Part of the obligations beholden to a business owner are ethical considerations, or what is today popularly known as ESG: environmental, social, and governance pledges. These are central to a company’s sustainability and social influence — but are easier said than done. The cannabis industry, like any other, must prioritize ESG factors to ensure long-term sustainability and social responsibility.
Environmental Factors
Despite the incredible array of things that the cannabis plant can be made into, growing it commercially is not always — or even usually — an environmentally-friendly task. Putting sustainability at the forefront of cannabis businesses’ minds often means disrupting established practices.
Sustainable Cultivation Practices
Organic farming and reduced chemical usage are important considerations for outdoor cultivators. Traditional methods of farming deplete the soil with mono-cropping and pesticide use, but with the right approach, cannabis cultivation can help replenish depleted soil
Water conservation and efficient irrigation techniques. Cannabis is a thirsty plant, which presents a problem for the drought-prone states in the West. Consider California, the mecca of cannabis cultivation, and the ongoing problems with droughts and over-irrigation of crops. Innovative and efficient irrigation techniques can help offset this, but require investment.
Energy-efficient cultivation facilities. Indoor cultivation facilities have a large carbon footprint, heavily due to the high volume of lights and long hours of use needed to grow cannabis plants year-round. Considering energy efficiency can help reduce this — can you switch bulb types, use solar power, or otherwise create more of a closed-loop system?
Packaging and Waste Reduction
Eco-friendly packaging materials. Cannabis can be a wasteful industry, with a heavy reliance on single-use plastics. Eco-minded consumers don’t appreciate this and considering how eco-friendly your packaging is a great place to start an environmental initiative.
Recycling and waste reduction initiatives. So much of the waste produced in cannabis packaging must be thrown in the trash and then landfills. Switching to recyclable packaging and taking the initiative to reduce your waste overall as a company goes a long way.
Carbon Footprint
Measuring and reducing carbon emissions. Businesses in all industries need to be considerate and mindful of their carbon emissions. Taking protective steps to reduce this from the start means less work later.
Investing in renewable energy sources. Diversifying your energy sources is more than good environmental policy — it helps stabilize your business against fluctuating prices on the energy grid and unexpected changes to the supply chain.
Governance Factors
Strong governance is about more than strong leadership — it’s about fostering a culture of inclusivity and transparency.
Corporate Governance
The strongest companies have strong leadership — not in a singular role but across the entire executive leadership team as well as the board of directors. This strength is personified by a willingness to go above and beyond, with ethical business practices and transparent leadership. These leaders aren’t afraid to face risks head-on, with a comprehensive risk management plan that empowers employees to speak up and take action when needed.
Investor Relations
Modern investors care about the ESG practices of the businesses they invest in — for environmental, moral, or financial reasons. ESG in Governance looks like clear lines of communication with investors about ESG programs, engaging the investors at every step of the process and truly believing in the importance of these programs. Adherence to securities regulations and disclosure requirements are vital for success as well.
The Benefits of Strong ESG Performance
ESG takes time, strategy, budget, and measurement. With all of the effort put into ESG practices, one may wonder what businesses get in return.
- Enhanced reputation: Today more than ever, customers, employees, and investors care about the ethical considerations of businesses. Strong ESG practices show your commitment to the community and the environment.
- Reduced Risk: Risks can come from all angles. Being proactive and intentional in ESG practices can help mitigate risks down the road, like regulatory fines for being out of compliance, supply chain disruptions, or reputational damage.
- Increased Financial Performance: ESG practices have a positive ripple effect across a company, helping to improve operation efficiency and reduce costs and redundancies.
With so much to consider, ESG practices can seem like the last priority of a busy canna-business owner. But ESG practices are not a luxury for flourishing businesses — they are an essential part of building a successful, long-term business. Strong ESG practices come back to help a company in many ways, from reducing operational costs to being equipped to weather supply chain disruptions. Ultimately, strong ESG practices help protect a company and set you up for long-term success.
Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by email [email protected] or calling 646-854-1093 for a customized letter or learning more about your cannabis insurance options.
Social Factors
Businesses do not exist in a silo — they are a part of the communities within which they exist. This makes social factors an important piece of success for any business, but particularly within the cannabis industry where so much bias against the plant still exists. There are several ways a business can be a good neighbor.
Labor Practices
Fair wages and working conditions. People deserve to be paid a living wage and work in decent conditions. Providing these basic but vital conditions sets a strong foundation for long-term success with employees and the community.
Employee well-being and mental health programs. Satisfied employees are productive employees, and that satisfaction extends beyond the confines of clocking in and clocking out. Treating your employees as rounded individuals with mental and physical needs means they can show up at work as their best selves.
Diversity, equity, and inclusion initiatives. The most profitable businesses have diversity of thought, which comes from diverse backgrounds. Being intentional is a requirement for going beyond your lived experiences and creating a diverse team.
Community Impact:
Supporting local communities through job creation and economic development. Paying fair wages and providing good working conditions are two of the most important ways a business can support local communities. Well-paid employees spread the wealth through their communities.
Charitable giving and social impact programs. Successful businesses know their foundation rests in their communities. Taking every opportunity to give back with donations, charitable contributions, and social programs helps fortify communities and in turn, create stronger businesses.
Product Safety and Quality
Adherence to strict quality control standards. A safe business takes a top-down approach to quality control, with regular audits of quality control and empowering employees to speak up when something isn’t right.
Transparent labeling and consumer education. With so much misinformation about cannabis circulating, it is the responsibility of every cannabis company to provide consumer education about the plant.