Compliance: Planning to stay in business

For producers and sellers of cannabis in medical and adult-use markets, it is a tightrope balance to run an efficient, profitable, and compliant business.

The challenge of compliance is directly corollary with the bottom line (your capacity to do business, or time consuming remediation) when regulations change often and licenses or permits required to operate are up for renewal within fairly short intervals.

Operators bridging from an unregulated to regulated market often take regulator behavior as interpretations of the law. The perspective makes sense for operators new to highly regulated markets. However does not consider the difficulty regulators face: having to develop and implement the defining of rules a burgeoning industry with strong implicit demand. Behavior is some indicator as to interpretation, but it also may suggest something else the challenges facing the bodies.

A Cautionary Tale

The extreme of negative consequences of misreading the regulators’ interpretation is in the “waves of extinction” that occurred in the California transition from Prop 215 to Prop 64. Though the reasons for each business are variable, it is pretty safe to say that cannabis companies in general were not prepared for the changes in law enforcement. Though fault may lay at the feet of all involved in the industry, it is businesses who bore the burden of responsibility.

The Network
  • Relationships with local interest groups
    To understand a specific regulatory environment environment, it is useful to be in contact with Lobbyists and prominent local business groups are great for understanding what and who are competing for the attention of legislatures in real-time.
  • Relationships with local regulating bodies
    The mechanisms that deliver enforcement are often understaffed. With that said, regulators often are clear and decisive with actions taken that display interpretation of a law. The intention for enforcement is also communicated beforehand. Developing a team attitude towards working with the bodies is much more useful than any alternative.
  • Professional Services
    Experts are needed to navigate this new territory. Though the specific environments of the cannabis and hemp spaces are unique, every issue faced has had a precedent in a comparable market. Gaining insights as to what has been done in other industries can only help to serve
  • The Competition
    Know which businesses have been successful within a given market. If the market is brand new, then get to know how laws were modeled and what comparable businesses have done to overcome the obstacles.
The Toolkit
  • Knowledge of Federal and State applicable laws
  • Internationally equivalent/relevant laws and regulations and best practices
  • The (developing or developed) standards of management practices as seen by regulatory bodies
  • A practice of inventory management that integrates the seed-to-sale software with operating procedures
  • A clear Chain of Custody practice
  • Redundancy in procedures to ensure multiple points of inventory management procedures
  • Workflow procedures that require easy authorization and implementation
  • A strict control of all inputs in operations integrated into workflow

The above list is by no means exhaustive. What “compliance” functionally means is “whatever you have to do to maintain high standards and stay in business.” The scope varies based on whether an operator is cultivating, processing, or dispensing–and is further complicated by the differences between Medical Cannabis, Adult-Use Cannabis, and Industrial hemp.

The list in instructive for companies beginning to “see through the fog” of the simple desire of wanting to open operations. It is intentionally general because of the variance that exists among the above mentioned categories.