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Cannabis Social Equity: Struggles, Success
As we celebrate Black History Month this February, the ever-crucial issue of social equity—programs promoting equitable ownership among marginalized groups—within the legal cannabis industry has taken on an even greater significance, as the wheels of economic justice still too often turn against those who need it the most. For example, last year, the Illinois CPA Society in 2023 felt compelled to publish an article on the shortcomings of social equity programs, in which they noted social equity licensees still face greater challenges due to a lack of funding capital, critical connections with industry insiders, as well as resources, compared with their often more well-connected and financially solvent competitors. Complicating the matter even further have been reports of predatory practices—aka “scams”—being perpetrated by those taking advantage of social equity applicants, such as having their information stolen by con artists, as well as contractual swindles where social equity companies have to turn over all their profits to a third-party company that provided them with funds to initially enter equity lotteries. Yet there have been many positive developments as well, from new programs to some corporations reinforcing their dedication to helping social equity owners and brands achieve genuine prosperity. In order to present a broader picture of current cannabis social equity developments, we made contact with city and state equity program government administrators, as well as connecting with a corporate equity department. The City of Boston’s Cannabis Equity Program, established in 2019, has put into place a number of requirements as established by the State Legislature’s 2022 “An Act Relative to Equity in the Cannabis Industry and Beyond.” To learn more about these specific exigencies, we reached out to Shekia Scott, the Cannabis Business Manager in the Economic Opportunity & Inclusion Cabinet. Ms. Scott kindly forwarded our inquiry to the Press Office of Boston Mayor Michelle Wu, which generously provided us with pertinent insights, including elaboration on the new stipulations contained within the aforementioned 2022 Act designed to increase equity in the cannabis industry: “First, we established the Boston Equity Fund, from which we have distributed over $1,000,000 since 2021 to applicants through direct financial assistance in the form of grants, as well as funded technical assistance projects. Second, requiring the Boston Cannabis Board to approve applications on a one-to-one basis; one equity applicant approved for every non-equity applicant. Third, ceasing collection of host community impact fees, and in the process, returning $2.86 million to nine cannabis shops in the city.” We also raised another unresolved issue, that those who may benefit the most from equity programs still have barriers to cannabis company ownership and success. When point-blank asked as to how can these barriers be realistically overcome, the Mayor’s Office respectably offered direct solutions: “Many of these barriers can be realistically overcome with continued support at the local and state level, but also with comprehensive federal legalization and regulatory guidance that prioritizes equity, access to capital, banking, automatic expungement, and most importantly, the descheduling—not rescheduling—of cannabis.” The Mayor’s Office is referring to the potential removal of cannabis from the Schedule I listing on the federal Controlled Substances Act, which categorizes weed as being as dangerous as deadly drugs like heroin, and classifies marijuana as having no medicinal value. Regarding the aforementioned “scams” that have plagued the industry, the Boston’s Mayor’s Press Office was able to encouragingly report that their program has been able to avoid such industry-related fraud: “We are aware and understand the possibility and presence of scams; however, we haven’t encountered such fraudulent activities as mentioned, because we don’t have licensing lotteries. In 2019, the state’s Cannabis Control Commission released a Fraud Considerations Memorandum, outlining red flags and useful tips to safeguard cannabis entrepreneurs, especially those eligible for our programs. “Despite this, the City of Boston’s Cannabis Equity Program, has not observed or received reports of its participants becoming targets of predatory practices. Nonetheless, our program can provide access to legal counsel to help navigate potential predatory investor situations and safeguard investments.” When asked how social equity programs such as theirs can be enhanced, the Boston Mayor’s Press Office suggested: “Improving social equity programs requires a multifaceted, proactive and comprehensive approach that addresses various aspects within the program, but also considers the agencies responsible for their development, while also recognizing that no single program can fully address all aspects of equity. “Critical elements that should be incorporated into these programs include automatic expungement, prioritization and exclusivity periods, a 2:1 licensing ratio, active community involvement throughout the development, implementation, and evaluation phases, and financial support mechanisms such as grants, low-interest loans, start-up funds, and fee waivers or reductions. “Additionally, there is a need for technical assistance, training, and mentorship, along with an expansion of program benefits to the medical side of the industry. Ongoing evaluations and analyses, transparency in reporting program outcomes, covering data on license distribution, economic impact, and community benefits, and flexibility in policies are also vital. “To ensure the success of these programs, key elements that should be integrated into the agency overall include cultural and historical competency training, dedicated staff from each department focusing on equitable processes and prioritizing equity, diversity in leadership, equity audits, and other measures that promote fairness and inclusivity.” Legal adult-use cannabis state Michigan operates its Social Equity Program to promote and encourage participation in the cannabis industry by individuals from communities that have been disproportionately impacted by marijuana prohibition and enforcement, as well as to positively impact those communities. We made contact with David Harns, the public relations manager for Michigan’s Cannabis Regulatory Agency (CRA) and the Michigan Department of Licensing and Regulatory Affairs (LARA). When asked his opinion on the current state of the Michigan social equity program, he relayed: “We are continuously investing in the social equity program and assisting the participants as they navigate their way through the licensing process.” As the state of Michigan, and the city of Detroit specifically, are renowned for their strong African-American heritage, we inquired about the number of black-owned cannabis companies that were presently in the state, to which Harns replied: “We don’t keep data by race. We do have a voluntary survey that we send out to licensees and that data is reported quarterly and included in our monthly reports.” Harns directed us to this website that offers program resources, which he referenced during our interview. Beyond listing the expected information, such as the program criteria and the process for applying, the Michigan program proudly honors cannabis company licensees who publicly demonstrate commitment to social equity. For their “All-Star” program, there are three levels of recognition which are awarded to licensees that, at the very least, have “published their social equity plans on the CRA website and attest to the fact that these plans are current in their implementation.” Harns stressed the importance of social equity applicants staying connected, in order “to educate and empower themselves to take advantage of such programs, they should sign up for our email updates and be sure to attend our education sessions as they are a wonderful resource.” When queried on their program’s latest developments for improvement, Harns cited the 2023-2024 CRA Social Equity Grant Program, which is available to entities that have valid adult-use licenses authorized and issued by CRA and LARA, and have also qualified to be listed on one of the three plateaus of the All-Star Program. The program requires funds granted to be spent on one or more of the following three categories: employee education, business needs, and/or community investment. Harns added, “Funds spent on employee education may be used for an employee of the entity to take one or more classes or courses that are relevant to the entity’s business from an accredited institution.” Canvassed for his advice to those considering social equity as a means to cannabis company ownership and success, David Harns was encouraging: “If an applicant is eligible to participate, we highly recommend it and are here to assist. For example, we offer our adult-use application assistance.” This is a free service designed to enable prospective licensees to become more aware of the expectations of the CRA application process, and how best to fulfill those requirements. Harns also cited the online education sessions offered by CRA/LARA, which include the most recent, published on February 1 this year, entitled: “Forming a Cannabis Business with LARA’s Corporations, Securities, & Commercial Licensing Bureau (CSCL).” To provide a measure of balance, and to gain the experiential insights of the corporate sector, we were generously granted an in-depth interview with Danielle Drummond, VP of Social Equity with Ascend Wellness Holdings Inc, which manufacturers cannabis products and operates medicinal and recreational dispensaries as Ascend Cannabis in seven U.S. states, including Massachusetts and Michigan. On February 1 this year, the company announced the formation of the Ascend CO-LAB, which seeks to support social equity initiatives via mentorship programs, cultivation education tours, expungement and resource clinics and donations. Drummond explained the origin of CO-LAB: “With the name ‘CO-LAB’ our philosophy and the way we approach this work is around collaboration with all folks in the industry. I think it takes the entire industry working together towards these efforts in order for them to be successful. “The CO-LAB is work we’ve been engaged in for over the last two years. We’ve really just (recently) created some branding, a name, which was intentional, but we wanted to get some work done first. We wanted to build relationships, and I think we knew that a name and an identity would naturally come out of the work we were doing.” Drummond deftly broke down the individual components of CO-LAB: “Ascend has an amazing team of experts, and we’ve been a very successful company over the last five years, so one of the things we could contribute was a mentorship program, which we kicked off in Illinois. Then we expanded it into New Jersey, and this year we’re looking to expand it in more states as well. The mentorship program came directly from speaking directly with social licensees, who said that one of the biggest gaps was the lack of knowledge as to how to create a thriving business in this industry. So the idea was that for 3-to-4 months we had a team of experts from each company department every single week deliver an hour-long workshop where we teach people about wholesale, marketing, commercialization; all parts of the industry.” She also explained how Ascend’s social equity puts their money where their mouth is: “We also provide donations to community-based organizations; we got recommendations for these organizations from people who were from the same community. So this is where we’re able to find our niche; identifying those programs and being able to support them through donations.” Drummond wrapped up her CO-LAB delineation by explaining their social equity expos: “The other piece of the work we do is expungement centers and resource fairs. We partner with agencies in each one of the states with organizations that work with people who are just coming out of prison, and host these expungement clinics. “We’re really being intentional about not just looking at cannabis offenses; we look at any expungeable offense in that state, and that’s important, because the ‘war on drugs’ has many ripple effects, and people have a variety of different [convictions] associated with it. And so we wanted to make sure we’re serving the whole spectrum of that. “In addition, it’s not just a one-and-done process where you come in, you get your record expunged, they do some paperwork and that’s it. The lawyers stay engaged with the people who come to our clinics for months afterwards, helping them follow up with paperwork filing, helping them with the court appearances they have, which is huge. “Lastly, we want to make sure there are resource fairs available. People who come out of incarceration have a variety of needs that have to be met afterwards, so we have community organizations that represent mental health, food services, health care services and jobs, which is a big thing, right? We also hire directly from these expungement clinics.” When questioned as to how these smaller, relatively new-on-the-marketplace social equity brands and companies can compete, Drummond offered advice from her professional perspective: “That’s always a continuous challenge. I think it’s about being really clear about [the social equity] company’s niche, right? Carving out who is your target demographic; what do you bring to the table that Ascend or some of the larger companies can’t bring to the table? “Oftentimes, it’s that community connection that smaller businesses have, that an MSO (a multi-state operating company) might not bring to the table. So I think it’s really about figuring out where your strengths are, where your niche is, and leaning into that. It’s also about building relationships; so one of the things we are trying to do is to elevate people on our platform as well; we’re in partnership with you, you’re going to be on our website, we’re going to elevate you, and have your brands on our shelves. “I can happily say this year, we have nine such black-owned, women-owned, and veteran-owned brands on our store shelves. And that is a number that is continuing to increase through procurement—right now we’re going through a process of looking through all of our vendors, and considering who and where the opportunities to diversify exist.” In summing up, Danielle Drummond admitted while social equity efforts can always be improved, she’s pleased with her department’s accomplishments: “I think there’s always a ton more to be done in terms of social equity; so we will continue to try to raise as much funding as possible to reinvest in our communities, which ultimately, is reinvesting in your own business–because you’re a part of that community, right? There is no Ascend without the people who work here, or the people in the community. In a world moving away from equity work, I’m proud we’ve doubled down our commitment to social equity and continue to build on it.”
