Regulatory compliance is one of the most critical factors for running a successful cannabis business. Like other commercial enterprises, cannabis businesses are subject to strict regulations and laws, but this industry faces additional challenges. When applying for a cannabis business license, the conditional license applicant must submit a regulatory compliance plan to meet all federal and state requirements at the first stage of the licensing application.
You have probably seen news stories about cannabis companies losing their licenses due to compliance infractions. An example is that of Sweet Leaf in Colorado, which lost business for repeatedly selling too many cannabis products to out-of-state clients. That is where a regulatory compliance plan comes in. This plan helps protect your business license and your working capital.
What is regulatory compliance?
Regulatory compliance is the act of a business adhering to legal obligations and professional norms. These include directives like Good Manufacturing Practices (GMPs) or International Organization for Standardization (ISO) standards, as well as regulations and laws from government agencies. Compliance shows that a business is conducting its operations legally and with consideration for quality assurance, giving regulators, customers, and partners assurance that they can rely on the goods and services a business offers.
When we discuss compliance, we mean two different types of standards:
- External legal requirements imposed by state and local governments
- Internal, exclusive procedures and policies that guide all of your company’s unique selling points
A well-designed cannabis compliance program considers both sets of standards.
What makes compliance crucial?
In an industry where millions of dollars are at stake, it’s more important than ever for cannabis businesses to be fully compliant with state laws. Not only does this ensure that your company operates within the law, but it also protects your brand from potential lawsuits and fines from regulators.
Here are some ways compliance can benefit you as a cannabis business:
- Helps protect consumers: Ensuring that products are not contaminated or genetically modified helps protect consumers from harm;
- Protects the industry: Ensuring that products are safe helps preserve the health of everyone involved in the supply chain;
- Reduces costs: Being compliant minimizes the risk of incurring fines and other penalties from state regulators;
- Gives you credibility: By being fully compliant, you’ll gain credibility as an industry leader who values the law and their customers.
What is a cannabis regulatory compliance plan?
A cannabis regulatory compliance plan is a road map focused on the regulatory compliance systems of the business. This entails identifying the individuals and roles in charge of each compliance-related topic, developing appropriate training materials and techniques, and successfully implementing SOPs (standard operating procedures). Among other purposes, a regulatory compliance plan aids in establishing the when and how of compliance process audits and corrections as needed. Additionally, a compliance plan specifies the appropriate sanctions, including the possibility of dismissal, that will be given to adequately trained employees who continue to negligently or willfully violate compliance requirements.
A compliance plan lists all the subjects that must be covered to act legally, cites the pertinent policy codes, and specifies which employee groups must receive training on those subjects. Some of the topics that such a plan should address are:
- Environmental impact plan
- Adverse event reporting SOP
- Safety and security plan
- Quality assurance and quality control SOPs
- Packaging and labeling SOP (for cultivation and manufacturing businesses only)
- Recall SOP
- Tax and accounting compliance SOPs
- Secure transport of weed SOP (for cultivation and manufacturing businesses only)
- Delivery SOP (for retail companies only)
- Cannabis testing
- SOP for reporting test results
- Age verification SOP (for retail companies only)
- Odor and air quality control
- Pesticide remediation and control
Top tips for developing a cannabis business compliance plan
The following advice can assist cannabis businesses in creating a thorough compliance strategy that gets them off to a good start even as regulations change and new ones emerge.
Know the laws
First, you need to know the laws. If you’re developing a cannabis business compliance plan for the first time, it can be easy to get overwhelmed by how many different state and federal laws there are. But don’t panic! There are only three main types of laws:
- State laws govern what’s legal or not in your state (for example, whether medical marijuana is allowed).
- Federal laws govern what’s legal or not across all 50 states (for example, interstate commerce).
- Penalties are associated with breaking these two types of law (like fines).
Start with your state.
The second step in developing a cannabis business compliance plan is understanding your state’s laws. This can be done by reading up on their regulations, talking with other businesses in the industry and asking them about their experiences, consulting an expert like the RADD CANN team, or even just Googling “cannabis laws” in your area.
Once you know what’s required for compliance and how best to get there (such as getting an occupational license), take some time to determine how much time and money you want to spend getting compliant with all of these regulations. You may find that some requirements can be fulfilled by doing something simple like updating signage or installing security cameras–or perhaps there are more complicated tasks such as hiring an attorney specializing in cannabis law if needed. Once again: start small!
Understand the difference between a cannabis business and ancillary products.
Cannabis businesses are the ones that sell cannabis products. On the other hand, Ancillary product providers provide products that support the cannabis business. Examples of ancillary products include packaging, security systems, and software.
Suppose you’re considering getting into this industry and becoming an entrepreneur. In that case, it’s essential to understand how these two types of companies differ, so you can ensure your business plan offers something unique compared to other companies in your niche market.
Build a solid financial plan.
With the legalization of cannabis, it’s crucial to have a solid financial plan in place. This means ensuring you have enough cash to cover your business expenses and sticking within the budget you’ve set for yourself. It also means keeping an eye on tax obligations and marketing and advertising costs–and paying attention to employee salaries so that they’re paid on time!
If possible, consult a cannabis financial planner or reviewer like RADD CANN, specializing in cannabis businesses, before starting.
Create clear HR policies and procedures.
It’s essential to understand the difference between HR policies and procedures.
- An HR policy is a statement of your organization’s values and beliefs about how employees should behave. These may include:
- What types of behavior are unacceptable?
- How will you handle complaints against an employee?
- What kind of disciplinary measures do you use?
RADD CANN provides you and your team with best practices and industry standards for cannabis HR experts.
Decide whether to pursue a permit, registration, or license
As you develop your plan, deciding whether you want to pursue a permit, registration, or license is essential. A permit is a license to operate a cannabis business. It allows you to grow and sell marijuana products in California.
Registration is a temporary license that allows you to operate while waiting for approval of your permanent application. You can have multiple registrations for different locations or types of businesses (e.g., retail stores).
A license is given after applicants, including local government approvals, meet all requirements, financial statements; criminal history record information; proof of good moral character (if applicable); proof that the applicant has met minimum vertical integration requirements, if applicable, under state law; other information required by state law or regulation explicitly related either directly or indirectly linked.
RADD CANN can also help you with your license and insurance.
Have a robust training program in place.
A robust training program is critical to developing a successful and compliant business. Training should be ongoing, consistent, and tailored to your needs. In addition, documentation should be documented so employees can refer to it if they need clarification or additional information on compliance requirements. Although in-person training is ideal because it allows employees to ask questions in real-time, online training programs are also effective:
- An overview of basic compliance requirements
- Detailed information about specific laws/rules/regulations that apply specifically to your industry (e.g., employee background checks)
- Sample forms and checklists for completing required tasks
Keep improving your compliance
The process of complying is ongoing. Unfortunately, a company’s current compliance status does not guarantee that it will continue to be so in the future. However, you can ensure you stay compliant consistently by setting up an environment where your compliance SOPs are routinely evaluated and revised. At the same time, your operations are exposed to internal audits. Here are some cannabis compliance services that can help you protect your business and stay compliant throughout your lifespan.
Conclusion
Working with regulatory compliance experts will help you develop an incredible compliance plan to secure your business and operating capital. RADD CANN is a cannabis consulting firm that can help you with regulatory compliance for your business. Our compliance services are customized to meet your needs; whether you are a grower, manufacturer, or retailer, we will help you develop a compliance plan for your business.
Please book a free consultation with our team today to learn how we can help.
