In 1921, there were more co-ops than ever before. At the International Co-operative Congress of World Co-op Leaders in Basel, Switzerland, co-op leaders wanted to identify and define the growing co-operative movement's common values and ideals to help unite co-ops around the world. They decided to develop an international co-op symbol to celebrate the movement's growing diversity.

It was hard to settle on an image that would please everybody. Artists all over the world submitted ideas and designs. Eventually, a famous French co-operator, Professor Charles Gide, suggested using the seven colours of the rainbow for the flag. He pointed out that the rainbow symbolised unity in diversity and the power of light, enlightenment and progress.