Social equity programs are expected to become the norm
Prospective adult-use cannabis operators in Massachusetts cannot pay lip service to diversity if they want to be awarded a permit. In late April, the Massachusetts Cannabis Control Commission denied an adult-use production permit on grounds that the applicant failed to demonstrate a sufficient commitment to diversity and inclusion — an industry first.
Diversity, inclusion and community impact programs are now industry standards in virtually every developing market. For example, in Pennsylvania’s competitive medical market, diversity and community impact constituted approximately one-third of an applicant’s total score. In California’s new adult-use market, various municipalities, including Oakland, Sacramento, Los Angeles and San Francisco, implemented priority licensing programs favoring diverse applicants. Some cities also provided technical assistance, low-interest loans, waived application fees and business compliance training, among other benefits.
However, Massachusetts was the first adult-use cannabis market in the country to develop a “social equity program,” specifically designed to engage individuals who have been negatively and disproportionately impacted by the War on Drugs. Massachusetts does not disqualify applicants for prior drug offenses (unless those offenses involved trafficking to minors), and its relatively low application and annual fees appeal to a variety of socio-economic groups. Moreover, Massachusetts requires each applicant to distinctly include: (a) in their application of intent, a plan to positively affect areas disproportionately impacted; and (b) in their management and operations profile, a “diversity plan” designed to promote equity among minorities, women, veterans, people with disabilities and people of all religions, gender identities and sexual orientation.
According to the Cannabis Control Commission, areas of “disproportionate impact” have been identified as areas with historically high rates of arrest, conviction and incarceration as a result of crimes related to cannabis. People of color — particularly blacks and Latinos — have suffered higher rates of arrest and incarceration for cannabis and other narcotics offenses than whites, notwithstanding evidence confirming that use rates between the two groups are largely the same. The Massachusetts program seeks to reverse the collateral consequences that have, in the past, largely prevented successful re-entry into society following an arrest and incarceration, including losing the right to vote, public assistance, public housing, student loans or access to education and barriers to employment.
The applicant recently denied a permit in Massachusetts was Mass Yield Cultivation, which sought to develop a 5,000-10,000-square-foot indoor cultivation facility in Pittsfield.
The commission has been lauded for its responsiveness to applicants and its issuance of various “guidance documents” designed to assist applicants’ analyses of Massachusetts’ regulatory requirements and reduce reliance upon otherwise expensive legal and business consultants.
The Cannabis Control Commission also provides applicants with sample goals to help make a positive impact (such as reducing barriers to entry, providing mentoring, professional and/or technical services to those who face systemic barriers, etc.), and examples of programs that applicants could develop to effectuate such goals (including, for example, giving hiring preference to those who meet the disproportionate impact criteria, establishing incubator/accelerator programs seeking to aid startup businesses owned by such individuals, providing direct funding or lending to businesses founded by such individuals, providing assistance to nonprofits and charities with similar missions, etc.).
In addition, the commission outlined how applicants should design metrics, including both qualitative and quantitative measurements, to enable applicants to evaluate the success of their positive impact plans.
With respect to the preparation of a “diversity plan,” the Cannabis Control Commission issued a comprehensive overview detailing, among other things: which demographics the diversity plan should be designed to promote (specifically minorities, women, veterans, people with disabilities and people of all gender identities and sexual orientations); appropriate goals for the diversity plan (including providing access for and assisting such individuals to achieve their goal of entering the adult-use cannabis industry and increasing the number of such individuals in management and executive positions, while also providing tools for their success, etc.); examples of programs in which applicants can engage to effectuate such goals (including hiring and promotion processes, establishing relationships with diversity-focused career-related opportunities, etc.); and how to design measurement metrics to enable applicants to measure the success of their diversity plans.
Massachusetts’ positive impact and diversity plans may require some creativity and work, but they’re not overly complicated. Prospective applicants in Massachusetts should take note and gear up accordingly.
While the future of New York and New Jersey’s respective adult-use cannabis programs are currently in limbo, lawmakers in both states have confirmed that their respective programs will contain diversity programs. Applicants looking to prepare while awaiting regulations and rulemaking in both states should turn to Massachusetts for guidance.
Lauren Rudick represents investors and startup organizations in all aspects of business and intellectual property law, specializing in cannabis, media and technology. Her law firm, Hiller, PC (www.hillerpc.com), is a white-shoe boutique firm with a track record for success and handling sophisticated legal matters that include business and corporate law.