How Aligning Business Incentives With Social Impact Could Change Legal Cannabis

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In business, incentives are often misaligned with social good. This is true in the prison and pharmaceutical industries and, now, much of the legal cannabis industry.

I’ve spent the last seven years in the cannabis industry investing in, advising and operating companies. During that time, I also worked on drug policy and criminal justice reform and serve on the board of the Marijuana Policy Project. I’ve met some incredible changemakers over these years. Recently, I’ve been interviewing social entrepreneurs and advocates for my podcast, People are the Answer. Based on this experience, I’ve outlined some common themes here.

Let’s examine what happens when injustice is incentivized and how “cannabusinesses” can align with social change.

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When Injustice Is Incentivized

The $182-billion-dollar prison industry locks up 629 people per 100,000 people in the United States, according to numbers from 2017. American people are imprisoned at the highest per capita rate of 223 tracked countries.

Beginning in the 1980s, the War on Drugs and harsher sentencing laws led to the rapid expansion of the prison population. According to the ACLU, local, state and federal governments could spend anywhere between $20,000 to $50,000 per year to keep one person behind bars.

The public sector did not keep pace with prison demand. Correspondingly, this opened the door to a for-profit prison industry that makes a business of incarcerating people in privately owned state and federal prisons. According to the Sentencing Project, between 2000 to 2016, the number of people “housed in private prisons increased five times faster than the total prison population.” Of the 1.5 million people in state and federal prisons in 2016, it found that 8.5 percent were incarcerated in private prisons.

Having interviewed a number of formerly incarcerated individuals on my podcast and researched the topic, it’s clear to me that U.S. prisons should be more closely aligned with rehabilitation and learning centers. If prisons’ incentives could be aligned with things like successful reintegration into society, lower recidivism rates and other positive prisoner outcomes, our system would be much better positioned to match the needs of our country.

Big Pharma

The U.S. is a global leader in per capita prescription drug spending. U.S. sales of the 20 top-selling drugs on the market were more than double that of the rest of the world combined. Because the development of new medicines is funded through markups protected by patents, innovation and affordability are usually not the focus of solving the biggest health problems. The pharmaceutical industry is incentivized for people to continue consuming products on an ongoing basis, rather than to cure people of illnesses.

The global cannabis market was valued at U.S. $25 billion in 2021 and is projected to reach $178.7 billion by 2030. In contrast, the global pharmaceutical market was worth an estimated $1.2 trillion in 2020. States are beginning to allow doctors to recommend cannabis to patients “for any condition they would prescribe an opioid,” according to NBC News. Despite its comparatively small size, the cannabis industry has the potential to disrupt mainstream pharma by offering alternatives to pharmaceuticals.

Inequity in Cannabis

The ACLU report, Tale of Two Countries, paints a devastating portrait of the current inequity in cannabis. The report finds that of all cannabis arrests, 89.6 percent are for possession only. In every state, Black people were significantly more likely to be arrested for cannabis possession. In some states, Black people were up to six, eight or nearly 10 times more likely to be arrested for cannabis. Legalization has not changed the trend: The report found in 31 states racial disparities in cannabis arrests were actually larger in 2018 than in 2010 despite legalization at the state level.

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The U.S. cannabis industry is projected to reach $30 billion annually by 2025, yet those most hurt by the War on Drugs are still most likely to lack access to opportunities in the space. According to a 2019 report, only one in five cannabis businesses is owned by a racial minority. In most states, cannabis licenses are expensive and difficult to get. Because cannabis is still federally illegal, banking and business loans are burdensome to obtain, which disadvantages those without access to investors and capital.

Many in the cannabis space attempt to make the industry a leader in aligning business incentives with social justice, but as bigger money continues to get more and more involved, old-school incentive models are unfortunately rising to the top.

How Can Incentives Align With Social Change in Cannabis?

When looking at the prison, pharma or cannabis industries from a perspective of incentivizing social good, the statistics can seem overwhelming. While it is tempting to lose faith in the systemic enormity of the problems, there are some ways that cannabis businesses and their leaders can take concrete actions to align incentives with social change.

Tips for Entrepreneurs to Align Cannabusinesses With Social Justice 

• Eliminate criminal conviction disclosure questions on employment applications.

• Practice non-discrimination in hiring practices for racial inclusion and hiring those impacted by the criminal justice system.

• Create workforce development and education for those who have been involved in the criminal justice system.

• Provide startup grants, interest-free loans and business support for cannabis entrepreneurs who have been most impacted by injustice.

• Connect beyond your business by creating strategic partnerships, sharing knowledge and skills, and participating in legislative advocacy.

Final Takeaways

Macroscopic change is needed at the policy level to address systemic causes of injustice. In the meantime, cannabis entrepreneurs can make impactful changes by aligning incentives with social justice and positive impact.

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