What happens if your cannabis company drops its environmental, social, and governance (ESG) program, or never had one in the first place?
ESG initiatives promote best practices related to the company’s environmental footprint, social impact, and corporate governance. In many industries, these initiatives are a proven pathway to profitability, driving near-term benefits like energy cost savings and waste reduction, and longer-term benefits such as lower employee turnover, customer satisfaction, and greater profit margins.
Unfortunately, in today’s legal cannabis industry, there are precious few operators employing an ESG team or showcasing any ESG-related activity. What’s going on in the cannabis industry? Or a better question is: How can your company capitalize on the benefits of ESG even if ownership is taking a hands-off approach?
The State of ESG in Cannabis
It is no coincidence that reduced spending on formal ESG programs comes when many multi- and single-state operators have been suffering from market compression and thinning profit margins. A robust ESG initiative requires cash to hire staff to develop programs, fund consultants, and manage implementation. When budgets are tight, ESG departments are often among the first to get cut, as their activities are not directly tied to profit. That view, however, is short-sighted. There are myriad ways in which companies can take low-cost ESG actions to realize financial benefits.
Paving Your Own Way: ESG Activities Without The Fuss
ESG initiatives address Environmental responsibility, Social impact, and corporate Governance. Cannabis operators at almost any stage in their growth can take action in any of these areas that will help the company thrive in both the short and long term. Here are a few places to start:
Environmental Responsibility
Any business can start by identifying where it may be wasting resources. Cultivators can baseline and track their resource consumption, set targets for ongoing improvement, and plan for targeted improvements, such as upgrading lighting and HVAC-D equipment. As another option, operators can establish purchasing policies that take into account environmental stewardship, such as partnerships with Certified B Corporations or members of 1% For The Planet.
Social Impact
Cannabis businesses can benefit their communities and social causes by donating time and money to organizations that help drive the societal changes they agree with, such as nonprofits supporting criminal justice reform, veterans, and minority groups. To drive meaningful change within their organizations, businesses can also implement hiring strategies to achieve greater diversity, equity, and inclusion in their workplaces. Actively seeking out diverse candidates helps businesses access a more robust range of talent and requires little to no capital investment to initiate.
Corporate Governance
Any company can commit to adhering to basic norms of good governance, by creating a board of directors that holds management teams accountable for their decision-making. For most businesses, practicing good corporate governance means following a code of ethics, acting with integrity, treating their employees fairly, and providing some degree of transparency in their decision-making process.
Onward And Upward
The fact remains that despite formal pauses in many operators’ ESG programs, companies that pursue activities under the aegis of ESG will reap the rewards in both the short and long term. Investing in improvements to energy and environmental performance, committing to a diverse workforce, supporting social causes in one’s local community, and following best practices in corporate governance not only feel good, but they are also proven to contribute to growth and profitability.
