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Comparable to Organic: How This California Company Aims to Certify Cannabis

By Aaron G. Biros
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Cannabis that contains more than 0.3% THC is not eligible for USDA organic certification, due to the crop’s Schedule I status. While some hemp farmers are currently on the path to obtain a USDA organic certification, the rest of the cannabis industry is left without that ability.

Growers, producers, manufacturers and dispensaries that utilize the same practices as the national organic program should be able to use that to their advantage in their marketing. Ian Rice, CEO of Envirocann, wants to help cannabis companies tap into that potential with what he likes to call, “comparable to organic.”

Ian Rice, CEO of Envirocann & co-founder of SC Labs

Rice co-founded SC Laboratories in 2010, one of the first cannabis testing labs in the world, and helped develop the cannabis industry’s first testing standards. In 2016, Rice and his partners at SC Labs launched Envirocann, a third-party certification organization, focused on the quality assurance and quality control of cannabis products. Through on-site inspections and lab testing, Envirocann verifies and subsequently certifies that best practices are used to grow and process cannabis, while confirming environmental sustainability and regulatory compliance.

“Our backyard in Santa Cruz and the central coast is the birthplace of the organic movement,” says Rice. California Certified Organic Farms (CCOF), founded in Santa Cruz more than 40 years ago, was one of the first organizations in the early 1990s that helped write the national organic program.

“What we came to realize in the lab testing space and as the cannabis market grew, was that a lot of cannabis companies were making the organic claims on their products,” says Rice. “At the time, only one or two organizations in the cannabis space were making an attempt to qualify best practices or create an organic-type feel of confidence among consumers.” What Rice saw in their lab was not cannabis that could be considered organic: “We saw products being labeled as organic, or with certain claims of best practices, that were regularly failing tests and testing positive for banned chemicals. That really didn’t sit well with us.”

Coastal Sun Farms, Enviroganic-certified

At the time, there was no real pathway to certify cannabis products and qualify best practices. “We met with a few people at the CCOF that were very encouraging for us to adopt the national organic program’s standards for cannabis. We followed their lead in how to adopt the standards and apply a certification, building a vehicle intended to certify cannabis producers.”

Because of their background in lab testing they added the requirement for every crop that gets certified to undergo a site inspection, sampling, as well as a pesticide residue test to confirm no pesticides were used at all during the production cycle. One of their clients is Coastal Sun Farms, a greenhouse and outdoor cannabis producer. “They grow incredible products at a high-level, commercial scale at the Enviroganic standard,” says Rice. “They have been able to prove that organic cannabis is economically viable.”

The Envirocann certification goes a bit beyond the USDA’s organic program in helping their clients with downstream supply chain risk management tools (SCRM). “Because of the rigorous testing of products to get certified and go to market, we are getting way ahead of supply chain or production issues,” says Rice. “That includes greater oversight and transparency, not just for marketing the final product.”

A good example of using SCRM to a client’s advantage is in the extraction business. A common scenario recently in the cannabis market involves flower or trim passing the pesticide tests at the lab. But when that flower makes it down the supply chain to a manufacturer, the extraction process concentrates chemical levels along with cannabinoid levels that might have previously been acceptable for flower. “I’ve witnessed millions and millions of dollars evaporate because flower passed, but the concentrated final product did not,” says Rice. “We’ve introduced a tool to get ahead of that decision-making process, looking beyond just a pass/fail. With our partner labs, we look at the chromatograms in greater detail beyond regulatory requirements, which gives us information on trace levels of chemicals we may be looking for. It’s a really rigorous audit on these sites and it’s all for the benefit of our clients.”

Envirocann has also recently added a processing certification for the manufacturing sector and a retail certification for dispensaries. That retail certification is intended to provide consumers with transparency, truth in labeling and legitimate education. The retail certification includes an assessment and audit of their management plan, which goes into details like procurement and budtender education, as well as basic considerations like energy usage and waste management.

Fog City Farms, Envirocann-certified

While Envirocann has essentially adopted the USDA’s organic program’s set of standards for what qualifies organic producers, which they call “Enviroganic,” they also certify more conventional producers with their “Envirocann” certification. “While these producers might not be considered organic farmers, they use conventional methods of production that are responsible and deserve recognition,” says Rice. “A great example for that tier would be Fog City Farms: They are growing indoor with LED lighting and have multiple levels in their indoor environment to optimize efficiency and minimize their impact with waste and energy usage, including overall considerations for sustainability in their business.”

Looking to the future, Ian Rice is using the term “comparable to organic” very intentionally, preparing for California’s roll out of their own organic cannabis program. The California Department of Food and Agriculture (CDFA) is launching the “OCal Comparable-to-Organic Cannabis Program.” The program is obviously using the same language as Envirocann. That’s because Envirocann is going to be one of the certifying affiliates under the agency’s new program. That program will begin on January 1, 2021.

Top 3 Ways Cultivation Methods Must Change with Regulations

By David Perkins
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There are obvious upsides and downsides to cannabis regulation. Gone are the days when it was a free for all, for outlaws growing in California’s hills, under the limited protections California’s medical cannabis laws provided. While there is no longer the threat of arrest and incarceration, for the most part, there are also a lot of hoops to jump through, and new rules and standards to contend with. This article highlights three areas in which your cultivation plan must necessarily change due to the new regulations.

1. Integrated Pest Management (IPM) is limited

In the new regulated market, products that were once widely used are now no longer allowed. Prior to regulation, in the days of Prop 215, you could spray your plants with just about anything, since there was no testing mandated for the products that were being sold. However, people unfortunately got sick and experienced negative reactions, with products like Eagle 20, which contains mycobutinol, and Avid, which contains bifenthrin. Accordingly, under new regulations there are thankfully much more stringent standards dictating what pesticides can be used. It’s ironic that for most of the “medical marijuana” era in California there were no mandatory testing requirements for the THC content of your cannabis, let alone testing for toxins, including pesticides, molds or heavy metals.

You need to have a very thorough pest management plan to make sure your bug populations are always in check. Given that there are a small number of allowable products for pest control in the regulated market, this can be tricky. You need to be extremely familiar with what is and isn’t allowed in today’s regulations. You must also make sure that someone who is certified to apply pesticides is applying them.

Photo: Michelle Tribe, Flickr

As a word of caution, there have been instances where approved pesticides were found to have old unused chemicals (that are not approved for use) from the manufacturing process in them. They may have only occurred in very small amounts, but they are harmful to humans and there is no lawful way to dispose of them.

Further, the presence of these harmful chemicals can cause your finished product to fail when undergoing mandated testing.

Rather than using risky chemicals, the best solution for (early detected) control of pests is the use of beneficial insects. Although they may not be the best solution for an infestation, predator bugs like Neoseiulus Californicus can efficiently control small populations of spider mites while ladybugs are good to limit aphids. Strategic planning of your IPM is one of the best ways to keep pest levels in check.

2. Plant size and plant count matter more than ever

Despite widespread legalization in the past few years for both the medical and recreational markets in the United States, the black market is still rampant and most cannabis is still being produced illegally in the US and internationally.

Maximizing plant canopy space is essential to a profitable business in today’s market

Generally speaking, in the black market, the less plants you have the better, as high plant counts lead to longer sentences of incarceration. With the passage of prop 215 in 1996, many growers, especially outdoor, started growing their plants as big as they possibly could because most limitations were based on plant counts. Some outdoor growers were able to cultivate plants that yielded over 10 pounds per plant. These days regulations are based on canopy measurements, meaning you can grow as many plants as you want within a defined, limited square footage area. This is where “light deprivation,” a method used to force plants into flowering, becomes favorable as it allows 2-4 harvests per year instead of just one. It is a much more intensive way of growing when you have tens of thousands of plants. While it is easier to plant, cultivate and harvest a larger number of smaller plants, it also requires a much more detailed level of planning and organization.

In order to achieve 4 harvests per year, you must have a well thought out cultivation plan and an all-star staff, but if you are able to accomplish this, you can increase your revenue significantly. Maximizing plant canopy space is essential to a profitable business in today’s market, and to do that will require more detailed planning, better organization and proper crop management.

3. How you grow and what equipment you use

With regulation comes liability for defects or injury. It is essential that all equipment used is approved for its intended use. Traditionally, cannabis was cultivated in secrecy in the black market. This led to many unsafe grow rooms being built by people who did not have the proper skills to be undertaking projects such as converting a garage into a grow room or handling the electrical and plumbing running into them. Accordingly, there were many instances of damages to property or injuries to people because of this. Now that counties and states permit cannabis cultivation facilities, the infrastructure and labor that is done must meet regulated building codes and general safety requirements. It is therefore imperative to know the codes and regulations and hire a professional that does, to ensure you meet the standards in order to avoid potential liability.

Larger scale cultivation requires bigger and more expensive equipment. Cultivation facilities are more likely to have sophisticated equipment, such as chiller systems, that are designed to control the grow room environment. While very efficient, some are not intended to be used specifically for cannabis cultivation, and can therefore be difficult to control and maintain. They perform very specific functions, and when not properly tuned to your conditions, can malfunction by prioritizing dehumidification over cooling. This can be a real challenge in warmer climates when temperatures rise, requiring cooling, but also necessitate removal of moisture from the cultivation space.

Larger scale cultivation requires bigger and more expensive equipment.

On the other hand, there is new technology that can make a huge difference in the success of your cultivation. I recently worked with two different companies that specialize in root zone heating systems. One manufactured equipment for root zone heating and cooling of 10k sq ft raised beds that had never been used in California previously. The other company specialized in root zone heating using radiant floor heat. They both worked as intended to maintain a constant root zone temperature, which increased plant health, and ultimately increased yield.

Many counties require data collection from your cultivation, requiring you to track the amount of water and nutrients used. Therefore, another useful tool you can use to increase efficiency, is data collection software that will allow you to collect different information about the amount of water and nutrients used, as well as specific information about the conditions in your grow medium. You can also record and display temperature and humidity readings in your grow room, in real time remotely through Wi-Fi, that you can then access from your phone or computer from anywhere in the world. This can be a useful tool when documenting information that your county, state or investors may require from you. Further, the ability to collect and analyze data will allow you to identify areas of inefficiency in order to correct and optimize your grow room’s potential. While you can achieve these same goals with simple in-line water meters, keeping track of nutrients and pesticides is not as easy. Data collection in the most basic form, using a pen and paper, can be an inaccurate and an inefficient use of time, and can easily be misplaced or ruined. Therefore, simple data software collection programs are the best solution to make the process simple and hassle free.

While it is nice to have state of the art equipment, if it does not work properly, or cannot be easily maintained, it will not be worth it in the long run and you will never see a return on your investment. Innovation comes with a price; using equipment that is cutting edge can be risky, but on the flip side, when done properly it can give you a big advantage over your competitors.

In switching from the black market to the regulated market, these three areas have proven to be the biggest areas of change and have presented the biggest challenges. It is important you consider these necessary changes, and make a solid plan before you begin your cultivation. This is where a cultivation consultant can help.

USDA Announces Risk Management Programs for Hemp

By Aaron G. Biros
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According to a press release published earlier this month, the U.S. Department of Agriculture (USDA) announced two new programs available for hemp growers to mitigate their risk.

The first is called Multi-Peril Crop Insurance (MPCI), which is a pilot hemp insurance program designed to cover against “loss of yield because of insurable causes of loss for hemp grown for fiber, grain or Cannabidiol (CBD) oil.” The second plan is Noninsured Crop Disaster Assistance Program, which protects against losses from lower-than-normal yields, destroyed crops or “prevented planting” where permanent crop insurance is not available.

Both of the programs are now accepting applications and the deadline to apply is March 16, 2020. “We are pleased to offer these coverages to hemp producers. Hemp offers new economic opportunities for our farmers, and they are anxious for a way to protect their product in the event of a natural disaster,” says Bill Northey, Farm Production and Conservation Undersecretary.

The MCPI program is available for hemp producers in 21 states, according to the press release. Th program is available in certain counties in Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia and Wisconsin.

There are a handful of requirements to be eligible for that program, such as having one year of growing under their belt and have contracts in place for the sale of their crops. Hemp growers producing CBD must have at least 5 acres and hemp growers producing fiber must have at least 20 acres cultivated.

In 2021, the press release states, “hemp will be insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program.” With those programs, hemp crops can be insured if grown in containers and in accordance with federal law.

To apply for any of these programs, hemp growers must have a license and must be totally compliant with state, tribal or federal regulations, or be operating under a state or university research plot from the 2014 Farm Bill. Growers need to report their hemp acreage to the Farm Service Agency, a division of the USDA.

The press release also mentions that if the crops have above 0.3% THC, the crop becomes uninsurable and ineligible for any of the programs.

The Launch of Cannabis-Related ETFs In Europe

By Marguerite Arnold
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Here is the headliner: As of the second week in January, there will be a cannabis related exchange-traded fund (ETF), trading on the Frankfurt Stock Exchange (or Deutsche Börse), the third largest stock exchange in the world and the meeting point between equities and the vast majority of institutional investment globally.

The Medical Cannabis and Wellness UCITS ETF (CBSX G) will trade on Deutsche Börse’s Xetra.

London-based ETF provider HANetf is the creator of the fund.

The idea is to create a fund with targeted exposure to the European market. And as a result, it is bound to be interesting. Especially as the companies included must go through a due diligence process that will only include equities traded on stock exchanges like the NYSE, Nasdaq and TSX.

This of course is no guarantee, particularly given the scandals of the major Canadians last year (who are listed on all or an assortment of the above).

Indeed, in the eyes of German authorities, this is not necessarily all that significant. And that in and of itself is a watchword of caution here. Namely the Deutsche Börse put the entire North American cannabis equity market under special watch two years ago and that has not changed since then. That said, with legalization now clearly in Europe, things in general look a lot different on the ground.

What will be really intriguing is when the fund (or the ones inevitably to follow) that look at the discussion from a European market perspective.

Purpose Investments, the Canadian partner involved, has over CA $8 billion in assets under management as of last month and across a range of ETFs.

Solactive, the German company which independently calculates the index, may also be unknown to North Americans in particular. In Germany, particularly Frankfurt, they have developed, since their founding in 2007, a reputation for being not only quirky, but not risk averse. In other words, decidedly “non-German,” at least by stereotype. And cannabis right now, particularly with this approach, is an inevitable development. This could, in fact, do very well. The problem, however, that is still in the room is the vastly different levels of compliance – but that too is a risk calculation that is to the people at the table, no different than certain kinds of commodities.

That alone makes this ETF intriguing simply because it will indeed be evaluated by German eyes – if not processes.

Significance

Things are clearly normalizing on both the accounting and reform front. The growth of the regulated Canadian market and the increasing focus on regulation of all kinds is only going to make things less risky for investors.

Bottom line: Good development, but won’t be the last. By far.Further, there are not many public European companies, yet. That may also change. However, for the moment, they are still a trickle (and all over the map).

What is intriguing is the timing of the fund. If not what it potentially spells for the public markets. And further the obvious research the Auslander team have done in finding the right European-based partner. Look for interesting things indeed.

This is the first real foray into Europe by anything outside a single stock offering on a European equity market.

For Germans, in particular, who are extremely risk averse, and tend to invest in other kinds of securities if not insurance to build up their pensions, the equity markets sniff a bit too much for most of “North American scam.” Far from cannabis. Yet some Germans do invest in the markets. As do other Europeans.

Bottom line: Good development, but won’t be the last. By far.

Strengthen Supply Chain Management with an Integrated ERP & CMS

By Daniel Erickson
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Success in the cannabis industry is driven by a company’s ability to adapt to an ever-changing market and meet the demands of the evolving consumer. Selecting the right business management solution to handle the complexities of the growing cycle as well as daily operations and compliance requirements necessitates diligent research. Ensuring that the selected technology solution has a centralized database in a secure platform designed to reinforce quality throughout company operations is essential in today’s competitive industry. An ERP solution with integrated CMS capabilities helps businesses strengthen supply chain management by seamlessly incorporating cannabis cultivation with day-to-day company operations to efficiently deliver seed to sale capabilities and meet marketplace demands.

What are ERP & CMS?

Enterprise resource planning (ERP) is a business system in which all data is centralized – including finances, human resources, quality, manufacturing, inventory, sales and reporting. A cultivation management system (CMS) is an extension of an ERP solution to manage cannabis greenhouse operations, including growing, inventory and labor needs. A CMS maintains a detailed level of tracking to account for continuous cannabis growth periods that require extensive monitoring and incur a multitude of expenses. In an integrated solution, both the ERP and CMS data are managed under the same secure database to provide a forward and backward audit trail of all business processes. This visibility encompasses the entire supply chain from the management of supplier relationships to distribution – including growing, cultivating, extracting, manufacturing and shipping.

How do ERP & CMS strengthen supply chain processes?

Tracks individual plants and growth stages – By tracking plant inventories at the individual plant level in real-time with a unique plant identifier, greenhouse operations are optimized – monitoring the entire lifecycle of the plant throughout the germination, seedling, vegetative and flowering stages. Audit trails maintain regulatory compliance, including information such as terpene profiles and THC and CBD potency. Monitoring genealogy, mother and cloning, crossbreeding, plant genetics and clone propagation are key to success in this industry. Strain tracking is equally important, including identifying which strains are performing best, producing the most yield and how they are received by the marketplace. Tracking of the entire supply chain includes the recording of plant health, harvesting techniques, production, growth, costs, lab testing and batch yields – without any gaps in information.

PlantTag
A plant tagged with a barcode and date for tracking

Optimizes growing conditions to increase yields – By automatically documenting and analyzing data, insights into plant and greenhouse activities create streamlined processes for an optimal cannabis cultivation environment. This includes the monitoring of all growing activities such as space, climate, light cycles, moisture content, nutrient applications, fertilizer and other resources, which all have an effect on plant growth and yields. Most importantly, labor costs are monitored, as it is the highest expense incurred by growers. In an industry for which many companies have limited budgets, enabling efficient greenhouse planning, automation and workflows reduces overhead costs.

Integrates with regulatory compliance systems – Compliance is a mandatory part of the cannabis business, and many companies haven’t expended the effort to ensure their processes are meeting regulations. This has placed their licensing and business at risk. An integration that automates the transfer of required reporting information from the ERP to state government approved software such as METRC, Biotrack THC and Leaf Data Systems to ensure regulatory compliance is imperative. This streamlined process assures that reporting is accurate, timely and meets changing requirements in this complex industry.

Facilitates safety and quality control – With an ERP solution tracking all aspects of growing, manufacturing, packaging, distribution and sales, safety and quality are effectively secured throughout the supply chain. Despite the lack of federal legality and regulatory guidelines, proactive cannabis producers can utilize an ERP’s automated processes and best practices to ensure safe and consistent products. By standardizing and documenting food safety procedures, manufacturers mitigate the risk of cannabis-specific concerns (such as aflatoxins, plant pesticide residue, pest contamination and inconsistent levels of THC/CBD potency) as well as dangers common to traditional food manufacturers (such as improper employee procedures and training) for those in the edibles marketplace. Food safety initiatives and quality control measures documented within the ERP strengthen the entire supply chain.

Maintains recipes and formulations – In manufacturing, to achieve product consistency in regards to taste, texture, appearance, potency and expected results, complex recipe and formula management is a necessity – including monitoring of THC and CBD percentages. The calculation of specific nutritional values to provide accurate labeling and product packaging provides necessary information for consumers. Cannabis businesses have to evolve with the consumer buying habits and marketplace saturation by getting creative with their product offerings. With integrated R&D functionality, the expansion of new and innovative edibles, beverages and forms of delivery, as well as new extractions, tinctures, concentrates and other derivatives, helps to meet consumer demands.

Handles inventory efficiently – Established inventory control measures such as tracking stock levels, expiration dates and product loss are effectively managed in an ERP solution across multiple warehouses and locations. Cannabis manufacturers are able to maintain raw material and product levels, reduce waste, facilitate rotation methods and avoid overproduction to control costs. With the use of plant tag IDs and serial and lot numbers with forward and backward traceability, barcode scanning automatically links product information to batch tickets, shipping documents and labels – providing the ability to locate goods quickly in the supply chain if necessary in the event of contamination or recall. The real-time and integrated information available helps mitigate the risk of unsafe products entering the marketplace.

Food processing and sanitation
By standardizing and documenting food safety procedures, manufacturers mitigate the risk of cannabis-specific concerns

Utilizes user-based software permissions – Access to data and ability to execute transactions throughout the growing stages, production and distribution are restricted to designated employees with proper authorization – ensuring security and accountability throughout the inventory chain.

Manages supplier approvals – Assurance of safety is enhanced with the maintenance of detailed supplier information lists with test results to meet in-house quality and product standards. Quality control testing ensures that critical control points are monitored and only approved materials and finished products are released – keeping undeclared substances, harmful chemicals and impure ingredients from infiltrating the supply chain. When standards are not met, the system alerts stakeholders and alternate vendors can be sought.

Delivers recall preparedness – As part of an edible company’s food safety plan, recall plans that include the practice of performing mock recalls ensures that cannabis businesses are implementing food safety procedures within their facilities. With seed to sale traceability in an ERP solution, mitigating the risk of inconsistent, unsafe or contaminated products is readily maintained. Integrated data from the CMS solution provides greater insight into contamination issues in the growth stages.

An ERP solution developed for the cannabis industry with supporting CMS functionality embodies the inventory and quality-driven system that growers, processors, manufacturers and distributors seek to strengthen supply chain management. Offering a centralized, secure database, seed to sale traceability, integration to compliance systems, in-application quality and inventory control, formula and recipe management functionality and the ability to conduct mock recalls, these robust business management solutions meet the needs of a demanding industry. With a variety of additional features designed to enhance processes in all aspects of your cannabis operation the solution provides a framework to deliver truly supportive supply chain management capabilities.

Aphria, Inc. Implements Quality Management Systems

By Cannabis Industry Journal Staff
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According to a press release published today, Aphria Inc. has implemented Rootstock Software’s cloud Enterprise Resource Planning (ERP) solutions and ComplianceQuest’s Enterprise Quality Management System (EQMS). Aphria, one of the largest cannabis companies in the world, trades on both the Toronto Stock Exchange and the New York Stock Exchange.

Rootstock’s cloud ERP software includes things like order processing, production management, supply chain management, lot and serial number trackability and traceability, compliance reporting, costing and financial management. ComplianceQuest’s EQMS software provides support for GMP compliance and can help improve efficiencies in operations. The EQMS focuses on quality and risk management across Aphria’s business platforms, from sourcing to manufacturing to supply chain management.

Aphria is using the entire EQMS platform, which includes software to handle documents, training, changes, inspections, nonconformance, corrective actions (CAPA) and customer complaints which integrates to Rootstock’s ERP. According to the press release, the company is currently working to roll-out audit, equipment, incident and supplier management functions and will be fully live with the entire quality system in the next few months.

According to Tim Purdie, chief information officer & chief information security officer of Aphria Inc., both platforms delivered on their implementation. “Grounded in the scalability of the force.com platform, CQ transformed our quality management operating capabilities overnight and we are delighted at the fully integrated partnership result,” says Purdie. “We now have fully digital real-time informatics and ability to implement change in a highly transparent manner to meet the demands of our high growth business.”

Adding that Rootstock ERP will help facilitate their company’s production, inventory and supply chain management, Purdie says both platforms will enable Aphria to be increasingly responsive to market needs. “Aphria is setting the standard as a worldwide leader in the cannabis industry through a diversified approach to innovation, corporate citizenship, strategic partnerships and global expansion,” Purdie says. “With these system implementations, we’re now technologically equipped to take our competitive advantage to new levels of market leadership.”

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Cannabis Growers and Distributors: Your Cyber Risk is Growing Like Weeds

By Emily Selck
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Cannabis growers and distributors are “green” when it comes to cyber security. Unaware of the real risks, cannabis businesses consistently fall short of instituting some of the most basic cybersecurity protections, leaving them increasingly vulnerable to a cyber-attack.

Cannabis businesses are especially attractive to hackers because of the vast amount of personally identifiable and protected health information they’re required to collect as well as the crop trade secrets they store. With businesses growing by leaps and bounds, and more and more Americans and Canadians purchasing cannabis, cybercriminals are likely to increase their attacks on the North American market in the coming year. Arm your cannabis business with the following best practices for growers and distributors.

Distributor Risk = A Customer’s PII

Cyber risk is the greatest for cannabis distributors, required to collect personal identifiable information (PII), including driver’s licenses, credit cards, medical history and insurance information from patients. State regulatory oversight further compounds the distributor’s risk of cyber-attack. If you’re a cannabis distributor, you’ll want to make sure to:

  • Know where you retain buyer information, and understand how it can potentially be breached. Are you scanning driver’s licenses into a database, or retaining paper files? Are you keeping them in a secure area off site, or on a protected network? Make sure a member of your management team is maintaining compliance with HIPAA and state statutes and requirements for cannabis distribution.
  • Institute strong employee oversight rules. Every employee does not have to have access to every sale, or your entire database of proprietary customer information. Delegate jobs behind the sales desk. Give each employee the access they need to do their job – and that’s it.
  • Distributors have to protect grower’s R&D information too. Most cannabis distributors have access to their grower’s proprietary R&D information so they can help customers understand which products are best for different medical symptoms/needs. Make sure your employees don’t reveal too much to put your suppliers in potential risk of cyberattack.

Grower Risk = Crop Trade Secrets

For cannabis growers, the risk is specific to crop trade secrets, research and development (R&D). If you’re a cannabis grower, you’ll want to:

  • Secure your R&D process. If you’ve created a cannabis formula that reduces anxiety or pain or boosts energy, these “recipes” are your competitive advantage – your intellectual property. Consider the way you store information behind the R&D of your cannabis crops. Do you store it on electronic file, or a computer desktop? What type of credentials do people need to access it? Other industries will use a third party cloud service to store their R&D information, but with cannabis businesses that’s typically not the case. Instead, many growers maintain their own servers because they feel this risk is so great, and because their business is growing so fast, there are not yet on the cloud.
  • Limit the number of people with access to your “secret sauce.” When workers are harvesting crop, or you’re renting land from farmers and planting on it, make sure to keep proprietary information in the hands of just the few who need it – and no one else. This is especially important when sharing details with third party vendors.

Cyber coverage is now ripe for picking

Although cannabis businesses are hard to insure – for just about every type of risk – cyber insurance options for cannabis companies have recently expanded, and come down in price. If you’ve looked for cyber coverage in the past and were previously unable to secure it, now is the time to revisit the market.

Know that cyber policy underwriters will do additional due diligence, going beyond the typical policy application, and ask about the types of proprietary information you collect from customers, as well as how you store and access it at a later date. Have this knowledge at your fingertips, and be ready to talk to underwriters about it when you’re bidding for a new policy – and at renewal time.

Cannabusiness Sustainability

Environmental Sustainability in Cultivation: Part 3

By Carl Silverberg
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Part 1 in this series went into a discussion of resource management for cannabis growers. Part 2 presented the idea of land use and conservation. In Part 3 below, we dive into pesticide use and integrated pest management for growers, through an environmental lens.

Rachel Carson’s book Silent Spring in 1962, is often credited with helping launch the environmental movement. Ten years later, VP Edmund Muskie elevated the environment to a major issue in his 1972 Presidential campaign against Richard Nixon. 57 years after Ms. Carson’s book, we’re still having the same problems. Over 13,000 lawsuits have been filed against Monsanto and last month a jury in Alameda County ruled that a couple came down with non-Hodgkin’s lymphoma because of their use of Roundup. The jury awarded them one billion dollars each in punitive damages. Is there a safer alternative?

“Effectively replacing the need for pesticides, we use Integrated Pest Management (IPM) which is a proactive program designed to control the population of undesirable pests with the use of natural predators, a system commonly known as “good bugs (such as ladybugs) fighting bad bugs”, states the website of Mucci Farms, a greenhouse grower. While this applies to cannabis as well, there is one major problem with the crop that isn’t faced by other crops.

Rachel Carson’s Silent Spring- often credited with starting the environmental movement of the 20th century.

While states are moving rapidly to legalize it, the EPA is currently not regulating cannabis. That is in the hands of each state. According to a story in the Denver Post in 2016, “Although pesticides are widely used on crops, their use on cannabis remains problematic and controversial as no safety standards exist.” Keep in mind that it takes a lot more pesticides to keep unwarranted guests off your cannabis plant when it’s outdoors than when it’s in a controlled environment.

We’re accustomed to using endless products under the assumption that a range of governmental acronyms such as NIH, FDA, OSHA, EPA, USDA are protecting us. We don’t even think about looking for their labels because we naturally assume that a product we’re about to ingest has been thoroughly tested, approved and vetted by one of those agencies. But what if it’s not?

Again, cannabis regulation is at the state level and here’s why that’s critical. The budget of the EPA is $6.14 billion while Colorado’s EPA-equivalent agency has a budget of $616 million. According to the federal budget summary, “A major component of our FY 2019 budget request is funding for drinking water and clean water infrastructure as well as for Brownfields and Superfund projects.” In short, federal dollars aren’t going towards pesticide testing and they’re certainly got going towards a product that’s illegal at the federal level. That should make you wonder how effective oversight is at the state level.

What impact does this have on our health and what impact do pesticides have on the environment? A former Dean of Science and Medical School at a major university told me, “Many pesticides are neurotoxins that affect your nervous system and liver. These are drugs. The good news is that they kill insects faster than they kill people.” Quite a sobering thought.

“We have the ability to control what kinds of pesticides we put in our water and how much pesticides we put in our water.”Assuming that he’d be totally supportive of greenhouses, I pushed to see if he agreed. “There’s always a downside with nature. An enclosure helps you monitor access. If you’re growing only one variety, your greenhouse is actually more susceptible to pests because it’s only one variety.” The problem for most growers is that absent some kind of a computer vision system in your greenhouse, usually by the time you realize that you have a problem it’s already taken a toll on your crop.

Following up on the concept of monitoring, I reached out to Dr. Jacques White, the executive director of Long Live the Kings, an organization dedicated to restoring wild salmon in the Pacific Northwest. Obviously, you can’t monitor access to a river, but you certainly can see the effects of fertilizer runoff, chemicals and pesticides into the areas where fish live and eventually, return to spawn.

“Because salmon travel such extraordinary long distances through rivers, streams, estuaries and into oceans they are one of the best health indicators for people. If salmon aren’t doing well, then we should think about whether people should be drinking or using that same water. The salmon population in the area around Puget Sound is not doing well.”

We talked a bit more about pesticides in general and Dr. White summed up the essence of the entire indoor-outdoor farming and pesticides debate succinctly.

“We have the ability to control what kinds of pesticides we put in our water and how much pesticides we put in our water.”

If you extrapolate that thought, the same applies to agriculture. Greenhouse farming, while subject to some problems not endemic to outdoor farming, quite simply puts a lot fewer chemicals in the air we breathe, the water we drink and the food we eat.

When You Don’t Know What You Don’t Know: Debunking Cannabis Insurance Myths

By , T.J. Frost
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For all of today’s growing acceptance and legitimacy with cannabis, the reality is that today’s operators – whether growers/producers or dispensary operators – still face risks in running their businesses. If, in the old days, a customer got deathly ill from cannabis contaminated with something from somewhere during the distribution chain, oh, well. But now that there’s a legal system of checks and balances; there’s recourse when issues arise.

The problem is that the business is so new that most people don’t know what they don’t know about mitigating those risks. And that, unfortunately, extends to many in the insurance business who need to be doing a better job helping put the right protections in place.

One grower bemoaned to me at a cannabis trade show, “I sure wish I could insure my crops.” What? “You can,” I told him. His old-school ag broker didn’t know any better and didn’t do him any favors with his ignorance. But it brought home the point: We have to start treating cannabis like the real business it is.

Reviewing the existing insurance policies of today’s cannabis businesses uncovers some serious gaps in coverage that could be financially crippling if not downright dangerous should a claim be triggered. Retail dispensaries, for example, are high-cash businesses, making banking and trusted employees a must-have.Today’s cannabis businesses need to understand there will be risks but they are a lot more manageable than in the old days. 

And a close eye must be cast to lease agreements for hidden exposures, too. We know a Washington state grower that had no property insurance on its large, leased indoor growing facility. The company’s lease made its owners, not their landlord, responsible for any required building improvements. It was one of a variety of serious exposures that had to be fixed.

Today’s cannabis businesses need to understand there will be risks but they are a lot more manageable than in the old days. Rather than find themselves under-insured, they can start by learning what they probably have wrong about insurance. Dispelling three of the most common myths is a good place to start.

Myth #1: Nobody will insure a cannabis business.

Not remotely true. You can and should get coverage. Think property and casualty, product liability, EPLI and directors and officers, employee benefits and workers comp. Additionally, you should be educated on what crop coverage does and doesn’t cover. Depending on your business’ role in production and distribution, you might also consider cargo, stock throughput, auto, as noted, crime and cyber coverage. It pays to protect yourself.

Myth #2: If my business isn’t doing edibles, I don’t have to worry about product liability insurance.

The reality is that product liability may be the biggest risk the cannabis industry faces, at every level on the supply chain. There’s a liability “trickle down” effect that starts with production and distribution and sales and goes down to labeling and even how the product is branded. Especially when a product is an edible, inhalable or ingestible with many people behind it, the contractual risk transfer of product liability is an important consideration. That means the liability is pushed to all those who play any role in the supply chain, whether as a producer or a retailer or an extractor. And all your vendors must show their certificates of insurance and adequate coverage amounts. Don’t make the mistake of being so excited about this new product that you don’t check out the vendors you partner with for this protection.

Myth #3: Any loss at my operation will be covered by my landlord’s policy.

As the example I cited early illustrated, that’s unlikely. Moreover, your loss might even cause your landlord’s insurance to be nullified for having rented to a cannabis business. It’s another reason to examine your lease agreement very carefully. You want to comply with your landlord’s requirements. But you also need to be aware of any potential liabilities that may or may not be covered. Incidentally, even if your landlord’s policy offers you some protection, your interests are going to be best served through a separate, stand-alone policy for overall coverage.

These are interesting times for the burgeoning legal cannabis business. Getting smart – fast – about the risks and how to manage them will be important as the industry grows into its potential.