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May 2, 2022 2022-05 Accountancy Faculty Student

Gies Partners with State of Illinois on data platform for cannabis industry

Gies College of Business and the Disruption Lab have been hired to collect and analyze data about the burgeoning cannabis industry in the State of Illinois. The initiative, led by Associate Professor of Accountancy Justin Leiby, is designed to help shape the cannabis industry’s diversity, equity and inclusion (DE&I) and social justice regulatory policies.

Since Governor J.B. Pritzker signed into law the Illinois Cannabis Regulation and Tax Act in June 2019, the recreational marijuana industry has grown quickly, generating more than $1B in sales in 2021. It is the state’s seventh largest source of revenue, surpassing alcohol taxes last year.

Illinois has taken a novel – and admired – approach to introducing cannabis to the state. It is the first in the country to legalize recreational use of cannabis through a legislative act, which is also the first to include social equity and community components to the cannabis business ecosystem. Licensing prioritizes social equity applicants and 45% of tax revenue is earmarked for re-entry, workforce development, and substance use disorder treatment programs. Illinois has also used cannabis tax revenue to facilitate the expungement of more than 500,000 arrest records and 20,000 conviction records involving cannabis. Many states that legalized marijuana through referendum now look to Illinois as the model for how to incorporate social justice and community revenue streams.

“Conversations about individual liberty, systemic racism about police overreach, and economics have always been an interest of mine,” said Leiby. “The cannabis world is unknown for a variety of reasons. Quantifiable benchmarks and rigorous analysis are things you don’t see in this space. There’s an opportunity to use data we collect to bring analytics to bear on DE&I related questions.”

Leiby’s teaching focuses on empathy building. It uses empathic design thinking to challenge accounting students to manage risk by first considering how stakeholder thoughts and feelings impact how they react to risk.

There are five ways for people to participate in the cannabis industry in Illinois: Cultivator, craft grower, transporter, infuser, and retail, which is the most visible aspect of the industry. Initially the State drew some backlash when it awarded the first recreational use retail licenses to those firms that already were selling medical marijuana because they would already be familiar with the process. Most happened to be owned by white men.

“Now other companies are playing catch up. It’s just dollars and cents,” said Leiby. “The cannabis industry can be an engine for building generational black and brown wealth. Generally speaking, like many industries, the marijuana industry is mostly white up at the top of the corporate ladder.”

Leiby cold-called the State of Illinois last year to ask Danielle Perry, the state’s Cannabis Regulation Oversight Officer, to speak to his class. Routine discussions led to this shared opportunity that aims to streamline collecting information from 100 companies and 3,600 employees.

“This is an opportunity I want America to get right. Often when we're talking about this work, we use the general ideas of equity and diversity. But the truth is a Black person is four times more likely to be arrested for cannabis possession than a white person. I want to see if our efforts to use licensing as a tool to reach those communities — the ones most impacted by prohibition — succeeded,” said Perry. “We are standing up a whole new industry in our lifetime, and, in doing so, we are creating a standard for what is equitable.”

A diversity survey is one of the statutory requirements and a major initiative; Illinois initially crafted a survey with several hundred questions on a platform with a difficult interface.

“The state was interested in financial barriers to entry that limit ownership opportunities, and we decided to look deeper to barriers that stem from culture or business practice, like lack of inclusivity. The only way you can figure out inclusivity is to ask people about their environment,” said Leiby, who helped the transition the survey from Microsoft SharePoint and developed a more user-friendly, streamlined survey to make it easier to look at the demographics of a company’s employees.

“We first asked owners, directors, and executives about their staff. Then we surveyed employees to gather the information directly from them because companies often won't necessarily know whether someone identifies as LGBTQ+, and they’re not going to ask,” said Leiby.

The data is expected to shed light on barriers to entry, perceptions, and job demands, and it is designed to reduce three pain points: Bring more transparency to the entire license application process; educate the cannabis industry about DE&I; and identify what the government can do legislatively – such as trying to increase Black ownership or reducing financial barriers for growers.

“Today we don't even know who's working in the industry. This is not just giving out a few valuable licenses to a few select people and they get really rich and no one else benefits. We have to look at diversity and equity broadly — across vendors and employees,” said Leiby.

For example, a first look at the data shows 16% to 18% are from the LGBTQ+ community, which is much higher than the Human Rights Campaign’s national average of 4%.

Leiby is working with the Disruption Lab to create a data management solution that’s hosted by Gies and can be accessed by State. The Lab brings together students, faculty and partners to advance new, disruptive ideas by combining technology and business in a constantly evolving landscape. It has delivered the social equity data and later this year will layer on dashboards and analytics to see key performance indicators. Next semester, they will add projects that can tie the data to production and sales. Ultimately, it helps create a research and teaching asset for the College, which the State supports.

“They want smart people looking at this data. If we have a population that is marginalized or may not feel as welcomed in other industries, we can address that. We can try to make this an industry where everyone can get a decent job and develop some level of economic security or independence,” said Leiby. “Right now, regulating this industry is akin to trying to take care of an animal not knowing what they’ll eat or when they sleep. It’s canvassing the unknown and learning how to feed and care for it.”

Nathaniel Inglis Steinfeld, deputy officer for research & data for the state’s Cannabis Regulation Oversight Office, said Gies and the Disruption Lab’s involvement means they will receive clean data upon which they can make good decisions, create good policy, and better understand the makeup of the primary and ancillary businesses to the cannabis industry.

“I’m so glad we have this relationship with Justin and the University to help us interpret the data, because there’s so much there. The legislature’s goal is to create a system that will encourage the leadership of this new industry to address not only DE&I, but also the past intense criminalization of certain types of illicit drug markets,” said Inglis Steinfeld.

“This is a big win for Gies and our students. My intention is to give them an opportunity to get real-world data consulting experience in an industry that's growing fast,” said Leiby.

Leiby and his students will use the data to look at job satisfaction as a function of diversity or explore their intentions to stay in the industry or find another job. They will be able to see if perceived inclusivity is high or low. Eventually, they will be able to apply the data they collect to other industries. 

University of Illinois alumna Toi Hutchinson, who recently left her position as Senior Advisor to the Governor for Cannabis Control in Illinois to become CEO and president of the Marijuana Policy Project in Washington DC, puts the implications in perspective:

“We’re still arresting almost 600,000 people every year for simple possession in this country, while a multi-billion-dollar industry and an entire ecosystem is built around it. This is untenable.” Hutchinson said, adding that the next push is to convince the 19 states who have not decriminalized cannabis that it’s in their best interest to do so. “It’s incumbent upon us to try to figure out how to bring people along who were most harmed by cannabis prohibition. We want to create federal legislation that benefits the whole country through social equity. Diversity surveys like this help us do just that.”