A cannabis company’s long-term success can be majorly influenced by the size of its eco-conscious footprint. 

This is what two members of Vicente Sederberg, a cannabis law firm, attest. 

Marc Ross and Kim Napoli are members of the firm’s newly-established environmental, social and corporate governance (ESG) practice.

According to the colleagues, ESG is a necessity for companies that want to accurately measure and report their eco-conscious efforts. 

They say that ESG is especially important for the cannabis industry, since consumers, regulators and investors are becoming increasingly interested in the social and environmental impact(s) of companies in this space.

Throughout history, large-scale industrial agriculture has been no friend to the environment. Cannabis farming is no exception, with grow sites often killing wildlife, impairing watersheds and draining/polluting streams.

Plus, a new study carried out by a Colorado State University research team explored the association between cannabis cultivation and greenhouse gases. The results suggested that a high amount of emissions are released during the cannabis production process, thus creating significant risk for the environment..

With these concerns in mind, cannabis business owners ought to at least consider implementing ESG tactics into their work.

Several cannabis companies have recently been fined for environmental violations 

Failure to focus on environmentally friendly practices in the cannabis industry could land business owners in some serious trouble. This was made apparent over the last few years, with a handful of companies having been penalized for their actions. 

San Diego-based cannabis extractor WellgreensCA, Inc. is one example. Back in 2018, the extractor pleaded guilty to offenses pertaining to hazardous waste dumping. One incident saw Wellgreens dispose of 55-gallon drums of waste ethanol. Now, the company owners could face two years behind bars and a $250,000 fine.

In addition to this, Sira Naturals was slammed with a fine of more than $17,000 by the Massachusetts Department of Environmental Protection for violating air emissions rules, as well as for storing industrial wastewater and hazardous waste at its Milford, Massachusetts-based cannabis production and cultivation facility.

The good news is that companies of all sizes can majorly benefit from practicing corporate responsibility. ESG can effectively boost customer retention, promote positive media coverage, save money on operating costs and help cannabis business owners gain a competitive advantage over industry competitors.

What is ESG?

Small cannabis firm’s, not to mention companies in other industries, can accomplish ESG goals with ease, so long as they understand the concept.

In regards to environmental impact, this concept covers things like waste, pollution, nature conservation, resource exhaustion and greenhouse gas emissions. 

Social impact, on the other hand, focuses on the working conditions of a corporation, in addition to health and safety, local and indigenous community interaction, and employee relations. 

Then there’s governance, which relates to a company’s pay equity, supply chain policies, diversity, board of directors, executive pay rates and tax plan.

“ESG is the measurement of all of these different aspects, and then ideally benchmarking them and reporting them, which is going to become increasingly required,” Ross explained.

How cannabis companies can implement an ESG strategy

The sooner an ESG strategy is adopted and established by a cannabis company, the sooner they can gain a competitive edge over other industry players. First things first, Ross advises, companies should assess pain points, concerns and material elements.

An ESG taskforce should always hold the company accountable, as well as do the following:

• Establish realistic and specific goals
• Ask company-related questions 
• Designate a senior-level employee
• Develop a focused action plan.

“That way you can at least put some guardrails or narrow your focus as you start to measure your ESG impact, and then, of course, you want to measure, measure, measure,” Ross said, adding that key performance indicators (KPIs) can assist companies in measuring the progress of certain goals.

“Then you can start to develop your KPIs to set where you’re going and basically create your map for continuous improvement,” he concluded.