Opening and running any business can be a challenging venture, but those looking to start a cannabis brand have a lot more hoops to jump through.
Between the fact that cannabis is still illegal at the federal level and the ever-changing state regulations, there’s a lot to keep up with even after you open your business. Mike Kennedy, co-founder and Chief Strategy Officer of Green Check, offers some quick tips for dispensaries to stay up-to-date on compliance within their respective states:
- Dedicate a Compliance Officer or Team
- Subscribe to State and Local Regulatory Newsletters
- Join Industry Associations
- Regular Role-Specific Training
- Leverage Purpose-Built Technology
- Establish a Formal Audit Program and Conduct Regular Audits
- Network with Other Businesses
- Regularly Consult with Legal Counsel
- Document Everything!
- Engage in Continued Education
- Implement a Feedback Loop and Build a “Compliance Culture”
Kennedy’s background involves helping community financial institutions leverage technology to better manage their compliance and risk functions. He has helped hundreds of institutions develop and implement bespoke compliance programs.
“The best compliance programs center around education and documentation,” Kennedy says. “Compliance is a team sport, meaning everyone within the organization is responsible for running a compliant operation. A strong compliance program focuses on educating all stakeholders and ensuring that processes, expectations, and exceptions are properly documented. With these cornerstones in place, an organization is much better equipped to navigate the complex regulatory landscape of the cannabis industry.”
Non-Compliant Issues Dispensaries Should Be Aware Of
Throughout Kennedy’s work in the cannabis industry, he has observed various non-compliant issues that could have severe ramifications if not addressed quickly. Some of these issues are due to lack of knowledge, while others might stem from negligence or the desire to cut corners.
Here are some of the most common and significant non-compliant issues Kennedy advises dispensaries to be especially cautious of:
- Improper Tracking / Reporting: The seed-to-sale tracking system is fundamental in many states. Failing to properly track or report can lead to discrepancies in inventory, which is a major red flag for regulators.
- Selling Over State Limits: Some dispensaries might be tempted to sell more than the permitted amount to a single customer, especially if that customer is a regular or purchases high volumes. This is a clear violation of most state regulations.
- Inadequate Security Measures: Many states have strict security requirements, including surveillance systems, alarm systems, and safe storage protocols. Failing to adhere to these can not only result in hefty fines but can also jeopardize the safety of the staff and inventory.
- Mislabeling: Whether it’s the THC/CBD content, strain information, or health claims, it’s imperative that all product information is accurate. Misrepresentation can lead to legal repercussions and harm the brand’s reputation.
- Selling Contaminated Products: Skipping or manipulating quality control tests to pass products that haven’t met safety standards is a grave risk. This can endanger consumers’ health and result in significant legal action.
- Not Adhering to Marketing and Advertising Regulations: Some states have very specific rules about how and where cannabis businesses can advertise. This includes restrictions on promoting to minors or making unsubstantiated health claims.
- Improper Disposal of Cannabis Waste: Cannabis waste must be disposed of according to state regulations. Simply throwing it in the trash or not rendering it unusable and unrecognizable can lead to penalties.
“Many of these non-compliant issues stem from either a lack of proper systems and training or a conscious decision to skirt the rules to increase profits. It’s crucial for dispensaries to remember that while the cannabis industry presents immense opportunities, it’s also heavily regulated. Cutting corners might provide short-term gains, but the long-term risks, both legally and in terms of brand reputation, are substantial. Investing in compliance from the outset is both the right and the smart thing to do,” Kennedy says.
Technology Can Help Dispensaries Stay Compliant
There are many dedicated, purpose-built tools that exist out there that dispensaries can use to reduce the risk of running afoul of state rules. Kennedy says that given the rigidity of regulatory requirements, technology with predefined workflows, limits, and other business logic can remove the guesswork out of many day-to-day operations, while also providing a detailed audit trail of all activities.
“By integrating technology into their operations, dispensaries can streamline processes, reduce human errors, and ensure a higher degree of accuracy in their compliance efforts,” Kennedy says. “However, it’s crucial to remember that technology is only as good as its implementation. Proper training and regular system updates are essential to maximizing the benefits and ensuring that these tools truly serve their compliance objectives.”
Regulatory Compliance Can Lead to a Seamless Customer Experience
Regulatory compliance, at its core, is designed to ensure the safety, integrity, and legitimacy of the cannabis industry. While it might seem like compliance primarily concerns the business side of operations, Kennedy notes that adhering to regulations can significantly enhance the customer experience in several tangible ways:
- Customer Safety and Assurance
- Consistent Product Labeling
- Professional Environment
- Educated Staff
- Streamlined Transactions
- Transparent Pricing
- Protecting Customer Data
- Enhanced Communication
- More Product Variety and Innovation
- Improved Feedback Mechanisms
“In essence, regulatory compliance establishes a framework that, when effectively implemented, creates a more reliable, transparent, and professional environment for consumers. This standardization, while ensuring safety and quality, also fosters trust and brand loyalty, enhancing the overall customer experience. While the immediate benefits of compliance might seem business-centric, in the long run, it’s the customers who reap the most significant rewards from a well-regulated, trustworthy industry,” Kennedy says.