Measure of success
Navigating the industry’s most challenging compliance conundrum
April 5, 2021 By Mari-Len De Guzman
It’s no secret Canada’s licensed cannabis producers operate in a highly regulated, highly stringent market environment, and some licence holders are finding the consequences of non-compliance a difficult and expensive lesson to learn.
Over the last two years, regulatory infractions big and small have been committed and penalties imposed. In some instances, the consequences have gone as far as prolonged licence suspension, even revocation – in the case of Agrima Botanicals Corp. in B.C.
The good news is that as the industry matures, continuous improvements on the compliance front are being seen. As the market undergoes right-sizing, companies that previously ran afoul of the regulations are correcting their mistakes and doing all they can to be back in the good graces of government regulators. The big comeback kids were Bonify and CannTrust, whose licences were reinstated in 2019 and 2020, respectively.
Having learned a difficult lesson, CannTrust is re-emerging on the market with a “determined focus on regulatory compliance,” says its CEO Greg Guyatt when the company announced its licence re-instatement in August 2020.
And Bonify seems to be picking up where it left off, managing to get its cannabis products back on retailer shelves in Manitoba, adding its medical cannabis on the Patient Choice platform, and inking a development deal with the Great White North Growers in Montreal for Cannabis 2.0 products.
Bonify, CannTrust and Agrima are among the highly prominent regulatory scandals in this very young Canadian cannabis industry, but there are likely many more licence infractions occurring that don’t necessarily get news coverage.
“There’s also ongoing compliance and regulatory audits that are being done by Health Canada – both before COVID and even during COVID… Those regulatory reviews continue and minor infractions are found through those; things like not complying with certain SOPs, not complying with certain quality standards. Those are ones that you wouldn’t really read about but that would get addressed and rectified through the general quality assurance functions,” says Rishi Malkani, a lead partner at Deloitte’s cannabis practice.
Regulatory infractions of varying scale, notwithstanding, the industry looks to be heading in the right direction, however.
“I think we will continue to see improvements in compliance. The industry is growing well; it’s at about a $3-billion domestic market right now, which is pretty incredible for only two years under its belt.”
Maintaining compliance with the regulations keep the most cautious companies on their toes, and the public health measures related to COVID-19 have also created additional challenges, Malkani points out.
Since the spring of 2021, when Canada began implementing safety protocols to help prevent the spread of COVID-19, government regulators have temporarily suspended in-person checks and shifted to remote or virtual inspections. This same measures are also being undertaken by quality assurance professionals, and most operations have had to deal with a somewhat limited QA support and oversight.
Reduced in-person inspections should not lead to complacency, however.
“We’re hopeful that companies are going to be allocating more HR dollars and more training dollars to quality assurance training within companies so it’s more ingrained in the culture,” Malkani says, adding the data has consistently revealed that quality-centric organizations tend to perform better with respect to compliance.
Workplace health and safety is also especially hightened during this pandemic. Just like any other workplace in Canada, cannabis industry workers – whether at a production facility or in retail – are covered by the protections under the Occupational Health and Safety Act.
From fall prevention to chemical safety, cannabis workplaces should be conducting regular assessments on the safety risks and hazards their workers may be potentially exposed to.
“Find out what hazards are present in your workplace. Some common industry hazards include noise, chemical exposure, working at heights, warehousing, machine safety and ergonomics,” writes Kelly Fernandes, a certified industrial hygienist with Ontario’s Workplace Safety and Prevention Services in her article published on GrowOpportunity.ca.
Fernandes says documentation is key to OHS regulatory compliance – including chemical inventory list, chemical handling procedures, safety data sheets, and training records.
In December 2020, Health Canada invited public comments on the government’s intent to amend the Cannabis Regulations and associated regulatory frameworks, particularly on provisions regarding cannabis research and cannabis testing, as well public possession limits, product labelling requirements and micro cultivation and nursery licensing. The comment period ended on Jan. 11.
It was a move welcomed by the cannabis industry, in hopes of getting the regulators to relax some of the restrictive provisions of the cannabis regulations.
“I think we’re going to see some evolution over time, in terms of being able to scale cannabis beverages in a more meaningful way,” says Deloitte’s Malkani. “I think some of the regulations will eventually broaden and become a bit more permissive to allow production of cannabis beverages to be less restrictive.”
The restrictive product marketing and labeling requirements are areas where some producers typically get into compliance trouble, he says. The hope is that these stringent requirements will gradually ease and be reasonably more responsive to industry, particularly as more Cannabis 2.0 products come into the market.
Cannabis producers are certainly viewing the review as an opportunity to create some flexibility in the regulations. A recent roundtable discussion hosted by Grow Opportunity, in collaboration with the Cannabis Council of Canada (C3), discussed some of the regulatory challenges with labeling and packaging.
“Our focus has been on finding sustainable packaging from Day One. So we have our glass jars, our pre-rolls are in tins. The thinking behind them is how we can produce nice objects that people want to reuse,” explains roundtable panelist Karine Cousineau, director of government relations and sustainability at The Green Organic Dutchman (TGOD).
Where the regulation becomes challenging is with smaller products, she points out. Finding sustainable ways to package small products that are also compliant with the regulatory requirements of childproofing and labeling can be difficult.
“I think there is still a lot of space for innovation in that regard,” Cousineau says.
Still, LPs are working with what they’ve got and finding ways to pursue measures that are more sustainable and environmentally friendly, while maintaining compliance. Initiatives such as the Sustainability Caucus, which is a collaboration between C3 and certain LPs, including Aurora Cannabis, TGOD, 48North and Canopy Growth, as well as launching a national vape recycling program.
“This is a proof of concept so that we can then say, ‘This quantity of materials can be recovered with this amount of effort and time,’” explains Steven Fish, senior manager of corporate social responsibility at Aurora Cannabis, about the vape recycling program. “We want to be able to have that information so that we can build out a national response that would not only include vape products but potentially widen that scope to include others.”
Deloitte’s Malkani notes sustainability is going to get a lot more attention and companies will be increasing focus sustainability reporting and environmental and social responsibility governance.
Malkani offers some best practices for staying on top of the regulations and ensuring LPs remain compliant.
“There’s no substitute to actually having a review done, and learning from that review. So doing self-audits, having a strong internal audit type function on compliance is helpful,” he says.
Investing in automation of compliance functions would be ideal for companies with the necessary resources. This will allow organizations to set up the right controls and maintain a good balance between automating certain aspects and having the human element.
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