How to Leverage ESG Strategies in the Cannabis Industry

Focusing on more sustainable energy practices in cultivation is one way to incorporate a key tenet of ESG.

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By now, most cannabis professionals and investors have heard something about ESG, the acronym denoting the set of criteria by which businesses are sometimes rated. ESG speaks to how conscientious a company is about its Environmental responsibilities, Social impact, and transparency in Governance.
 
Multiple studies have shown that a strong ESG performance is positively correlated with higher returns and lower overall risk. Operators may want to consider how they can reap the benefits of incorporating ESG criteria into their operations, regardless of whether they are actually being rated. 
 
For cannabis cultivators, one of the quickest and best ways to take advantage of the ESG benefit is by focusing on energy, especially how efficiently they are using it and its carbon content. 
 
To do this, they can begin to capture easy wins by asking: 
What equipment is using the most energy?
When are we using the most power?
Where does the power for our facility come from? 
Why are we spending what we are on energy? 
How does our current energy profile fit into a sound ESG strategy?
 

Perform an Energy Assessment 

For most indoor cultivators, energy expenditures are among the most significant line items in their operating budget.
 

While many growers accept their energy bills as the inevitable cost of doing business, those operators that scrutinize the energy profile of their facilities can cut their overall operating costs significantly and become more profitable. 

RELATED: ESG: Not If, But When

An essential first step is to perform a professional energy assessment on your facility. In many cases, the cost of the evaluation can be paid back in just a few months, based on short- and longer-term interventions inside your grow rooms that can bring improvements in energy performance. 

Following the assessment, operators may choose to select from a possible menu of follow-up items, including perhaps: 

● Choosing to install energy-efficient LED or HVACD equipment in their facility, 
● adding features, such as side lighting, under-canopy air flow, or nano water oxygenation, to improve yield and plant health, 
● making simple operational changes, such as playing with target temperature setpoints, 
● adjusting the times of day when the facility is drawing the most power, and 
● negotiating for better deals on your power rate if your state allows it.
 

One practical outcome of being a smarter energy user in your cultivation facility is that you will likely get much better control of the environmental conditions in your grow rooms, potentially minimizing hot spots, cold spots, and sick spots, with less troubleshooting, more consistent results, and better quality and yields.

Consider Alternative Energy Sources

For most growers, a major contributing factor to their energy consumption and overall carbon footprint will be the state in which their facility is located. But even if you are in a highly carbon-intensive power grid, like that of Illinois, where according to the U.S. EPA, coal makes up more than half of its energy mix, power customers can usually source cleaner energy for their electricity supply. 
 
For example, a highly visible and direct action that many growers can take is to install onsite clean generation, such as solar. Solar power has had a long association with the cannabis industry, with early indoor farmers in California installing solar panels to stay under their local utility’s radar, Now, data from the U.S. Energy Information Administration shows that solar is becoming one of the cheapest forms of power, often less expensive at scale than even the most efficient natural gas power plants. 
 
According to Justin Miller, CEO of High Life Solar, a company that provides solar solutions to cannabis businesses, even relatively energy-efficient indoor growers wanting to go 100% solar will need 10 to 20 square feet of panels for every square foot of plant canopy, plus a bank of batteries, to meet their facility’s daily electricity needs. For growers who are solar-curious but lack access to cash to purchase the systems outright, there are companies that offer solar leases, called "power purchase agreements," that allow for third-party financing to cover the capital costs of the system installation and maintenance. 
 
And for those growers who cannot install panels at their facility, they can still tap the benefits of solar energy by participating in community solar programs. Instead of drawing power from onsite solar panels, community solar subscribers are credited for production at a local solar farm. Many states, including cannabis hotbeds such as Colorado and Maine, offer these programs which, in some cases, according to the online solar marketplace, Energy Sage, can deliver electricity to subscribers at a rate lower than the local utility.  
 
Finally, businesses can purchase renewable energy credits (RECs) from worldwide clean energy farms as a final option. These represent the quickest and easiest way to green up your energy mix. However, you will pay a premium over and above your current power bill for the RECs.  
 

Energy Win-Wins 

Being thoughtful about where energy comes from, how efficiently you use it, and how it fits into an overall ESG strategy are critical for operators hoping to remain viable in an increasingly crowded marketplace. 
 
1. An energy-smart company will likely be more attractive to future investors. 
2. They will have better managed and controlled grow rooms with fewer chances for crops to be damaged by problems such as powdery mildew and pests. 
3. They will be better positioned to benefit from advanced energy strategies, such as shifting load to reduce expensive demand charges, using backup power to participate in potentially lucrative demand response programs, or creating circular economies by turning biomass into energy.  

4. Finally, they will stand above the competition in terms of operating costs, and they will also have a legitimate story they can use to showcase their commitment to the “E” in ESG. 

Sam Milton is owner of Climate Resources Group, a company that brings energy and sustainability solutions to growers nationwide. Readers can learn more at EnlightenYourGrow.com

 
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