners – to protect local jobs and the local economy, and for them to realise the wealth they’ve built in the business,” says Jones. “While we’ve moved beyond the anchor institution model, we’re still helping other communities develop the model using employee ownership as an impact magnifier. Cooperative ownership puts that impact on steroids.”
The businesses Evergreen is targeting are usually too small to attract the attention of typical M&A cash, says Jones – and millions of baby boomers running small businesses are set to retire in the next few years. “Owners now understand that they have an option to exit the business and take care of their employees on the way out. They don’t have as many exit options – not as much access to strategic buyers, who’re looking for larger transactions. Smaller companies without exit strategies usually end up shuttering businesses and thus putting people on the unemployment line. And if you take into account the merit increases if you’ve been doing that job for a while, then the likelihood of them coming back to the market at the same [wage] rate is low.
“Two to three businesses a year would be a really good pace for us… if we can help 150, maybe 200, employees become owners each year.”
Jones admits that, actually, the best sign of Evergreen’s work is when you see no economic impact. “We maintain the local economy; maintain jobs; maintain the businesses,” he says. “If we do our job well, you’ll see no negative impact from businesses closing – and maybe some positive impact from employee-owners profit sharing.”