Building Worker Co-ops in the Cannabis Industry

With legalized adult-use cannabis around the corner, we have heard from people about the many different challenges and barriers to entering the Illinois recreational cannabis industry. Specifically, individuals tend to believe that they alone do not possess the resources, capital, political access, or support necessary to apply for a license, let alone successfully operate a business in a seemingly highly-regulated industry.

So how do individuals who have participated in legacy cannabis businesses, those who possess expertise and experience in cannabis cultivation, distribution, and sales, benefit from the booming industry when the world has been working against them?

Stronger Together

We believe there is power in numbers. People who would otherwise operate in silos can learn to organize themselves, in democratically-controlled workplaces, and achieve more collectively than they could individually while competing against each other. Is it possible for us to work together in a commonly owned business?

Consumer and producer cannabis cooperatives already exist, although most operate informally due to the (previously) illegal nature of the business. It’s likely that most informal cannabis businesses are practicing some form of cooperative principles, whether intentionally or not.

Co-ops in popular culture: The Wire

Worker-Ownership 101

A worker cooperative is a business owned by the workers. Workers become owners, or members, according to criteria set by the cooperative. Each member of the worker cooperative becomes an owner with rights and obligations, including voting on major workplace decisions, participating in conflict resolution, and contributing labor and skills. Some worker cooperatives hire employees who are not members.

Worker-owned companies generally apply cooperative principles, including but not limited to:

1. Voluntary and open membership. Cooperatives open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination. New members are typically voted in by existing members.
2. Democratic member control. Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and decision-making through consensus decision making, or other democratic structure.
3. Member economic participation. Members contribute equitably to, and democratically control, the capital of their cooperative. In a worker co-op, all worker co-op members gain or lose together. No single member benefits at the expense of other members.
4. Autonomy and independence. Cooperatives are autonomous organizations that are controlled by their members. Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity.
5. Education, training, and information. Cooperatives keep their members informed and provide education and training for their members so they can contribute effectively to the development of their cooperative.
6. Cooperation among cooperatives. Cooperatives strengthen the cooperative movement through teamwork, collaboration among each other, and by supporting each other’s businesses.
7. Concern for community. While focusing on members’ needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.

One misconception about cooperatives or worker-owned companies is that these arrangements or approaches to organizing ourselves are exclusive to individuals in radical-left circles. However, collective ownership is a concept which can be adopted by anyone who wants to strive for a more just and equitable society.

Cooperatives: Still a Business

Worker-owned businesses are still subject to the same challenges or needs as any business: recruiting well-trained and competent personnel, access to working capital and financing, market research,and strategic planning. Co-ops are vulnerable to the same market and economic forces that face all businesses but can be more resilient through economic hardship.

Most new businesses, including worker cooperatives, typically develop through four phases:

1. Organizing. Organization can take from 3 to 12 months.
2. Start-up. A phase that usually lasts for about 6 months in which the basic business strategy is tested.
3. Growth. A phase that may last for several years in which the markets are expanded, management techniques and governance systems are refined, production techniques are altered as dictated by experience, and the workforce is expanded.
4. Consolidation. The phase in which the worker-owners assess their progress in reaching the targeted growth and develop the firm’s goals and strategies for the next 3 to 5 years.

Elements Needed for Successful Worker Co-op Start-up

Worker-owners collectively take on the economic risks and benefits of working in, owning, and operating their cooperative business. Worker-owners decide how the net income, or net losses, are allocated and govern and control the enterprise on the basis of one member-one vote.

According to Steps to Starting a Worker Co-op by the University of California, Center for Cooperatives, organizers of worker co-ops must have or obtain all of the following elements to start and operate a successful business:

1. A commitment to cooperative and worker-cooperative principles. The organizing group must understand what a worker cooperative is and have a commitment to the cooperative model.
2. A viable business concept. All members of the group must share a viable business concept or develop a suitable business idea. The business concept is analyzed with a feasibility study and a business plan. Timing is important; changing technology, economic conditions, or impending privatization are just a few of the many forces to consider.
3. Access to funds or capital. Access to adequate capital includes the money contributed by membership (equity) agreed to by the organizing members, loans or grants, the time and labor of the worker-members, and credit from banks and other sources.
4. Entrepreneurial characteristics and business skills. The following characteristics, experience, and business skills should be present within or available to the organizing group: a) high energy level-the ability to work hard; b) determination to succeed; c) good oral and written communication skills to sell a product or service; d) flexibility and resiliency to adjust to the rewards and pitfalls of the marketplace; e.) decision-making skills; f) ability to mobilize and organize resources; g) ability to work with others to achieve a common goal; h) the courage to try new things; i) previous business experience; j) financial management skills and experience; k) experience and skills in the business area identified.

When worker co-ops fail, it is usually because one or more of the above requirements is lacking. We would also add to the list embracing and maintaining of a fair-minded conflict resolution methodology.

Founding Member Tom Gliszewski presenting on Illinois Adult-use and Social Equity in the Cannabis Industry at the Eastern Conference for Workplace Democracy in Baltimore.

Worker-Ownership: Not a Novel Concept

According to the Democracy at Work Institute, U.S. researchers and co-op developers estimate that there are at least 300–400 democratic workplaces in the United States, employing around 7,000 people and generating over $400 million in annual revenues.

There are hundreds of examples of collective, economic organizing and cooperation among African Americans, as well as other people of color and low-income people, throughout the nation’s history, as documented in Jessica Gordon Nembhard’s book Collective Courage.

According to Community-Wealth.org, “worker-owned cooperatives in the United States can be traced back to the early labor movement, when workers — especially artisans and craftsman — formed cooperatives while on strike or after a strike had failed. For example, after a 1794 strike in Baltimore, shoemakers self-organized a shoe production facility under worker ownership. In the 1880s, the Knights of Labor helped organize hundreds of worker cooperatives.”

The Pullman Strike in Chicago led to Labor Day becoming a national holiday. The designation came at a particularly bloody time in the labor movement as a way to appease labor activist.

Building Equity in the Cannabis Industry

We have already written about the opportunities for equity applicants presented in the recreational cannabis bill, but how these measures and aspirations will play out and materialize in the real world is still to be determined. The pathway for creating equity in the cannabis industry is still unclear, and there are many past transgressions and harms which have yet to be resolved and atoned for.

It’s troubling that wiping out the “black market”, or people’s livelihoods, is seen as a success of “legalization.” This could lead to unintended consequences. A better indicator may be how many people were enabled to successfully transition from an informal/underground business to a so-called legitimate business.

As a worker-owned company, our mission is to build an inclusive cannabis cooperative while providing economic opportunities for small farmers, disadvantaged communities, and Chicago’s neighborhoods that have been negatively impacted by “the war on drugs”. Responding to a need to build equity in the cannabis industry, we are actively working with community organizations whose purposes are aligned with this mission.

Read more about our worker-owned cannabis company.