Reasons to Remain Compliant in the Cannabis and Psychedelic Industry

Compliance is cool, especially when incentives are involved. “Incentives” is a thing that motivates or encourages us to do something. We are constantly surrounded by opportunities and incentives, whether it be to enhance our personal lives or business health. Creating a vigorous and sustainable business will always include compliance nuances, especially within the cannabis and psychedelic industries.

In heavily regulated industries, staying within compliance is key to keeping the doors open…wide open! Business incentives to remain in compliance boil down to finance and reputation. Staying compliant is not only cool (Allay certainly thinks so!) but it will save your business money and create a positive business reputation your customers can stand by. Below is a deeper dive into business incentives to staying within compliance.

Business Reputation: Those nation-wide food recalls typically have customer backlash, especially when customers got sick from eating their products. This results in many customers walking away from purchasing those products because the trust in product safety and quality was lost. Not all non-compliance issues are necessarily visible to customers – some government entities post their inspection findings online, but consumers must specifically search for the business name and location which can be difficult to find. However, other violations are showcased in the news and can be very apparent to consumers – product recalls, severe workplace injuries, and environmental contaminations/spills are examples of newsworthy topics. Non-compliance can damage a business’s reputation, leading to decreased sales from customers choosing competitors. Customers tend to trust companies that follow the rules. Maintaining a positive reputation is essential for long-term profitability.

Costly Penalties and Fines: Regulatory agencies can impose hefty fines for violations! These penalties can add up quickly, potentially crippling a company financially. State departments and federal agencies have the ability to impose fines and shut down businesses for excessive violations. Expect immense fines from both OSHA (worker safety & health) and EPA (environmental – air, water, waste compliance). Based on the severity of the violation, fines could have a predetermined amount or be charged per day until the violation is fixed. Egregious violations can also result in prison time. Check out this website for OSHA violations that led to prison time. Here is great article detailing a peanut butter company executive knowingly shipping salmonella contaminated product that injured ~700 and resulted in 9 deaths – he received 28 years in prison.

Legal Expenses: Businesses may face legal actions or lawsuits from regulatory bodies or affected parties. In addition to any fines imposed for violations, paying for attorney’s fees, compensatory and punitive damages, court costs, and settlements can pile high! Not to mention the business’s reputation will be directly impacted by a messy legal battle.

Avoiding Business Interruptions: Violations can not only lead to fines and other financial losses, but also could lead to shutting down operations. Non-compliance can lead to regulatory-ordered shutdowns or orders to cease and desist of operational activities. A “shut down” from a regulatory body is not a good look for any company. This may result in lost revenue, customer dissatisfaction, and harm to the business’ reputation. Staying within compliance helps prevent such damaging disruptions.

Insurance Costs: When businesses demonstrate dedication to compliance, lower premiums may be offered by insurance providers. When a business complies with safety, security, and other regulations, it is considered a lower risk, which can result in cost savings on insurance coverage. Obtaining certain certifications may also help decrease insurance coverage for companies. Certifications like defensive driving, CPR, various ISO quality certs, good manufacturing practices (GMP), and other quality and safety related accreditations.

Long-Term Sustainability: The ultimate business goal is to stay in business while staying profitable. Businesses who prioritize compliance can avoid legal and financial crisis and keep their doors open much longer than those who do not take regulatory compliance seriously. By avoiding and preparing for legal and financial crises, businesses are better positioned to survive economic downturns and capitalize on growth opportunities.

Employee Satisfaction: Compliance expectations must trickle down from the highest positions within any company. Company leaders must “walk the walk” and show their employees that compliance is a must and not an option. With compliance held as a company value, employees see that the checks and balances provide structure, accountability, pride, and satisfaction in knowing their duties are done correctly and documented. Increased employee satisfaction directly relates to longer employment retention and attracts higher qualified staff. All a win-win!

Non-compliance often leads to fines, penalties, and legal fees. By staying compliant, a business can avoid these costs. Staying compliant with relevant laws and regulations is a practical financial strategy for all businesses. There are many benefits to staying in compliance, especially in the cannabis and psilocybin industry but all have a constant trend…financially based incentives. Allay Consulting is here to help you meet your business strategies to remain in compliance.