Member Blog: Off The Backburner – Compliance During COVID-19
by Mark Slaugh, CEO and Co-Founder of iComply, LLC
Operational cannabis compliance has been a vital but often ignored part of many owners’ guides to success. With the hustle and bustle that is the ever-expanding nature of the cannabis business, most owners and operators want to believe they are compliant 100% of the time.
However, anyone who owns a cannabis business and is honest with themselves knows that to understand the constantly changing regulatory updates is a constant challenge. Often, the needs of the business outweigh the time it takes to assess the best ways to remain compliant. Too often, the distractions of growing the brand, networking, and conferences distract us from what’s happening with staff, procedures, and operations behind the scenes.
This has become alarmingly evident during COVID-19.
The pandemic began affecting how different operators in different States had to adjust various emergency procedures and restrictions on how cannabis could be bought and sold. From there, pandora’s compliance box released a torrent of issues to look at.
In our experience, 95% of the industry has a reactive approach to compliance management and will scramble to take time and pay expensive attorneys fees to dig them out of trouble once they are caught.
And what you resist, persists.
During COVID-19, owners are already making procedural adjustments to remain compliant and are staying at home for a change – which has allowed them and their teams more focus and less distraction by avoiding conferences, travel, and in-person meetings as much as possible.
What they are finding is that the compliance train has been off the tracks for a while.
Naturally, as the industry grows, so does the responsibility of mitigating liability and staying on top of the backburner projects in dealing with compliance. It is not the sexiest or most fun aspect of the industry (if you aren’t compliance nerds like us).
People tend to resist being honest about it, managing it appropriately, or holding others accountable until it’s too late.
COVID has at least provided some breathing room for owners and operators to put on their facemask and dust off their SOPs or untangle the strings around poor inventory management.
Some cannabis companies are asking themselves how they can use the boredom of COVID-19 (to some degree) and the extra time saved from travel, conferences, and meetings to re-examine their operational compliance infrastructure.
We are finding that owners in the cannabis industry are lacking a transparent cannabis compliance plan that can be easily adjusted to stay ahead of regulators, rules, and to mitigate product liability. They lack accurate employee training to specific procedures with accountability and wonder why turnover is so high. They are starting to realize that inventory, books and records, and daily compliance management are creating more risk than is tolerable for a tangible reward.
The word “decimation” comes from the Roman times and was considered a military punishment in which squads of 10 (deci) would draw stones from a bag. One black stone among the white ones meant beating that soldier to death by his fellows. While extreme, the lesson was an important one and is still relevant in the cannabis industry today.
Out of every inspection by the MED, in Colorado, around 10% of licensees were found in violation and administratively punished. Having come from a banking risk management background, it is shocking to see that level of risk be “ok” with most operators.
No other heavily regulated industry tolerates such a high level of risk. Cannabis, in fact, tolerates 10x more risk loss on average than is acceptable in banking (less than 1%).
Some of the biggest backburner projects in compliance coming to the forefront are:
SOPs and Employee Training Manuals
It is crucial to have compliant procedures that are accurate to current operations. One cannot effectively and proactively run a cannabis company without valid and accurate Standard Operating Procedures and related documents. They are essential.
What we find is that most established operators have to dust these SOPs off from whatever shelf they placed them on when they finally come around to looking at them.
Inventory and METRC
Another big problem area is inventory inaccuracies which require regular reconciliation and clean up. As we all know, once the snowball effect of inaccuracy happens, it simply gets more entangled and difficult over time.
During COVID-19, regulators are doing fewer in-person visits and are relying more on their ability to look at seed to sale tracking systems to identify potential non-compliance to conduct their inspections and request specific information from operators.
Books and Records
Most cannabis companies think SOPs, audits, and inventory are compliance management in a nutshell. The detailed accountability over files, logs, and forms often escapes their mind as soon as the file is saved or placed into the file cabinet.
Like dusting off SOPs, opening the file cabinet to ensure the accuracy of these documents can be best done during COVID-19 as well. Insight to this helps improve procedures and ensure accountability of staff members from visitor logs, to pesticide applications, incident reports, and manifests.
Staff Knowledge
For many of our medium to large clients, COVID-19 has affected their staff members. When one person is infected, many others may not want to come to work, and companies are forced to hire in additional labor to meet operational demand. If this hasn’t happened, consider you might want to be prepared for it as it takes away employees for a minimum of 2 to 4 weeks.
COVID-19 is causing a wide gap due to faster training requirements and creating more risk for non-compliance, product liability, and workplace safety without proper education, knowledge and accountability for staff.
Challenges like COVID-19, rule changes, and human nature are greatly mitigated and proactively managed when cannabis companies commit to taking compliance off the backburner and putting it at the forefront. Taking the time now to do so may be better than any other time for experienced operators to better prepare for “normalcy” when it returns.
An ounce of prevention is literally worth pounds of cure. And, during COVID-19, cannabis companies would do well to prevent the “decimation” of their very valuable licenses and operations by taking advantage of the extra time and energy to do the heavy lifting necessary to take compliance off the backburner.
Mark Slaugh, CEO and owner of iComply, works in the specialist sector of compliance for the medical, retail, and hemp industries and has over 12 years’ experience in cannabis industry development, consulting, and operational compliance and over 21 years’ experience in regulations and risk management.
Due to his extensive background and education, Mark knows what it takes to move markets forward at political, policy, and operational levels. He has developed small and large startups, improved existing operations, and has protected some of the top companies in the field.
iComply provides operational compliance services and validation of over 200 cultivation, manufacturing and processing, and dispensing facilities since 2011 and iComply consults for a variety of communities, organizations, and governments. Engaging in legacy projects over the long-term, iComply builds trusted relationships to ensure industry integrity, standards, regulations, and best practices are implemented and adhered to within organizations.
Veterans And Cannabis: A Discussion With Congressional Champions
by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations
Last week, NCIA’s Government Relations team honored the veteran community and Memorial Day through our latest #IndustryEssentials webinar. Our Director of Government Relations, Mike Correia, and I “Zoomed” with congressional cannabis champions Congressman Lou Correa (D-CA) and Congressman Earl Blumenauer (D-OR), as well as the cofounders of the Veterans Cannabis Coalition, Eric Goepel and Bill Ferguson. During the webinar, we talked about how through cannabis, veterans of all generations and with various conditions have experienced improvements in their quality of life and also discussed policy and legislation to address this conundrum. NCIA members can catch the full webinar recording, but in the meantime, check out a few highlights:
Congressman Earl Blumenauer (D-OR):
“In fact, if we were able to have the Veterans Administration (VA) embrace medical cannabis, veterans would get better care because they could deal directly with their primary care physician, who is in the best position to give them appropriate advice. But sadly, the VA is caught with this federal restriction and they have a very narrow interpretation of what they can do, and how they can do it, and they simply do not permit their physicians to work with veterans to discuss and work with — let alone prescribe — medical cannabis.”
Congressman Lou Correa (D-CA):
“These folks came back from the theater of war with a lot of invisible, psychological scars– many of them that never were addressed. Back when I was the Chair of the Veterans Affairs Committee in the state of California, I would go on to have town halls and I remember veterans more and more would ask me, ‘Hey state senator, what’s going on with cannabis? I prefer cannabis to opioids, it makes me feel a lot better, I’m being able to function much better, why can’t I be prescribed cannabis by my VA doctor?’ And that really set me off on a quest to address medical cannabis in reference to veterans. Now in Congress, that’s something that I’m trying to work on front and center, and when I say trying to — I am working on it — I’m trying to score some victories there and get this legislation to the President’s desk for a signature, but again in the context of an election coming up, it’s going to be a challenge. But nonetheless, I think it’s a task all of us must take to heart and work hard towards.”
Veterans Cannabis Coalition Co-Founders:
Bill Ferguson: “I think it’s really cool that both of those politicians you know — and you know, they’re not backbench guys either — they essentially say that, you know, like if we can get the VA bill to pass, that will be like opening the floodgates for the rest of the cannabis legislation, you know like the banking and all that kind of stuff. And I think they’re right because you know once you poke a hole in a dam, you know eventually a dam is going to break.”
Eric Goepel: “The problem is that they’re largely out of step with the population — like the general population and the veteran population. I mean Pew’s been tracking public support for medical cannabis legalization and adult-use legalization and it’s 92% in favor of medical use and 60 plus in favor of legalization. That’s pretty overwhelming when it comes to any political issue. Like these issues out-poll most politicians and popularity and certainly, maybe beyond like universal background checks, I can’t think of too many other major policy issues that have this level of public support that see no conversion into federal legislative change.”
We are all so grateful to the Congressmen and the VCC team for joining us. While Memorial Day has now passed, I’m continuing to feel so appreciative of our fallen service members. While all gave some and some gave all, the vast majority of our veterans are still unable to access safe, regulated cannabis, and since they fought for us, we’ll keep fighting for them.
Meet The Team: Clarissa Krieck – NCIA’s Director of Business Development
I was born and raised in the far south of Brazil, drinking yerba mate, listening to rock, going to the beach, and eating lots of BBQ! The war on drugs was fought hard in our streets, and we all remember the guns, the violence, that “social pain” growing up. I earned a business degree and relocated to the U.S. in 1999. Little did I know I was going to join a movement with the greatest mission, one much greater than you or I can grasp.
The West (and a Navajo rescue pup named Samba) stole my heart. Before cannabis, I led programs and teams working to bridge the digital divide through STEM education in Denver Public Schools for over 10 years. Colorado wowed me with its socially responsible libertarianism, vibrant third sector, and bravery to challenge the Union on unfair laws. Laws which later would personally affect me when I was diagnosed with cancer in 2011.
I felt extremely blessed to have access to regulated medicinal cannabis in Colorado. Edibles were instrumental in my healing and recovery. But it was not easy. Whether it was my medical team, my family, or my employer, I found myself educating my community constantly on the eminent scientific evidence behind the therapeutic properties of the plant.
I had been happily married to a U.S. diplomatic serviceman for nearly two decades. But when the Federales found out about my state-level medical marijuana registry, I was not given clearance to serve our country along his side. The conservative, globe-trotting lifestyle of the State Department did not allow for any access to cannabis. It became clear that I had to choose between my life and my marriage as the call to free cannabis from my home base in Denver spoke loud and clear. It was evident: I would have to fight for my birthright to heal myself. And I have never looked back!
After my divorce, I returned home from Warsaw, Poland, and immediately landed a job trimming bud in different medical centers. Between 2014-2016 I took a job as a sales representative with Bluebird Botanicals, one of the pioneers in the CBD and hemp space. I volunteered with the National Hemp Association (NHA) and the Hemp Road Trip and was truly blessed to work and learn alongside the greatest hemp professionals and activists. It was during this time I realized that hemp was going to be huge soon, and that THC was in need of some TLC.
I joined the board of Denver NORML from 2016-2018 as a volunteer, a flagship chapter that led the charge to lobby on behalf of consumers regionally and nationally on issues like social consumption, impairment, and access post adult market launch. Professionally, I led marketing and sales for Indo Expo Trade Show, a grower-centric cannabis trade show hosted in Denver and Portland every year. What a neat chance to build, support, and connect the emerging responsible industry!
In 2019 I proudly joined NCIA’s business development team to continue fighting and advocating for this most amazing industry we have built block by block. That’s right! We did not arrive here by parachute. We owe a great deal of gratitude to every activist, patient, mother, entrepreneur, policy official, and dreamer who refused to obey laws so unfair they border negligence. There is not a day in my life where I do not profusely thank the universe for this opportunity to represent the cannabis industry and to be a voice of change.
What came after my cancer was a series of countless blessings powered by a lot of hard work. Watching Dr. Mechoulam speak at the Inaugural Institute for Cannabis Research (ICR) Conference in Colorado, getting a private tour of the U.S. Capitol from now-Colorado Governor Jared Polis, leading policy reform and philanthropic work in Brazil, speaking to nearly 20,000 people at Hash Bash post adult market legalization in Ann Arbor, Michigan, ground zero for decriminalization… And the list goes on! Even when my retirement account was taken away in 2019 because I work in cannabis… that just fueled my fire more!
I always knew I would one day fight for justice when I was a little kid, but how could I have predicted that from something so disruptive, heavy, and terrible would bloom the most beautiful lotus flowers I could ever imagine? How is one to comprehend the many, often painful turns life takes, only to later arrive at the most fruitful of gardens? Ah! The mysteries of life! I will take every single one of them, accept them, and be grateful! All the way. Onward!
Webinar: NCIA Committee Insights – Cannabis Retail Success and Strategies
NCIA’s #IndustryEssentials webinars are our new weekly educational series featuring a variety of programs allowing us to provide you timely, engaging and essential education when you need it most.
The NCIA Committee Insights series showcases content produced in partnership with one of our 15 member-led committees.
According to a recent Gallup poll, 66% of Americans support the federal legalization of recreational marijuana and with that comes an ever-expanding retail footprint. This session is designed to address the unique challenges faced by cannabis retail leaders and entrepreneurs in planning their operations for success in a modern retail environment. The panel will take a look at Talent, Brand, and Compliance strategies with real-life case studies to help provide valuable take-aways for the implementation of a Retail 2.0 strategy.
Register now to join us on Monday, June 1 at 1:00 PM MT.
Ryan Rapaport
Managing Partner
Digital Venture Partners
Melissa Stapley
Founder
MJ Hybrid Solutions
Larina Scofield
Director of Operations
Lucy Sky Cannabis Boutique
Webinar: Policy Council Conversations: Just Say No – Keep the DEA out of Cannabis Research
NCIA’s #IndustryEssentials educational webinar series is our new digital platform featuring a variety of programs to provide you timely, engaging, and essential education when & where you need it most!
The Policy Council Conversations series features insights & invaluable content directly from members of NCIA’s Policy Council, the preeminent “Think Tank” for the cannabis industry.
The Drug Enforcement Administration recently issued a notice of proposed rulemaking on cannabis research. If adopted, this rule would fundamentally change how cannabis research is conducted. NCIA recently submitted public comments, rejecting the DEA’s power grab and strongly suggesting that a public health agency (i.e. Health and Human Services, National Institutes of Health, etc.) lead on cannabis research. Simultaneously, lawyers at Yetter Coleman filed a Freedom of Information Act lawsuit against DOJ, demanding the release of an OLC memo relied upon by DEA in their rulemaking. That successful suit was brought on behalf of Scottsdale Research Institute.
This panel will discuss the critical importance of cannabis research, the DEA rulemaking and NCIA’s numerous objections, and the lawsuit against DEA and the resulting disclosure of the DOJ policy memo.
Register now to join us on Wednesday, June 3 at 12:00 PM MT.
Jodi Avergun
Chair, White Collar and Criminal Defense and Investigations Group
Cadwalader, Wickersham & Taft LLP
&
Former Chief of Staff
Drug Enforcement Administration (DEA)
Andrew Kline
Director of Public Policy
National Cannabis Industry Association
Sue Sisley, MD
Principal Investigator
Scottsdale Research Institute
Matt Zorn
Associate
Yetter Coleman
Shane Pennington
Associate
Yetter Coleman
Member Blog: The Ever-Evolving Chief Human Capital/Human Resources Role
More than any other role in an organization, the role of the Chief Human Capital/Human Resources (CHC/HR) Officer has changed. It continues to do so as organizations grow and shift. Nothing could be more accurate in this current pandemic environment. Understanding the critical need for this role and the types of capabilities you should be looking for in a candidate will help prepare you for your search and ensure that you’re evaluating potential candidates based on the real needs so that when we enter into our new normal, your organization is prepped and set up for successand not trying to play catch up based on some missteps. We’ve curated a list of the qualifications and criteria below that your top tier candidates should possess to fill this critical leadership position.
Strategic mindset and business acumen: The CHC/HR Officer is expected to be discerning, future-orientated, open-minded, commercially astute, and able to make evidence-based decisions. They will develop robust people plans aligned to the business strategy. A people plan cannot merely serve internal HR functional requirements; it must demonstrate an impact on the business.
Change and transformation management: Play a leading role in defining and adapting corporate strategies, structures, procedures, and technologies to handle changes in external conditions and the business environment. The people side of change management is often the most important element above the technical tasks necessary to enact change. When the people side of change is poorly managed, change often fails or doesn’t achieve desirable results. Driving change management and transformation requires an organization to embrace learning agility and innovation as a culture. The CHC/HR Officer is often expected to embody this agility and be the catalyst for change and transformation.
Mastery of executive compensation: Issues of pay equality continue to gain prominence in the market, and this leader must play a key role in designing competitive, equitable compensation packages. This includes innovative and sometimes creative incentive structures to attract and retain key talent. The position is to continuously test internal pay structures against the market where potential gaps and risks are identified and develop risk mitigation plans.
A clear understanding of board governance: Cannabis organizations are increasingly scrutinizing executive compensation, examining linkages of talent and performance, focusing on CEO succession, and the broad talent agenda. The Chief HC/HR role can add value to the board by bringing expertise in compensation, succession, talent, and the people-based implications of mergers and acquisitions.
External focus: Today’s cannabis HC/HR Chief has to have a good sense of the external industry and the competitive landscape. She/he should keep abreast by playing an active role in relevant industry bodies. Talent is becoming increasingly mobile-savvy, which makes it all the more important for this leader to have a strategic mindset.
Shape culture: The head of HR holds a key role in defining and co-creating the organizational culture with the executive leadership team. A company’s organizational culture can make or break the most insightful strategy. The executive leadership team and the HC/HR Chief have a shared responsibility in creating and driving a culture that is aligned with the business strategy.
Committed to diversity and inclusion: For diversity and inclusion to be successful, it has to be a top-to-bottom business-critical mission that is embedded in all aspects of the organization. Diversity and inclusion practices should be led in close partnership with the CEO, with the HR Lead playing an important role in articulating the business case for diversity alongside the CEO.
Leadership gravitas: The ideal candidate must possess significant confidence and power supported by competence and an undisputed delivery track record. This power is acquired through strong interpersonal relationship skills, the ability to influence others, and being respected and admired. This type of power is particularly important in this role since it is built on collaboration and influence rather than command and control. In addition, HR leaders must have the ability to assess risk, to demonstrate independent thinking and speak truth to power, having the courage to say “No,” when necessary.
Balance agendas of high-level stakeholders: Your ideal candidate should have experience serving multiple high-level stakeholders such as the CEO, board, shareholders, and employees who often have competing demands. The capability to effortlessly navigate and balance the various needs through effective communication, seeking alignment, and managing expectations is a must.
Visible, value-added partner: The head of HR is a critical stakeholder in the health of the organization. It’s important that your hire has an open door policy and is proactive about building teamwork and company culture. They should be seen everywhere within the organization. HR leaders must be on the pulse of the organization at all times to make unpleasant surprises less likely to happen.
These ten key areas are all critical when hiring a CHC/HR leader for your organization. If you use this list as a checklist when you hire this critical role (or evaluating your current leadership) and find positive responses to all, you should have an excellent fit for your team!
Bryan Passman is a father, a husband, a trailblazer, and Co-founder and CEO of Hunter + Esquire. My professional background before launching H+E was entirely in retained executive search for 18 years in MedTech/Pharma (15 yrs) and Food and Adult Beverage CPG (3 yrs). My deep knowledge of those highly regulated and nuanced industries has helped H+E significantly understand the needs and wants of our cannabis clients. My deep and genuine networks within those industries have helped us deliver that rare talent “unicorn” our clients desire to fit their particular needs. My client-first approach helps us provide a very customized, white-glove, headhunter treatment to client and candidate.
Webinar Recording: Good Manufacturing Practices in the Age of COVID-19
Tune in to this webinar recording from Wednesday, April 15, 2020. As the realizations of the Coronavirus sink in, one thing is certain – cannabis companies need to be leveraging good manufacturing practices, otherwise known as GMPs. GMPs are the practices required in order to conform to the guidelines recommended by the Food and Drug Administration (FDA). The FDA is the public health agency in the United States that controls the authorization and licensing of the manufacture and sale of food and beverages, cosmetics, pharmaceutical products, dietary supplements, and medical devices. While many companies in cannabis are already following these guidelines, some are not.
This panel explores the GMPs themselves, how companies can become compliant, how GMPs can be amplified to make certain that we are preventing the spread of COVID-19, and whether there are extra precautions that should be taken to keep cannabis consumers safe.
Panelists:
Andrew Kline, Director of Public Policy National Cannabis Industry Association
Haley Brandsgard, Senior Quality and Compliance Manager Mary’s Brands
Alena Rodriguez, Managing Director Rm3 Labs
Trevor Morones, Founder Control Point
Jen Komerda, Quality Assurance Manager Wana Brands
NCIA’s #IndustryEssentials webinars are our new weekly educational series featuring a variety of programs allowing us to provide you timely, engaging and essential education when you need it most. The NCIA Committee Insights series showcases content produced in partnership with one of our 15 member-led committees.
Members of NCIA’s Scientific Advisory Committee will discuss how label claims came to be, what they look like in sister industries, and why label claims are important for cannabis products. Attendees will leave with a thorough understanding of what drug labels look like, what food labels look like, and why cannabis labels are different. A review of state based regulatory requirements and why they matter will also be provided.
Register now to join us on Wednesday, June3 at 10:00 AM MT.
Tiffany Coleman, Director of Quality
Copperstate Farms Management
tiffanyc@copperstatefarms.com
Cynthia Shelby-Lane, MD
Shelbylane MD PC
Presented by Tiffany Coleman, Director of Quality at Copperstate Farms Management
SAFE Banking Provision of Federal Relief Package Approved in House, Faces Difficult Path in Senate
by Morgan Fox, NCIA’s Director of Media Relations
It’s been a busy week for NCIA in our nation’s capital as we try to make sure the industry can survive the pandemic and continue to develop and thrive once the country begins to focus on recovery.
Earlier this month, NCIA and a coalition of advocacy and industry groups sent a letter to Congress urging them to include the SAFE Banking Act in the next stimulus package. We worked diligently with allies and our champions in the House to this end, reminding lawmakers that this legislation was approved with an overwhelming bipartisan majority in a stand-alone bill last September and that the pandemic was creating even more need for cannabis businesses to be able to access banking services immediately.
Unfortunately, the partisan backlash to the Democrat-backed legislation was almost immediate, with some lawmakers opting to use this necessary and nearly revenue-neutral provision of the legislation as a punching bag and a symbol of overreach in the lower chamber. Republican lawmakers decried things as irrelevant as the number of times the word “cannabis” appeared in the language and claimed that this provision did not belong in a COVID-related bill. Senate Majority Leader Mitch McConnell even complained about a section of the bill that would study diversity in cannabis banking access and cost a practically infinitesimal percentage of this roughly $3 TRILLION stimulus bill.
This misdirected vitriol was thankfully not enough to block cannabis banking reform from moving forward. On Friday, the House approved the HEROES Act with the SAFE Banking language included!
The public health and safety benefits of allowing cannabis banking are undeniable. Our industry employs hundreds of thousands of Americans and has been deemed ‘essential’ in most states. Forcing the majority of them to deal almost entirely in cash puts workers at risk of infection from the cash they are handling. It makes the social distancing that is so important to getting this pandemic under control much more difficult and increases the danger for workers and consumers, particularly immunocompromised patients. The public safety concerns regarding cash being a target for crime will only grow as unemployment rates increase around the country.
The economic benefit to post-COVID recovery is clear as well. Lack of access to banking and other financial services will ensure that the cannabis industry – which has been exemplary in providing continuous healthcare, preserving jobs, and generating much-needed tax revenue during this disaster – recovers at a significantly slower pace than other industries. We deserve fair access to the financial systems utilized by every other legitimate industry.
Make no mistake: this is a big step forward for cannabis policy reform. But now comes the hard part – convincing the Senate to support this legislation. With or without cannabis banking language, all signs point to an uphill battle getting the Senate to consider any additional coronavirus relief spending. But that’s all the more reason to redouble our efforts, and support continues to grow. This week, a bipartisan group of 34 state attorneys general added their voices to the chorus calling for cannabis banking reform.
And with the chances for direct access to federal relief funding looking increasingly slim, it is absolutely vital that we do everything we can to push this legislation forward.
Please contact your senators today and ask them to support the HEROES Act with the House-approved cannabis banking provisions.
Recently, we had the pleasure of joining a webinar hosted by NCIA in which they discussed the state of the Illinois market. The #IndustryEssentials presentation covered topics such as Illinois House Bill 1438, social justice reform, licensing and social equity.
Social equity just so happens to be a topic near and dear to my heart and is something we advocate for in everything we do in the industry. So let’s talk about it. What exactly is social equity and why is Illinois always in the social equity conversation? Well, social equity came about as an answer, if you will, to the many unfair statistics we see in the industry as a whole. What statistics, you ask? Well, 80% of the cannabis industry is owned by white males, even though minorities are four times as likely to be arrested for cannabis-related offenses. Social equity is an intentional effort to lessen the gap and provide all people the opportunity to operate and work in the cannabis industry.
One misconception people tend to have is that social equity is diversity. This couldn’t be further from the truth. By definition, a diverse team is a team of people that represents differing racial and ethnic backgrounds, religious beliefs, sexual orientation, gender, disabilities, and military status. Diversity is about pulling together a well-rounded team to be more successful in solving the customers’ needs.
Social equity is purely about socioeconomic barriers. While that may be written in cannabis regulations differently depending on the state, here in Illinois, a social equity cannabis organization is defined as:
A cannabis organization that is at least 51% or more owned by individuals who hold social equity status.
OR a cannabis organization that has at least 51% or more of employees who hold social equity status.
How do we determine if a person holds social equity status here in Illinois? The Illinois Department of Commerce and Economic Opportunity (DCEO) surveyed census records to determine what areas had poverty levels 20% above the national average, what areas had 20% or more of families on food assistance programs and what areas that had schools with 75% or more of their students on the free lunch program. These particular areas were then surveyed for the prevalence of high drug-related arrests and this map was created.
If you type in an address and the address is covered in blue, that means that area is a disproportionately impacted area or “DIA”. Now there’s yet another layer to social equity; the war on drugs. If you received a charge, conviction, or arrest related to cannabis in Illinois, that now is expungable under the new Illinois bill you have social equity status. But wait, there’s more. If you have a parent, spouse, or child who received a charge, conviction, or arrest, that means you have been affected by the War on Drugs and also have social equity status.
Families who weathered the trauma of the war on drugs saw it in lost opportunities, barriers to entry, and constant judgment because of possessions, distribution, or consumption of a plant that is now legal in the state of Illinois. Far too often, these charges affected people already living in disproportionately impacted areas.
So what are the rules?
For principal officers applying for licenses:
You must have lived in a DIA for at least five years and have two forms of identification proving this, including, state ID, driver’s license, pay stubs, voter registration cards, utility bills, or anything else the state may deem acceptable forms of residency.
You, your parent, your spouse, or your child has a charge, conviction, or arrest that is now expungable under the bill. This too must be proven with proper documentation of such arrest, charge, or conviction.
For employees:
You must currently live in a DIA and have two forms of identification proving this, including state ID, driver’s license, pay stubs, voter registration cards, utility bills, or anything else the state may deem acceptable forms of residence.
You, your parent, your spouse, or your child has a charge, conviction, or arrest that is now expungable under the bill. This too must be proven with proper documentation of such arrest, charge, or conviction.
While this all sounds very complicated, it is an effort by the state of Illinois to balance the scales. HB1438, although not perfect and never claimed to be, strives to right the wrongs of the war on drugs. While social equity holds 25% weight in the application process, we’re yet to see how it will be regulated for licensees in operation. With that said, many organizations in Illinois intend to keep those scales balanced and celebrate the most equitable cannabis market yet.
Rashaunah “Shawnee” Williams is the co-founder at Illinois Equity Staffing, a minority, disabled and woman-owned business based in Chicago, that supports the cannabis industry in education, job placement, human resources, payroll and compliance. While a south suburban native, Shawnee has also lived in Florida, Tennesee, Missouri, Nebraska, Louisiana, Oklahoma and California. She holds a bachelor’s and master’s degrees in business and has worked in industries such as entertainment, recruiting, tech, higher education, marketing and sales.
Shawnee and her business partner Lynette Johnson founded Illinois Equity Staffing because they understood the barriers to entry for lower and middle class people, minorities and women in the cannabis industry. Both having the Corporate America background, Shawnee and Lynette, understand the pain points of this population, as they both grew up in disproportionately impacted areas and are minority women. It’s this perspective that has allowed Illinois Equity Staffing to bridge the gap and create a more equitable cannabis industry in Illinois.
Shawnee also brings another unique perspective to IES, as she suffers from Lupus and Sjogren’s Syndrome, two disabilities that involve the immune system. As a Black woman suffering from two autoimmune diseases, Shawnee advocates for those with debilitating diseases seeking more knowledge on alternative and holistic approaches to symptoms causes by autoimmune diseases. She also is an advocate for those suffering from disabilities that seek to find more uplifting, supportive and progressive employers.
The cannabis industry has the opportunity to show older, more traditional industries the areas of opportunity to improve and to be more responsible. As such, Shawnee Williams and the team at Illinois Equity Staffing seek to be a leader in promoting a more socially equitable and diverse industry within the cannabis space in Illinois and nationally.
Meet The Team: Amy Rose – NCIA’s Business Development and Partnerships Manager
When I think about where I was 5 or 10 years ago, I would have never imagined that this is the career path I would be on. When I left college in 2013 with a Bachelor of Arts in Sociology, I considered so many options. Not one of them was working in the cannabis industry. I contemplated becoming a teacher. Maybe I should be a social worker? What about some sort of community outreach position? But before making any decisions on my career, I decided to take a huge step back and move my life across the country, with one suitcase, and with barely enough money in my pocket to survive more than a month.
The transformation of my life began in February 2014 in Colorado. A one-way flight. Four winter jackets (that I wore on the plane so I didn’t have to pay an extra baggage fee), three scarves, and whatever clothing I could fit in my one checked bag. Life ahead of me was extremely uncertain.
Coincidentally, I moved to Denver right after Colorado legalized the adult use of cannabis. That wasn’t the reason why I moved, although it definitely was a perk. I moved because I wanted a fresh start. I’d spent my whole life on the East Coast. First in a New Jersey suburb of New York City. Then on the west coast of Florida. After I finished school, I lived for a short while with my mom in very rural central Florida. It was horrible. Not a place for a young person. But it gave me time to think about what I wanted out of life. I knew I needed a change.
Things didn’t really go as planned. I was working long 60-hour weeks in restaurants and at catering gigs and was able to provide for myself, which was enough at the time. I told myself that by the fall of 2014, I wanted to get a “real job” whatever that meant. And so I did. I started working an administrative job at a physical therapy company. I learned a lot, had good days, bad days, but it certainly wasn’t making me happy. After spending 2 years working there, I felt like I was at a dead-end. I didn’t see the growth in myself that I had wanted to see. And I was more miserable at work than anyone should be.
The summer of 2016 was when I took a huge chance. I remember calling my family to tell them I got a job offer as a budtender at a dispensary and them thinking I was absolutely crazy for even considering it. A few weeks later, I got another job offer as an inventory manager at a dispensary. To my family, that seemed like a “real job” since if it didn’t work out, I’d have skills that I could transfer to something else. I was scared to take the leap, but nothing was scarier than staying at a job I was unhappy at.
My professional connection to the cannabis industry began in August 2016. I couldn’t believe it. Not only was I happier in my job, but I was making a living while working for a company in a relatively new industry that I truly believed in. I learned all about the retail and cultivation side of the cannabis industry. And I learned a whole lot more about myself. BGood Dispensary in Denver will always have a special place in my heart. I appreciate that they took a chance on someone new to the industry. Not to mention that they are long-time members of NCIA.
After spending a few months there, I decided to make my next move and work for a testing lab in Boulder, Rm3 Labs. I knew about cultivation and how dispensaries worked. My position at Rm3 Labs gave me the opportunity to understand the testing and regulations side of the industry. I was satisfied. But I wanted more.
My working relationship with NCIA started in July 2017. The past three years, as I’ve learned so much, have just flown by. I’ve been able to experience things I never imagined. Things that can only happen when you totally believe in the mission of your organization completely. I have been able to educate myself and others about things that are important to me personally and which I believe are important to society as well. Each day is an opportunity to learn something new. I’ve gotten to travel and experience new things that have contributed to my growth as a person. Sometimes I try to imagine where I’ll be five years from now. With this industry, that’s hard to tell.
Webinar Recording: Protecting Your Cannabis Brand
As the cannabis industry emerges from start-up to major economic player, the protection of intellectual property becomes all the more critical. This expert panel will discuss the options available to protect trademarks at the state and federal level, how to apply for and obtain a federal patent, and how to protect designations of origin (much like we protect Champagne or Bordeaux in France). The panelist will draw upon their professional expertise, as well as their practical experience in applying for and successfully receiving trademark and patent protections. A white paper summarizing the author’s recommendations will be released this summer by NCIA’s Policy Council.
Member Blog: The Importance of a True Human Capital Management Leader
Numerous cannabis organizations have taken advantage of the global health crisis to cut staff and combine positions. We saw the role of HR lead added (yet again!) to the job description of the CEO, CFO, or another officer. Unfortunately, we witnessed several companies perform these cuts and layoffs during the pandemic as a way of cleaning house. Without a strong HR foundation in place, many of these exits were messy and resulted in angry ex-employees and disgruntled employees who are preparing their resumes to manage their exits proactively. While this transition is always challenging, it doesn’t need to end with poor relationships with ex-employees. As we know, the world of cannabis is small, ensuring a good reputation is critical. As the overall and cannabis economy opens back up to our new normal, it is even more important than ever to ensure your organization has the vital piece of the puzzle in place.
The human resources profession in and out of cannabis has evolved in recent years, and with it, the role of the Chief Human Capital (or ‘Resources’) Officer has changed as well. It progressed from fighting for a seat at the table to playing a vital role in the executive team as a strategic partner to the CEO and CFO. The CEO, CFO, and Chief HC/HR Officer should be viewed as equally responsible for executing the business strategy, with distinct yet highly interdependent roles to play. In essence, the CEO defines &/or leads the vision/strategy; the Chief HC/HR Officer articulates and drives people’s DNA, while the CFO manages financial resources and investments. It takes people and financial resources to implement the business strategy, which is why the relationship between these leadership roles is so vital.
The role of the Chief HC/HR Officer is becoming increasingly complex. It is continuously changing due to a range of factors, including the evolution of technology, artificial intelligence, automation, the changing profile of the workforce, new ways of working, and the increased focus on talent, especially in the cannabis industry. The profile has shifted from a traditional HR professional, narrowly focused on his/her function to a well-rounded business leader who can contribute meaningfully in all areas of the business. Today’s HR Chief is a culture champion and change-agent who is commercially astute, analytical, and technologically savvy, who speaks truth to power and influences softly yet assertively.
Hiring and retaining the right talent.
Human Capital Management is essential for hiring, managing, training, and retaining talented and high performing employees. Employees are the most valuable resource in an organization. Individuals who spend the maximum part of their day contributing towards the success of an organization are its most crucial resource. Employees can either make or break an organization, truly making them an organization’s lifeline.
Making new employees feel comfortable/orienting them to the organization.
Human Capital management plays a vital role in orienting a new employee to the system. Boring and meaningless onboarding programs lead to confusion and eventual loss of employee interest. Most new hires develop very strong positive or negative vibes about their new employment within the first 24 hours in their new role; it’s a lot easier to enjoy the positive vibes from getting that first 24 hours right than dealing with the negative vibes from the start. Turnover can cost an organization 2.5 x the salary. Incorporating professional onboarding into your standard SOPs is critical for new hires who make a “stay” vs. go” decision within the first 24-48 hours in a new job. This includes not loading someone with unnecessary information on the very first day (s)he steps into the organization. Making him/her feel comfortable, which during a pandemic and isolation can be challenging. Clickherefor tips on creating a connection virtually. Such small initiatives go a long way!
Training employees
Employees need to stay current and continue to learn to prepare themselves for adverse conditions. Human Capital Management helps train employees and makes them a valuable resource for the organization. Employees who do not brush up on their skills from time to time find it difficult to survive in the long run. Human Capital Management helps develop the skills of employees, which creates a positive impact on the overall organization. Human Capital Management plays an essential role in increasing the knowledge, well-being, and efficiency of employees. Individuals are in a position to contribute more towards the system, eventually increasing the overall productivity of the organization. Take the steps now to add this essential team member to your roster.
A productive, thriving workforce is the most crucial component of a successful business. This requires viewing people as human assets, not costs to the organization. As with any other asset, a talented workforce can be used strategically to add value to an organization.
Bryan Passman is a father, a husband, a trailblazer, and Co-founder and CEO of Hunter + Esquire. My professional background before launching H+E was entirely in retained executive search for 18 years in MedTech/Pharma (15 yrs) and Food and Adult Beverage CPG (3 yrs). My deep knowledge of those highly regulated and nuanced industries has helped H+E significantly understand the needs and wants of our cannabis clients. My deep and genuine networks within those industries have helped us deliver that rare talent “unicorn” our clients desire to fit their particular needs. My client-first approach helps us provide a very customized, white-glove, headhunter treatment to client and candidate.
Meet The Team: Rachel Kurtz – NCIA’s Deputy Director of Public Policy
I grew up an Army brat. By 1992, when I was 18 years old, I had lived in Wisconsin, New York, Texas, Oklahoma, Indiana, Alabama, and Germany. I was fortunate my father served during a 23 year period where he would never be sent into a conflict, especially as a physical therapist. I reaped the benefits of experiencing various cultures and socialized medicine.
I started my cannabis activism in 1995 volunteering with the Washington Hemp Education Network in Olympia, WA, while attending The Evergreen State College. Following a stint in Congressman Brian Baird’s district office, I went to law school at the University of Washington School of Law, figuring that having a law degree would give me more respect while pushing for such a controversial issue. Serendipitously, during my 2L year, the King County Bar Association (where my school was located) started a Drug Policy Project, where I was fortunate to get a job after graduation. I worked there, and simultaneously for the Voluntary Committee of Lawyers, until around 2010 when my boss was running for his third term in the state legislature and I wanted to focus on more local issues around medical cannabis implementation.
I spent some time as an acting-executive director for the Cannabis Defense Coalition, advising businesses on the medical cannabis laws, and became a partner in a medical authorization clinic and wellness center. I was also volunteering with Seattle Hempfest — where I started in 2004 and have continued to commit my free time to this day, now as part of the board of directors.
After the legalization initiative passed in Washington state in 2012, I began using my law degree to represent businesses during the licensing process, working with Wykowski Law and Gleam Law. But billing clients was not for me, and circumstances in my life made me want to run a cannabis business.
It was 2016, and by then I had moved to Oregon where they had also passed a legalization initiative. With a partner who had previously had a successful medical cannabis business, spent a year forming the business and pitching it, only to fail to secure enough funding to continue in such an expensive endeavor.
I became disheartened in the whole process and the future for all small businesses trying to make it in the industry. I knew the only way to truly have a successful industry that worked for all stakeholders and citizens was to legalize at the federal level, and the main organization focused on that effort was NCIA.
On a whim, I looked at the NCIA website to see if they were hiring. Lo and behold, they had a business development position open and wanted someone located in the Pacific Northwest and connected in the industry. Business development wasn’t quite in my skill set, but we made it work and I have had a hand in multiple areas at the organization since I started January 2017. My biggest effort so far has been the creation and development of NCIA’s Allied Associations Program; it has been very satisfying bringing together cannabis trade associations from around the country.
I am now Deputy Director of Public Policy and feel so fortunate to work with the brilliant Andrew Kline and all the work that is coming out of the Policy Council. I continue to work with the Allied Associations Program, alongside Amy Rose, to keep my finger on the pulse of state policy, and I’m coordinating NCIA’s member committees and their content, along with Morgan Fox.
Moving forward, I’m feeling like probably most people, ranging from the anxiety of existential uncertainty to the optimism of knowing cannabis is considered essential in society and the endless possibilities as we all navigate this new normal. The creativity and tenacity of all my amazing colleagues at NCIA and our members leave me full of hope.
Just Say No: Keep The DEA Out Of Cannabis Research
by Andrew Kline, NCIA’s Director of Public Policy
Democracy requires active participation. Of course, that starts with VOTING in November, but it doesn’t end there.
When Executive agencies request public comment on proposed rulemakings, it’s important that anyone with a stake in the issue chime in. This process is governed by the Administrative Procedure Act, and agencies are required to consider any such comments filed by members of the public. The more comments submitted, the more likely that the Executive Branch will take them into account.
This week, NCIA did its part by filing public comments in response to DEA’s proposed rulemaking on cannabis research. It is our view that instead of facilitating research, this proposed rulemaking (and any subsequent rules that codify DEA’s plans) will serve only to further hinder research and indefinitely delay any potential positive outcomes. And that is not a positive development for the industry. Because we believe that these proposed rules would radically overhaul how medical cannabis can be researched, we opposed this rulemaking in its entirety. We encourage the industry to file public comments expressing similar concern. So, get typing – because this is a very important rulemaking for the cannabis industry.
The success of modern medicine is dependent on sound implementation of evidence-based medicine. Expanding research capability is of critical importance for NCIA’s nearly 2,000 members who serve consumers and patients across the nation and who have a vested interest in knowing as much as possible about the medical properties of the cannabis plant. The reasons why the U.S. lacks sufficient data on the medicinal use of cannabis are simple — supply and quality. Plainly, there is not enough cannabis being grown by the University of Mississippi for meaningful research by NIDA. The quality of the cannabis produced is also objectively unsuited for medical research or rigorous clinical trials. Better quality cannabis and more easily accessible supply are greatly needed. Research is also needed to make better decisions about the myriad potential uses of cannabis and for better policy-making, including legislation and drug scheduling decisions. DEA’s attempted rulemaking would do nothing to solve either of those problems. In fact, it is more likely that these proposed rules would, in fact, obstruct research by leaving the most experienced cultivators on the sidelines.
Our most significant objection is related to the power grab by DEA. Plainly, a law enforcement agency should not be in charge of any aspect of this process. Instead, NCIA believes that one of the many qualified public health agencies in the federal government (i.e. Health and Human Services, National Institutes of Health, etc.) should manage all of the processes related to research into the medical benefits of cannabis, including making decisions about who might qualify to grow and sell the product to researchers. It is for this reason that we call for a complete withdrawal of this rulemaking. But, it’s not just DEA’s power grab that is causing consternation.
In promulgating these new rules, DEA has stated that it is bound by the dictates of an international treaty — the Single Convention — in how it licenses cultivators of cannabis for medical research. In doing so, DEA proposes new regulations that require licensed growers to transfer all of their output to DEA and, with limited exceptions, gives DEA exclusive control over the import, wholesale trade, and maintenance stocks of cannabis.
To our knowledge, compliance with the Single Convention has never previously been raised as a requirement to obtain a registration. While we believe that the adherence to international treaties is important, DEA’s new focus upon the Single Convention is curious, to say the least. In recent years, President Trump has not been shy about his opposition to international trade groups and security alliances. It is therefore rich to see the Administration relying upon an international treaty to justify the transfer of authority over cannabis production for research to law enforcement. There is, however, a simple solution: withdraw from the Single Convention and rejoin the Convention with a formal reservation opting out of the cannabis-related provisions of the Convention.
DEA’s proposed rule also specifically notes that it will consider prior compliance with federal (not state) narcotics laws (particularly the Controlled Substances Act) in granting or denying the registration. This threatens to exclude many of the nation’s most qualified applicants, namely, state-compliant cultivators. There is a great deal of complex technology and learned technique that goes into cannabis growing and extraction practices. The U.S. needs to leverage the expertise of growers with 20-30 years of experience, rather than relying on suppliers with limited experience growing cannabis. NCIA would prefer to see a greater emphasis on other factors, like compliance with state laws, expertise in growing cannabis, and demonstrated ability to grow research-grade cannabis.
Finally, the new NPRM provides that no new application for manufacture will be considered until all of the applications that were accepted for filing before the effective date of the rule have been granted or denied. Given the nearly four-year backlog of pending applications, this plan appears likely to cause further delays to much-needed research which could help Americans.
Andrew Kline is NCIA’s Director of Public Policy and a former federal prosecutor. He can be reached at andrew@thecannabisindusty.org
Pushing For SAFE Banking In The Next Coronavirus Relief Package
by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations
For years, NCIA has been lobbying for the SAFE Banking Act. Now, as we adjust to our “new normal,” we are trying to make lemonade out of the lemons we’ve been given and see if some provisions of the SAFE Banking Act can be attached to the next coronavirus relief package.
To that end, last week ten cannabis advocacy and industry organizations sent a letter to congressional leadership urging lawmakers to include the Secure and Fair Enforcement (SAFE) Banking Act or similar language in the next pandemic relief package which would create a safe harbor for banks and other financial services providers to work with cannabis and ancillary businesses that are in compliance with state law.
Signatories included Americans for Safe Access, Global Alliance for Cannabis Commerce, Marijuana Policy Project, Minority Cannabis Business Association, National Association of Cannabis Businesses, National Cannabis Industry Association, National Cannabis Roundtable, National Organization for the Reform of Marijuana Laws, Policy Center for Public Health and Safety, and Safe and Responsible Banking Alliance.
The coalition wrote,
“In 2019, it is estimated that sales of cannabis in the United States topped $12 billion– the vast majority of which were cash transactions. Previously, this situation created an unnecessary public safety risk and undue safety burden on state and local tax and licensing authorities who must receive and process large cash payments. Now, as recent reports show that viruses can live on cash for up to 17 days, the public safety concerns of this cash-only system compound. The lack of access to financial institutions places industry workers, government employees, and the public at-large at risk as banknotes circulate from consumers and patients to businesses to government.”
Even the lead sponsors of the SAFE Banking Act weighed in. Senate lead Sen. Jeff Merkley (D-OR) told NCIA, “Locking legal businesses out of traditional banking services—leaving them with no option but to operate exclusively in cash—has long put workers in danger. And now in the face of this pandemic, it’s making it increasingly difficult for these businesses to keep their workers and customers safe while they fight to stay afloat. The SAFE Banking Act is more important than ever to these businesses and the families who rely on them, and I’m committed to doing everything I can to get it passed.”
Congressman Ed Perlmutter (D-CO) also weighed in, stating, “Cannabis businesses and their employees already face a significant public safety risk without access to the banking system, and the COVID-19 crisis has only exacerbated this risk with these essential businesses having to move their cash-only transactions outside the store. At the same time, many of these businesses are facing disruptions in their supply chain and in normal operations and they should be eligible for relief just like any other legal, legitimate business during this pandemic. I will continue to push for inclusion of the SAFE Banking Act or other forms of relief for this industry in the next package.”
The next coronavirus relief package is set to be unveiled any day. Here at NCIA, we remain cautiously optimistic that our concerns have been heard and will be addressed. Regardless, we continue to call, email, and video message with congressional offices and remain dedicated to providing relief for our industry.
Member Blog: Suggestions For Cannabis Economy Leaders As We Navigate the COVID-19 Crisis
As COVID-19 swept across the globe, shutting down countries, there was an unexpected side effect taking place in the cannabis economy. Many cannabis companies that may have made hiring or operational errors have used the pandemic as an opportunity for correction even as they are staying open and deemed an essential service. Companies who over-hired based on “what if” scenarios of possible growth have used this to exit or furlough unexpecting employees with little to no explanation why.
Working in the cannabis executive recruitment space for several years (and being in the people business for decades), this is heartbreaking to see and hear. New hires should be based on new and real business needs grounded in data and facts instead of staffing up because a company is hoping for amazing growth. Companies using this pandemic as a correction must be more transparent and human in their actions. Acknowledge and realize some employees are losing their jobs (sometimes after stellar performance reviews) with little to no severance and little explanation. However, we all can learn from this experience and make some changes to how we operate moving forward.
Treat people as you would like to be treated.
The impact of a bad employee exit has a trickle-down effect. There’s a lot more good to come from understanding that former employees, along with their family members, friends, and colleagues, are all potential consumers, investors, and future employees. The (relative) smallness of our cannabis economy should be further inspiration to behave accordingly towards others during this time of crisis. When an employee is let go in an unprofessional manner, it impacts the morale of those employees who are still with the company. Relationships matter. We’re not saying that there isn’t a need to let people go and make organizational changes; you’re still running a business. Look for ways to make an unpleasant experience more positive. Furlough some people instead of flat out laying them off, and then communicate a lot with them during the time they spend in that holding pattern for you. Evaluate performance over salary when deciding on cutbacks. Consider bringing in an Industrial Psychologist to speak with your remaining employees who are probably suffering emotionally and thinking they’re next on the chopping block. Offer more perks to show that you care. Reach out to those individuals who are no longer with the company and see how they’re doing. Offer to pay for resume writing services or actively connect them to career support services or recruiters.
Invest in a strategic HR or Human Capital position.
You need a dedicated strategic HR leader in your organization to help guide your company vs. simply hiring an HR body to keep you out of a courtroom and to keep your files organized! This is a critical role, often overlooked by young and growing companies. Employees are the most valuable (and only appreciating) asset in an organization, and they can make or break an organization. Companies spend a lot of time and money on M&A diligence, vetting strategic partnerships, etc. However, many miss putting the same consideration into their human capital management. Hiring, training, and retaining best-in-class talent provides some of the best ROI for any organization, and that requires an individual (or entire department) dedicated to the recruitment, onboarding, training, continuous employee relations activities, and ultimately increasing employee happiness and effectiveness.
Evaluate Everything
Every company is looking to save money and improve their operations. Take this time to evaluate your current operational partners critically. Are you paying too much in additional fees? Are you getting the ROI you expect? Use this time to interview and seek out new partners who might be a better fit. What are the pillars of your culture? Is your leadership team the right mix? Do you have the right people on board to steer you toward the culture and future you hope for? Who do you want to attract to the organization? You may need to take some time to reflect and make some adjustments to the culture or team members to build the company you aspire to be.
Moving forward, companies who survive this can come out on the other side with better processes for employee hiring, onboarding, training, management, and retention. Many of us are in this business for the love and respect of the cannabis plant. Cannabis is a great connector of people, and this is an opportunity for us all to shift our operations to pay tribute to that fact and to improve our human relations processes.
Bryan Passman is a father, a husband, a trailblazer, and Co-founder and CEO of Hunter + Esquire. My professional background before launching H+E was entirely in retained executive search for 18 years in MedTech/Pharma (15 yrs) and Food and Adult Beverage CPG (3 yrs). My deep knowledge of those highly regulated and nuanced industries has helped H+E significantly understand the needs and wants of our cannabis clients. My deep and genuine networks within those industries have helped us deliver that rare talent “unicorn” our clients desire to fit their particular needs. My client-first approach helps us provide a very customized, white-glove, headhunter treatment to client and candidate.
Protected: Webinar Recording: Fireside Chats – Staying Politically Engaged in the Age of Coronavirus
Webinar Recording: Communications Strategy During Times of Crisis and COVID-19
In case you missed it, watch this webinar recording from April 8. With the cannabis industry customer acquisition and service models disrupted by the pandemic, it’s critical to understand that what you do today will affect your business now and have a large impact on your future. Adjusting communications to focus on brand and strengthening bonds with existing customers will help you minimize damage and promote future growth.
In this webinar, crisis experts Jeanine Moss (Chair of NCIA’s Marketing and Advertising Committee) and Nicole DeMeo of Outfront Solutions will outline immediate and practical steps you can take to address crises before, during, and after they’ve occurred. They will provide specific recommendations for the cannabis value chain including cultivators, manufacturers, distributors, retailers, and ancillary businesses. Learn how to build trust and brand loyalty in times of crisis with customers, employees, directors, shareholders, and vendors so you come through with a strong platform for growth and knowing you’ve done all that you can for your stakeholders.
Webinar Recording: Policy Council Conversations – Sustainable Cannabis Cultivation
In case you missed it, watch this webinar recording from Wednesday, April 22 to Celebrate Earth Day with NCIA. Learn about the environmental impacts of the cannabis industry and the sustainable best management practices that can be implemented for green operations.
You’ll get a sneak peek into NCIA’s upcoming white paper focused on sustainability in the cannabis industry, and learn from your peers by hearing from four sustainable cannabis cultivators: Terrapin Care Station, Native Roots, LivWell, and Cascade High.
Panelists:
Kaitlin Urso
Environmental Protection Specialist Colorado Department of Public Health and Environment
Emily Long
Communications & Marketing Consultant Rocky Mountain Reagents, Inc.
Sarah Davis
CEO S.R.D. Consulting, LLC
Peter Marcus
Communications Director Terrapin Care Station
Brandon Rhea
Compliance Officer and Sustainability Co-Chair Native Roots
James Schwartz
CEO Cascade High Organics
NCIA’s #IndustryEssentials webinar series are crafted for cannabis business owners highlighting the insight and expertise of NCIA members, NCIA staff, as well as regulatory and legal experts.
To us, webinars arenʻt just about getting some big-name talking heads on a Zoom call. Itʻs about giving you insights you canʻt find anywhere else, from experts who will surprise and delight you with their in-depth knowledge on relevant industry topics. Thatʻs why we have created our NCIA #IndustryEssentials webinar series. Over the coming weeks, we’ll be rolling out a variety of programs under this umbrella which will allow us to provide you timely, engaging, and essential education when you need it most.
Member Blog: IRC Section 471(c) of the TCJA May Mitigate the Curse of 280E for the Cannabis Industry
On March 30, 2020, the Treasury Inspector General for Tax Administration issued a report titled “The Growth of the Marijuana Industry Warrants Increased Tax Compliance Efforts and Additional Guidance.” The 53-page report discussed several different topics, including that the IRS should conduct more audits under Section 280E, and this discussion focuses on Section 471(c).
The report states that certain qualifying cannabis taxpayers, who would otherwise be subject to business expenses being disallowed under Section 280E, could potentially account for their inventory under Section 471(c) using a method that would classify most or all of their expenditures as inventoriable costs and avoid Section 280E’s disallowance of such expenditures. Accordingly, as all the costs would be capitalized into inventory, they would then reduce taxable income as the inventory was sold. In other words, expenditures previously disallowed under Section 280E would be part of the cost of goods sold and allowed as a reduction of gross receipts. There was no public comment from the IRS in the report on the potential that 471(c) may eliminate 280E.
Before continuing to provide our additional comments, it is important to mention the impact of Section 471(c) on Section 280E has not been reviewed by the Courts and the Inspector General also stated that necessary guidance addressing 471(c) is lacking from the IRS. As such, the impact cannot be stated in certain terms.
The curse of Section 280E on the cannabis industry cannot be overstated – some businesses actually end up paying more in tax than they make and Section 280E can turn an economic loss into a taxable gain. This seemingly unconstitutional result has been justified by the courts and IRS under a very old principle of taxation that “deductions are a matter of legislative grace.” New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934) Legislative grace, according to these authorities, means the legislature has the power to deny all deductions, if they so choose, and it should be said that the limitation of such grace, under the 16th Amendment to the US Constitution, is that 280E cannot disallow costs of goods sold. With Section 471(c), however, legislative grace appears to be on the side of the cannabis industry because, as discussed below, Congress created Section 471(c) and it appears to allow inclusion of deductions into the cost of goods sold where they can’t be disallowed under Section 280E.
The Code states that Section 471(c) allows a small taxpayer, one with less than $25 million in revenues, who is not a tax shelter or public company to account for inventory according to their applicable financial statements, or absent applicable financial statements, according to the actual books and records of the taxpayer. For a qualifying business that doesn’t have applicable financial statements, if their books and records include deductions in COGS, then these deductions may not be subject to 280E.
Question #1 – What are applicable financial statements, what does it mean to have them, and if a taxpayer does not have applicable financials statements what are the books and records of the taxpayer prepared in accordance with the taxpayer’s accounting procedures?
It is our opinion that under IRC § 451(b)(3) if a taxpayer is required to issue audited financial statements in accordance with generally accepted accounting principles (GAAP) for credit purposes, to owners, or for any other nontax purpose, they have applicable financial statements. It would seem that “any other nontax purpose” would include audited GAAP statements required to be issued to state regulatory agencies. As such, because GAAP requires accounting for inventory in a manner similar to Section 471(a), taxpayers who have Applicable Financial Statements appear to be precluded from adding costs disallowed under Section 280E into COGS pursuant to Section 471(c). Of concern are states that require license holders to provide their licensing agency with audited financial statements. However, if the state doesn’t require GAAP financials, then the “Applicable Financial Statements” provision shouldn’t be a problem.
If the taxpayer does not have applicable financial statements, then they are allowed to account for inventory for tax purposes in the same way as they account for inventory on their internal books and records. Thus, their books and records would have to mirror their method of accounting for tax purposes.
Question #2 – Could a small cannabis company, who is not issuing applicable financial statements in accordance with GAAP and is subject to 280E, establish a method of accounting for inventory in which they consider all or most expenditures of the company to be inventoriable costs? If so, does characterizing these otherwise nondeductible costs as inventoriable costs change the nature of the expenditures from non-deductible business deductions to deductible costs of goods sold when the inventory is sold?
As noted above, there is currently no guidance from the IRS regarding this question and, we should assume, that the IRS will not acquiesce to the position that 471(c) eliminates 280E. So, let’s consider the arguments the IRS might make. First to consider is the Service’s conclusion in Chief Counsel Memorandum Number 201504011 regarding Sec 263A. Early on, cannabis taxpayers attempted to use Sec 263A to capitalize general and administrative costs, otherwise subject to 280E, into inventory and then deduct them as part of COGS. This does sound somewhat similar to the approach we are looking at under 471(c).
The IRS concluded in CCA 201504011 that Sec. 263A would not allow an expense disallowed under Section 280E to be added to COGS because of “flush language” added to Sec. 263A(a)(2) in a subsequent congressional amendment. The flush language states:
Any cost which (but for this subsection) could not be taken into account in computing taxable income for any taxable year shall not be treated as a cost described in this paragraph.
The U.S. Tax Court agreed with the Chief Counsel memo in several opinions including Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health Center v. Commissioner.
However, where this language was fatal to the cannabis industry’s attempt to use Section 263A to its benefit – it may help in the case of Section 471(c). It appears to have been necessary for the U.S. Congress to add the Flush Language to Section 263A to prevent the inclusion of otherwise disallowed expenses into COGS. There is no equivalent language added to Section 471(c) and so the argument is that in the absence of an equivalent provision, Section 471(c) can be used to include expenses disallowed under 280E into COGS where they can be used to reduce taxable income.
Another argument the IRS may make is that Treas. Reg. § 1.61-3(a) prevents the inclusion of deductions into cost of goods sold because the regulation states that Gross Income is determined without subtraction of “…selling expenses…” However, Section 1.61-3(a) is part of the Treasury Regs defining gross income and its reference to the non-inclusion of “selling expenses” is from the regulations under Section 471(a). Section 471(c) specifically states that Section 471(a) does not apply (which include the regulations) and a taxpayer’s method of accounting for inventory under Section 471(c) does not fail to accurately reflect income. And, Section 471(c) is a higher authority than the regulations. Thus, it appears that Section 471(c) trumps Treas. Reg. § 1.61-3(a).
Question #3 – Should a taxpayer, eligible to use 471(c) to account for inventory file their tax return taking positions regarding 471(c) as described in this article?
Every taxpayer is different, and accounting for inventory under Section 471(c) is not right for everyone in the cannabis industry. It is also important to understand that it may not work and for taxpayers who use the method to do so with caution and understanding. However, below is a list of issues to discuss with your tax professional:
What is your tolerance for risk and a legal dispute with the IRS? Such a dispute could be time-consuming and costly.
If 471(c) is proven not to eliminate 280E – how will you manage additional tax, interest, and possibly penalties?
Should the position be disclosed as part of your tax filing?
Does the entity have applicable financial statements?
Is the cannabis business a tax shelter?
How aggressive does management and ownership want to be regarding the position?
How will management accomplish the necessary accounting and records to support such a position?
In summary, 471 (c) has left the cannabis industry with several questions and definitive answers are probably not immediately available. License holders should work closely with their advisors as they navigate these questions. But, there is a possibility that Section 471(c) eliminates Section 280E for qualifying taxpayers. Cannabis businesses should take the necessary steps to understand it and protect their ability to benefit from Section 471(c) if it does work.
The Bridge West and GreenspoonMarder teams work tirelessly to understand the tax and accounting issues facing businesses in the cannabis industry and provide the best possible solutions to their clients.
To discuss any of the questions within this article please feel free to contact Calvin Shannon, Nick Richards or any of their team members.
Calvin Shannon is a Pricipal of Bridge West and has over 17 years of experience providing tax, audit, estate planning and trust services. Calvin is skilled at understanding client’s challenges and working with them to develop and implement innovative and unique solutions. Assists organizations to address the industry’s unique and ever-evolving issues. He enjoys having the opportunity to work with cannabis clients to understand their business needs, and to provide timely solutions
Nick Richards is a Partner in the Tax practice group at Greenspoon Marder LLP. He represents individuals and businesses in tax audits & trials, M&A, in managing tax debt, and he advises cannabis companies, owners and investors regarding tax and regulatory compliance matters. Mr. Richards has been a tax attorney for more than twenty years beginning his career with the IRS where he was a leading trial attorney, a Chief Counsel advisor, and a Special Assistant United States Attorney.
With his broad experience and understanding at all phases of the tax system, from reporting and assessment through appeals, court, and tax debt resolution, Mr. Richards achieves successful legal solutions tailored to his individual client’s needs. Mr. Richards also teaches tax attorneys and CPAs throughout the US and he is an Adjunct Professor of Law at the University of Denver, Graduate Tax Program, where he teaches State and Local Tax and Civil and Criminal Tax.
by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations
I don’t know about you, but it seems no matter where I look, everything is about COVID-19. And with good reason — many of us are still working from home, helping their families with distance learning, and overall dealing with the effects of the virus. That being said, this week I wanted to take a look at two pieces of cannabis legislation — non-COVID related — and update you on where things stand, since we’re already nearly halfway through 2020!
The SAFE Banking Act
Last September, the SAFE Banking Act became the first piece of cannabis reform legislation to ever pass out of the United States House of Representatives by an astounding bipartisan vote of 321-103. The first iteration of the bill, named the Marijuana Businesses Access to Banking Act, was introduced to the 113th Congress back in 2013 and has made a long journey to get to this point in the legislative process.
Now that the SAFE Banking Act has passed the House, its journey has continued in the more conservative, Republican-controlled Senate. However, just before Christmas, Senate Banking Committee Chairman Mike Crapo (R-ID) issued a press release detailing his opposition to cannabis policy reform — including the SAFE Banking Act as it’s currently written. In the release, Chairman Crapo said,
“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho. I also do not support the SAFE Banking Act that passed in the House of Representatives. Significant concerns remain that the SAFE Banking Act does not address the high-level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system.”
Even now with COVID-19, NCIA is virtually lobbying for the SAFE Banking Act, or some of its provisions, to be included in the next coronavirus relief package. Before COVID-19, the all-cash situation cannabis businesses face created an unnecessary public safety risk and undue safety burden on state and local tax and licensing authorities who must receive and process large cash payments. Now, as recent reports show that viruses can live on cash for up to 17 days, the public safety concerns of this cash-only system compound. The lack of access to financial institutions places industry workers, government employees, and the public-at-large at risk as banknotes circulate from consumers and patients to businesses to government.
NCIA is continually working with Sen. Crapo, congressional and committee staff, coalition partners, and the bill’s cosponsors to ensure that all parties have the materials and information that they need in order to solve this pressing public safety– and now, public health– issue and pass the SAFE Banking Act into law!
The MORE Act
In November, by a vote of 24-10, the House Judiciary Committee approved the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2019, or H.R. 3884. This bill was introduced by House Judiciary Committee Chairman Jerrold Nadler (D-NY) and currently has 73 cosponsors. This was the first time that a congressional committee held a vote on – let alone approved – a comprehensive bill that would make cannabis legal. Perhaps even more significantly, this bill recognizes and works to address the disproportionate impact prohibition has had on marginalized communities and people of color while helping to increase access and opportunity in the legal cannabis industry.
The bill still has a long way to go, though. While the House Judiciary Committee has passed the legislation, there are still six more congressional committees with jurisdiction over the bill, including the Energy and Commerce, Agriculture, Education and Labor, Ways and Means, Natural Resources, and Oversight and Reform committees. In January, the House Small Business Committee waived its jurisdiction over the MORE Act.
While the MORE Act does not contain an explicit regulatory structure for cannabis after it is descheduled, Chairman Nadler said in a press conference the day before the markup vote that it was possible amendments could be added to the bill as it moves through the House.
All that being said, it’s unclear what Congress’ schedule will look like for the rest of the year. The Senate returned to Washington yesterday, however, the House remains out of session as concerns about legislating in the age of COVID-19 remain. On top of that, 2020 is an election year, which complicates matters (and scheduling) even more. Regardless, I hope you can rest assured knowing that NCIA’s government relations team is working around the clock to advocate for the cannabis industry — whether that be banking reform, ending cannabis criminalization, or allowing for SBA relief. From D.C. to wherever you are, stay healthy!
Member Blog: While You Are At Home – Time To Prepare For Achieving GMP Certification
COVID-19 has altered everyone’s day to day life and has put a strain on the healthcare, food, distribution, insurance, and financial industries in ways we did not think possible just a few short months ago. It will be a slow process to get our lives and businesses moving forward. Having Good Manufacturing Processes (GMPs) in place will ensure that your business will rise from this stronger and more profitable, in addition to the trust and safety that it will display to customers.
The lifeblood of your organization starts and ends out on the production floor – whether that is in the greenhouse, the extraction and formulation room, or in packaging. This can be reduced to a series of processes with inputs and outputs. It should go without saying that without product moving through your processes, you have no output and thus no revenue.
Enter Good Manufacturing Practices (GMPs). Don’t confuse GMP as just the latest buzzword in the cannabis and hemp industry. It is a system of best practices that have proven themselves the world over through continuous improvement and refinement for several decades!
These best practices provide significant value to your employees, risk managers, investors, and customers as they enforce your company’s commitment to their safety. While you continue to keep your business afloat during these uncertain times, whether it is from the safety of your home or from the front lines if you are in a market that has recognized cannabis as the essential business NOW is the perfect time to review documents and take the next step to becoming GMP compliant.
Why GMPs for the Cannabis or Hemp Industry?
Good Manufacturing Practice (GMP) is a system for ensuring that products are consistently produced and controlled according to quality standards. It is designed to minimize the risks involved with any manufacturing production that cannot be eliminated through testing the final product.
GMP covers all aspects of production from the starting materials, premises, and equipment to the training and personal hygiene of staff. Detailed written procedures are essential for each process that could affect the quality and safety of your final product. These are complemented by systems to record and store data, to provide tangible proof that these procedures have been consistently followed – every time a product is made.
If your cultivation, extraction, manufacturing, laboratory, or distribution business is still operating you have probably had to modify your daily operating procedures. This may include implementing staggered schedules, limiting production runs, and providing frontline employees with revised hygiene guidelines and protective gear. Have you updated your standard operating procedures (SOPs) to reflect these changes?
Your SOPs are living breathing documents and are fundamental to every business, and a business built on Good Manufacturing Practices is no exception. To understand the value, let’s ask a few simple questions.
First, have any of these events happened within your business recently?
A change in PPE requirements
New or more stringent sanitation practices
Additional steps for end of day facility closing
New vendors or suppliers of ingredients (hand sanitizer? bleach?)
Employee leave requirements
Assuming the answer is yes to at least one of those questions (and if it isn’t, go back and read it again or call another colleague and ask them), your SOPs need to be updated.
Have you or someone in your organization reviewed your SOPs since any of those changes were made?
If you answered yes, how do you know that? Is there written evidence (a record or log) of this review somewhere?
For many of you, it is likely that someone somewhere performed some level of review, but whether it was documented in a clear traceable manner is another story.
Give Credit Where Credit is Due
It is common that within many organizations, the activities required to establish a robust Quality System, including GMPs largely exist, yet most likely not being documented. Unfortunately, the lack of documentation or poor documentation is nearly just as bad as not having done it in the first place. Why? Because an organization is a large fluid operation with many people moving in different directions. Without a record of changes, this change quickly gets lost in the shuffle.
By now it should be clear that the redundancies and miscommunications from a lack of documenting your activities can quickly multiply. By taking a few minutes to record everything properly provides tangible evidence of the activity (get credit for the work you did!) and will save time and money in the long run!
Now what?
Remember those questions earlier on in the article? Everywhere you had a “No”, go back and make it a “Yes”! And record it. At the end of the day, give yourself a pat on the back. You just conducted your first internal audit! You are well on your way to increasing your operational efficiency, and being able to show the world you care about product safety and quality by demonstrating Good Manufacturing Practices!
Stay tuned for our next post where we will dive deeper into the functional areas and programs that are the core components of a GMP system.
Co-Founder & CEO of TraceTrust and A True Dose™ and hGMP™ the first universal independent certification programs for dose accuracy in legal cannabis and hemp-derived ingestible products. Always at the forefront of emerging trends on the future of food, technology, health and wellness, she leverages 25 years of experience of creative development, operations and investment for everything food and beverage. Current Chair of the NCIA Education Committee.
David and his team at The GMP Collective bring decades of pharmaceutical and food industry best practices to cannabis and hemp. He holds a Master’s Degree, is a Certified Food Systems Auditor, and brings a decade of experience in various governmental scientific work. David supports the industry in many ways, including serving as an Officer on ASTM International’s D37 Cannabis Standards Development Committee, participation in NCIA’s Facility Design Committee, and has also developed cannabis training content for college courses.
Contact the authors to learn more about how your business may benefit from implementing GMPs.
Member Blog: 7 Places You’ll Find Mold In Most Cannabis Grows
In the battle against mold, there are three critically important questions.
Where is the mold coming from?
How did mold get there?
How did the mold travel to where it grew?
Answering these questions gives growers the power to mitigate mold, and the ability to pass total yeast and mold tests.
Know Thy Enemy
It helps to first understand what you’re up against. Understand first and foremost that mold is a living thing that starts and ends somewhere. Its spores travel to reproduce, just like a plant.
And it needs the right environment to flourish. Moisture and temperature have the biggest impact. But hosts that help it travel are also critical.
Process Over Point
Most indoor and greenhouse grows have dozens, if not hundreds of people working across the organization. From back office to packaging to production – you have people and places that impact the air quality and can act as hosts, ultimately, impacting spore counts.
These hundreds of interchangeable parts make it difficult to figure out the source of mold, so it’s critical to see it as a process.
Break your facility into seven core parts of a process, and start digging. Not literally, of course, but as a scientist would. Examine what might cause the issues by looking at variables and constants.
Look at these seven locations:
Mother Plants
Cuttings from Mother Plants (clones, propagation)
Vegetative Growth
Flower Growth
Trim Rooms
Immediate postharvest
Sometimes after dry and cure
Dry Rooms
Cure Space
Follow the plant through those places and test regularly to see where moisture or cross-contamination may be occurring.
This is a painstaking process, make no mistake. Mold develops over time, so you’ll need to spend weeks or months tracking the lifecycle of the plant.
You’ve Solved The Riddle, Now Solve The Problem
Of course, once you find the sources, mitigation through a solid Integrated Pest Management (IPM) program is critical. There are many methods for that, from cleaning and disinfection to HEPA filters, and more. You’re not in this fight alone, either. You can call solutions providers like ProKure for help or find a Certified Industrial Hygienist in your area.
Whatever you choose to mitigate with, just remember to start with the answers to those core questions. Any program will be much more effective with those in mind.
Bernie Lorenz, PhD, is Chief Science Officer for ProKure Solutions, where he applies an advanced chemistry background and passion for sustainability to make ProKure products approachable to cultivation professionals. As one of the industry’s most seasoned experts on ClO₂, Dr. Lorenz recently led the effort as technical contact for a new ASTM International standardaimed at establishing cleaning and disinfecting protocols for indoor and greenhouse cannabis cultivation facilities. Dr. Lorenz earned both his PhD and Masters in Inorganic Chemistry from New Mexico State University.
Meet The Team: Morgan Fox – NCIA’s Director of Media Relations
This week marks my second anniversary working with the National Cannabis Industry Association, and with everything going on in the world, it very nearly slipped by me unnoticed. However, the occasion has given me an opportunity to reflect on the past and look to the future, both of which are truly motivating to me when it comes to the work we are doing in the present.
When I first came to NCIA, it was a very turbulent time for cannabis policy reform, the industry, and for me personally.
After working in the movement for ten years, I was very familiar with what the organization stood for and what it had accomplished. I was eager to join those efforts and pivot more into federal policy work after a wave of state-level victories and to help protect businesses that were responsible for so much innovation despite unprecedented challenges over the years.
It was also a very scary time: earlier in the year, then-Attorney General Jeff Sessions had rescinded the Cole Memo that had guided federal prosecutors in their hands-off approach to regulated (but federally illegal) cannabis businesses, and then-Rep. Pete Sessions’ prohibitionist tenure as head of the House Rules Committee had a firm stranglehold on any cannabis-related legislation in Congress.
This move just happened to coincide with the impending birth of my first child, which made me look at everything through a different lens and ask myself some hard questions. Was I making the right decision to continue working in a field that could get shut down at any moment? Was there any hope for positive change in the foreseeable future? Should I keep working in cannabis when there are other ways I can try to make a positive difference for future generations?
The answer to those questions was a resounding “yes” as I was soon to see repeatedly in the coming months. The feared federal crackdown on state-legal cannabis businesses never came. Congress once again approved a spending ban on targeting medical cannabis patients and providers. By the end of the year, both Jeff and Pete were out of their jobs, a Democratic takeover of the House of Representatives had created opportunities for real progress on cannabis bills, and voters in three more states had approved ballot initiatives to create regulated adult or medical cannabis markets. It was an interesting year, to say the least.
But I think one of the most important developments for me was getting more direct exposure to the people that work so hard to advance this vibrant and inspiring industry. From the people who risked their freedom and often their life savings to open businesses when the threat of arrest and forfeiture were commonplace, to those working every day to undo the damage of our disastrous drug laws and create fair opportunities in the industry for people and communities that have been most harmed by prohibition, I can safely say I’ve never met more passionate and dedicated individuals.
Practically every day I see developments and ideas that could have wide-reaching effects outside of cannabis. Social and criminal justice issues that are starting to become more central to cannabis policy are forcing us to reexamine many problems related to fairness and historical inequality in our society. The increasing focus on corporate responsibility and sustainability is creating a model for other businesses to follow at a time when we desperately need one. New innovations are improving health and wellness while paving the way for technologies, methods, and applications that have the potential to revolutionize agricultural and industrial fields.
I want my child to grow up in a world with laws that prioritize justice, freedom, and fairness; with businesses that care about their communities and try to make the world a better, cleaner, and healthier place. There is still a lot of work to do, but I know I am in the right place to help make that world a reality in my own small way. I can’t wait to see what the next ten years hold for NCIA.
Webinar: NCIA Committee Insights – Illinois Market – What’s Happening and What’s Next
Join us on Monday, May 11 at 1:00 PM MT for this webinar.
How is the 11th state to permit adult-use cannabis doing, and what’s coming next? Want to get your foot in the door? Join us in a lively conversation about Illinois application and licensing.
Considering expansion to Illinois from another market? Learn how Illinois differs from other markets on some key issues. Think it’s essential that states successfully innovate to promote social equity?
We’ll discuss what Illinois is doing well and where the gaps are in regards to their Social Equity program. Join industry thought-leaders from NCIA’s State Regulations Committee as they discuss these crucial topics and more.
The COVID-19 pandemic has drastically changed how businesses operate and how people interact with one another. For many individuals, one of the greatest changes is living under “shelter-in-place” orders. The restrictions put in place have resulted in the closure of businesses that just a few weeks ago, many of us assumed would be open. The impact of COVID-19 on the cannabis industry has been dramatic, and the regulations and designations put in place over the past six weeks have altered the way cannabusinesses interact with their patients, as well as the way they are perceived as part of the larger healthcare conversation. The increasing adoption of technology solutions will continue to define the evolution of the industry long after the COVID-19 crisis has passed.
Dispensaries As Essential Businesses
Shelter-in-place has expanded across the country at a similar rate to the virus itself. When officials from states like California and Colorado issued these orders, cannabis dispensaries were initially not designated as an essential business. Due to public outcry, however, these initial orders were reversed. Dispensaries were classified essential and critical, joining other vital businesses like grocery stores, pharmacies, banks, and gas stations.
This distinction of dispensaries — medical, recreational, or both, depending on the state — as an essential business reflects how the cannabis industry and retailers are evolving to become a key part of the health infrastructure. Medical marijuana is a $5 billion industry with around 2,000 retailers serving more than two million patients nationwide. Among them are patients fighting cancer and using cannabis to manage their symptoms, veterans working to manage post-traumatic stress syndrome and those being treated for severe forms of epilepsy, Dravet syndrome, and Lennox-Gastaut syndrome. For patients like these, the cannabis industry plays an important role in their day-to-day health.
According to our research, cannabis sales have increased by 19.2% during the COVID-19 pandemic. Additionally, between March 11 and March 31, online ordering increased by 355%, delivery sales went up by 280% and pickup orders increased by 118%.
Modernizing the Cannabis Industry’s Way of Distribution
As demand continues to grow, cannabis dispensaries must adapt and adjust their operations in order to be compliant with the CDC’s guidelines for social distancing. For some business owners, this can be challenging, as historically, most cannabis dispensaries have sold and delivered product in-person and in-store with cash payments. In this “old way” of doing business, budtenders played an important role in helping customers, as they are trained to listen and discuss the most suitable products for each individual.
The reality of today’s world is forcing a shift in how businesses operate, moving from the traditional “in-person” model and embracing digital transformation for online menus, ordering, and delivery. Dispensary owners need to ask themselves: how with the aid of technology can they differentiate their products, and how can they engage and educate new and existing customers? As an essential business, how can cannabis dispensaries embrace the “new ways” of operating?
Through the integrated use of technology, business owners can keep up with the changing landscape to connect and engage with customers through:
Offering online video budtender consultations to replace in-person meetings
Providing online menus with robust product descriptions, improved merchandising, and bundled offerings around specific themes such as ‘sleep’ or ‘calming’
Developing targeted email and text messaging campaigns customized for individual customers to educate them on new product information
Guaranteeing secure, electronic payments
While industries across the board are embracing digital transformation, the cannabis industry now has an opportunity to fast-track its way there – and in time, this is what will enable cannabis business owners to thrive while protecting the health and safety of the community.
Nina Simosko serves as Chief Revenue Officer for Akerna, a global regulatory compliance technology company in the cannabis space. Akerna’s companies and investments also include MJ Freeway, Ample Organics, Last Call Analytics, Leaf Data Systems®, solo sciences, and ZolTrain.
With more than 20 years of technology industry experience, she has spearheaded strategic innovation initiatives for global Fortune 100 companies including Oracle, SAP, and most recently, NTT Group. Nina oversees both Akerna and MJ Freeway’s revenue generation streams, builds strategies to drive revenue growth, and plays a pivotal role in aligning revenue generation processes across the Akerna organization
Previously, Nina was President and CEO of NTT Innovation Institute Inc. (NTTi3), the prestigious Silicon Valley-based innovation center for NTT Group, one of the world’s largest ICT companies. Prior to NTT i3, Nina was responsible for leading the creation and execution of Nike Technology strategy, planning and operations world-wide. At SAP, she was the Senior Vice President of SAP’s Global Premier Customer Network (PCN) where she led both the PCN Center of Excellence and SAP’s Global Executive Advisory Board. During her eight-year tenure, she was a part of SAP’s Global Ecosystem & Partner Group which was charged with continuing to build and enable an open ecosystem of software, service and technology partners together with SAP’s communities of innovation.
Ms. Simosko currently sits on the Advisory board at Santa.io, AppOrchid and Reflektion and she has also been a member of the advisory boards at Appcelerator and Taulia.
The changes around ordering, delivery, payment, patient education and promotion are here to stay. With more than 70 integrated partners, MJ Platform offers clients the advanced technology solutions that are becoming increasingly important to the industry as we work through these challenging times, and that will define the future of cannabis in the months and years to come.
Welcome to NCIA Today – tune in for our latest episode!
Host Bethany Moore, NCIA’s Communications Manager and host of NCIA’s weekly Podcast ‘NCIA’s Cannabis Industry Voice‘ brings you an in-depth look at what is happening across the country in federal cannabis policy reform and with NCIA.
From the top, Bethany discusses the newly-launched NCIA #IndustryEssentials series. Webinars that arenʻt just about getting some big-name talking heads on a Zoom call. This new series provides insights you canʻt find anywhere else, from experts who will surprise and delight you with their in-depth knowledge on relevant industry topics.
We check in with NCIA Social Media Manager, Vince Chandler, to hear some of the recent highlights from the Internet about cannabis policy reform, cannabis & COVID-19, and more. Our resident digital expert also breaks down the ways that NCIA is looking to help our members improve their engagement and reach online.
Executive Director Aaron Smith joins Bethany on NCIA Today to discuss the unacceptable exclusion of cannabis from federal coronavirus relief efforts, especially surprising given that cannabis has been deemed essential. Join Aaron is calling Congress today and ask that they support The Emergency Cannabis Small Business Health and Safety Act.
Legal cannabis, for all of its promise, has failed – in some markets spectacularly – to live up to its economic potential. But while each self-contained state market faces its own combination of political and regulatory challenges, the core of the problem everywhere is basic economics. Legal markets exist to efficiently move goods from where they are best produced to where there is the greatest demand. But cannabis, straddling the line between emerging state regulation and the remnants of federal prohibition, has negotiated that legal chasm by violating the inviolable laws of supply and demand, with predictably disappointing results. Perhaps now, in the face of a disastrous recession, with legal and legalizing states in desperate need for jobs and economic stimulus, is the time to get it right by allowing licensed commerce between legal markets.
The inability to move cannabis across state lines creates myriad problems for legal cannabis market operators that have far-ranging effects for all stakeholders in the cannabis industry, from investors to employees down to the patients and consumers who use the end products. The hindrance to economic activity also slows economic growth, employment, and tax revenues to states that have legal cannabis sales.
Oversupply Vs. Undersupply
Oversupply of cannabis in states like Oregon, which has excellent growing conditions and a favorable regulatory environment, are completely artificial and created not by the true excess of cannabis, but by the current inability to export to more populous states. This oversupply causes prices to plummet, which benefits consumers in the short term but is disastrous for small and medium-sized businesses and has far-reaching impacts on the communities that rely on this agricultural cash crop. Long term, the effect of these artificially low prices is that small businesses fail and large businesses take their assets to scale, which reduces employment and revenues in the communities that produce cannabis and extract the profits for investors in the large firms. This reduces competition and diversity in the industry, which hurts the same consumers in the long run who briefly benefited from the low prices. This is not a theoretical or academic argument, as we have seen these exact dynamics play out in Oregon over the past three years, with a staggering failure rate and rapid consolidation across the industry. Hundreds of millions of dollars of local capital have been eradicated as small businesses funded by friends and family have been forced to sell out to larger operators just to cover the worst of their debts.
In states which experience undersupply of cannabis, whether due to poor growing conditions or unfavorable regulations (or both) prices rise, hurting legal customers and patients of state-legal operators right away. Businesses can ultimately suffer losses of potential revenue, even as prices climb when consumers turn to cheaper cannabis from the illicit market. This undermines the legal systems set up by these states and pushes consumers to less-safe, unregulated products. As consumers drift from the legal to the illicit market, again the small and medium-sized businesses that currently represent the majority of the industry become financially unsustainable will suffer most, with the same end result to cannabis stakeholders as an oversupplied market.
Meanwhile, the artificial boundaries make scaling a business nearly impossible without access to an unlimited pool of capital. If a company from Washington, for example, wished to scale up and access new markets, they would have to completely recreate their entire supply chain, and most of their administrative operations, equally increasing their overhead with physical space and labor, for each new state that they wanted to enter. Effectively, they would have to create a brand-new small business in each state instead of scaling their operations efficiently and just expanding sales efforts to new territories. This is complicated in the extreme, both logistically and financially. What is worse, those redundant operations will become completely obsolete when cannabis is de-scheduled and interstate commerce allowed. This will almost certainly lead to a mass lay-off in the cannabis industry for all multi-state operators seeking to consolidate their operations. This will improve their cost competitiveness and further accelerate price drops that particularly hurt small businesses and stakeholders across the industry.
In fact, the extreme difference between the current state of the industry and a future in which interstate trade is allowed creates perverse incentives to investment, as opportunities that may be attractive in the short-term will ultimately prove disastrous long term. For example, massive energy and water-intensive indoor growing operations would be needed for New York to supply its population locally, and those facilities would require billions in investment dollars. These investments would look fantastic if one could be assured that the current regulatory environment would not change. But, if de-scheduling or other federal action allows for interstate trade, these facilities would have only a few years to reap the benefits of high margins before having to compete on cost with cannabis grown outdoors in the fertile Emerald Triangle of Northern California and Southern Oregon, which can produce much larger quantities of high-quality cannabis with a fraction of the inputs.
Newly legal net consumption states like New York and New Jersey will struggle to match supply to demand for years after initial legalization, resulting in millions of dollars of lost revenue, lost employment opportunity, and lost tax collections as the state struggles to develop the capacity to meet demand in a place that has no history of large scale production. If states that have historically been net importers plan for interstate trade from the outset, they can have a thriving retail industry with fully stocked shelves by taking high-quality products from producer states like California, Oregon, and Colorado within months of being able to import. The rapid change from essentially no legal industry to a robust, rich, and diverse retail environment would provide immediate economic stimulus in the form of jobs, thriving small businesses, and tax revenues. If new states are forced to rely solely on cannabis that is grown, harvested, processed, and distributed within state lines, it could take many years to develop the full economic benefits that a legal market could bring to bear.
All of these issues can be avoided, or at least mitigated, by a shrewd approach to incremental interstate trade instead of an instantaneous switch from 25 or more siloed industries to one national, or potentially international, market. The dynamics of how different state regulations interact can be tested and worked out thoughtfully, allowing for a more seamless transition and a clear roadmap for federal regulation when cannabis is de-scheduled. Successful interstate trade on any scale, between even just two states, will clearly signal to investors that the future of interstate trade is of pressing urgency to incorporate into their investment strategy. An investor in New York could then focus on opportunities related to local product development with the promise that affordable raw materials would be available from California and skip investing in indoor agriculture. Consumers and patients in states that allow for trade across their borders will instantly have access to a wider array of products, and as the size of the market that the industry has access to increases the dramatic supply and demand swings will be dampened by a larger and more diverse base of both consumers and producers.
Ultimately, the purpose of markets is to maximize the efficiency and utility of the flow of goods. They should move from the places where they are cheapest to produce to the places where the demand is highest. This is most effective with commodities and consumer goods, like cannabis. The current restrictions against moving cannabis across state lines completely hobble the market’s ability to perform this critical function. The result is bad for producers, consumers, regulators, and state governments. Interstate commerce for cannabis means better markets for producers, more choice for consumers, and a massive economic stimulus for all participating states in the form of job creation and increased tax revenues.
Gabriel Cross is a Founder and CEO at Odyssey Distribution, LLC, a distributor for locally-owned craft cannabis producers and processors in Oregon. Gabe worked in the sustainable building industry for a decade before starting Odyssey and brings his experience with sustainability and systems thinking to his work in the cannabis industry. Odyssey manages logistics, sales and marketing for boutique producers so they can focus on creating great craft cannabis products for the Oregon market.
Gary Seelhorstof Flora California has a passion for developing high-quality cannabis products so their most therapeutic effects can be realized. His 25 years in pharmaceuticals and medical devices helps him bring scientific rigor to the cannabis industry. Gary is very active at both the State and Federal level as an advocate for policy reform/higher quality standards. He enjoyed lengthy stints at Eli Lilly and Pfizer (in clinical development and corporate development) and worked with several start-ups developing corporate and compliance strategies. Gary has a B.S./B.A. from UC San Diego in Biochemistry/Psychology, an M.S. in Clinical Physiology from Indiana University, and an MBA from the University of Michigan.
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works in the specialist sector of compliance for the medical, retail, and hemp industries and has over 12 years’ experience in cannabis industry development, consulting, and operational compliance and over 21 years’ experience in regulations and risk management. 
“In fact, if we were able to have the Veterans Administration (VA) embrace medical cannabis, veterans would get better care because they could deal directly with their primary care physician, who is in the best position to give them appropriate advice. But sadly, the VA is caught with this federal restriction and they have a very narrow interpretation of what they can do, and how they can do it, and they simply do not permit their physicians to work with veterans to discuss and work with — let alone prescribe — medical cannabis.”
I was born and raised in the far south of Brazil, drinking yerba mate, listening to rock, going to the beach, and eating lots of BBQ! The war on drugs was fought hard in our streets, and we 
Bryan Passman is a father, a husband, a trailblazer, and Co-founder and CEO of 
Coincidentally, I moved to Denver right after Colorado legalized the adult use of cannabis. That wasn’t the reason why I moved, although it definitely was a perk. I moved because I wanted a fresh start. I’d spent my whole life on the East Coast. First in a New Jersey suburb of New York City. Then on the west coast of Florida. After I finished school, I lived for a short while with my mom in very rural central Florida. It was horrible. Not a place for a young person. But it gave me time to think about what I wanted out of life. I knew I needed a change.
Democracy requires active participation. Of course, that starts with 
Calvin Shannon is a Pricipal of Bridge West and has over 17 years of experience providing tax, audit, estate planning and trust services. Calvin is skilled at understanding client’s challenges and working with them to develop and implement innovative and unique solutions. Assists organizations to address the industry’s unique and ever-evolving issues. He enjoys having the opportunity to work with cannabis clients to understand their business needs, and to provide timely solutions
David Vaillencourt
Bernie Lorenz, PhD, is Chief Science Officer for ProKure Solutions, where he applies an advanced chemistry background and passion for sustainability to make ProKure products approachable to cultivation professionals. As one of the industry’s most seasoned experts on ClO₂, Dr. Lorenz recently led the effort as technical contact for 
After 
Nina Simosko serves as Chief Revenue Officer for 
Gabriel Cross is a Founder and CEO at 
Gary Seelhorst