Many cannabis companies are working to understand Environmental, Social and Governance trends so that they may mitigate risks and establish compliant policies at the enterprise level.
The growing impetus behind the current focus on ESG is not only to comply with new regulations and meet consumer and employee demand, but also to increase the capacity to attract capital as many investors are looking to invest in companies with ESG initiatives in place. Given increased demand for ESG action from businesses, many cannabis companies are uniquely positioned to benefit from highlighting their current ESG efforts and incorporating additional ESG practices.
ESG is in the headlines, but it is more than just a fad.
At its core, ESG is a process for evaluating longer-term environmental, social and governance risks that are often considered when implementing traditional risk management strategies. This evaluation includes everything from a company’s treatment of employees and contract labor to its potential unintended impacts on the communities in which it operates. This can encompass product safety and labelling, carbon emissions, water consumption, as well as a company’s adoption of meaningful diversity, equity and inclusion programs. The list is long, but it is also important and cannabis operators are poised to take advantage.
Because the nascent legal cannabis industry often finds itself needing to overcome public and policymaker misperceptions and abide by strict regulations, many cannabis companies have already incorporated ESG-like policies and good governance into their business model.
Growers already analyze their environmental impacts. Brands are required to know the sources of their ingredients and to track their quality. Cannabis product labels are scrutinized for misrepresentations. Because cannabis companies are typically less corporately established entities and because many have evolved from a non-traditional financial background, cannabis companies already also tend to be more diverse and concerned about social justice. By converting de facto ESG policies into express, well-formulated and executed ESG policies, allows companies to add value and position themselves for stronger growth in the marketplace.
Many cannabis companies seem to simply be too busy. The fact that ESG reporting is itself still rapidly evolving makes ESG frameworks hard to adopt, but this challenge is not unique to the cannabis industry.
Constrained access to capital and the industry’s general immaturity are both causes and effects of this lack of capacity. But if a cannabis company accurately markets its ESG framework, it can attract affordable capital or enter new markets that are looking for socially conscious businesses. Cannabis corporate leaders often prioritize alternative capital sources, such as family offices, hedge funds and individuals to attract investment, but many of these capital sources want to know that they are investing into businesses that are ESG-conscious.
The cost-benefit analysis of embracing ESG in the cannabis industry, however, is rapidly shifting. In addition to consumers actively seeking out brands with meaningful sustainability and social responsibility ethos, as more private equity and hedge fund investors enter the space, and with institutional money starting to come off the sidelines, https://www.investopedia.com/barbarians-at-the-gate-institutions-are-buying-u-s-cannabis-stocks-5075004 (CITE) the companies with the best risk management systems will attract valuation premiums. And as more opportunities become available to compete for local licenses, those companies already boasting systematized and certified ESG disclosures will have a substantial competitive advantage.
So, What’s Next?
Like addressing your company’s cybersecurity and protecting your consumer’s privacy (a critical piece of ESG), the best time to start implementing an ESG program is yesterday, but the second best time is right now.
Companies can start this process by making a board committee or high-level executive responsible for aggregating the information necessary to identify ESG risks and opportunities. This might entail polling key stakeholder groups and investigating opportunities to measure, report and communicate the company’s material ESG factors, risks and opportunities.
Here are examples of existing operational practices or industry conditions that could be readily conformed to meet ESG metrics:
Any cannabis company looking to adopt more formalized ESG measures should include the company’s general or outside counsel in the initial stages of this process. They are often uniquely able to articulate ESG risks and help adopt a framework for proper incorporation into the company’s corporate governance, including protocols and policies. Getting sued for making a misrepresentation or violating a consumer protection statute defeats the purpose of marketing ESG success. ESG-related public claims and statements (this includes marketing and labelling, anything related to environmental impacts or sustainability) should be carefully researched, documented and contain proper disclosures to inoculate companies from potential ESG-related risks.
The focus on ESG is gaining momentum. Early adopters of ESG will need to be cautious as standards continue to develop, but they will likely be the first to reap the benefits of meeting increased consumer demand for ESG programs and attracting the attention of larger investors looking for entry points into the growing cannabis industry.
As July comes to a close, we’ve got plenty of work to do in the cannabis space. Perhaps the biggest story of the month was the announcement of the Cannabis Administration and Opportunity Act, a fairly comprehensive legalization bill that actually stands a chance at making headway in Congress this year.
It’s hard to say what that means to currently licensed cannabis business owners, except for the fact that change is coming. But you already knew that, right? That’s the name of the game.
N.B.: Next month, we’ll be in Las Vegas for Cannabis Conference 2021. Check the full schedule of educational programming here—and make sure to register!
We’ve rounded up some of the key cannabis headlines from the week right here.
Ohio is making a run at adult-use legalization. Will it work? Read more
“Colorado has created the Cannabis Business Office to promote social equity and provide financial and technical assistance to entrepreneurs in the industry.” Read more
Speaking of Colorado, the state’s latest biennial reports puts some long-standing misconceptions around youth cannabis use and impaired driving to rest. Read more
“The Illinois Department of Financial and Professional Regulation (IDFPR) awarded 55 cannabis retail licenses to 53 firms on July 29 in the first of three licensing lotteries aimed at improving social equity in the state’s adult-use market.” Read more
From Assistant Editor Andriana Ruscitto: “Jushi Chief Creative Director Andreas Neumann describes how the brand is leveraging non-cannabis sales to boost its core cannabis business.” Read more
And elsewhere on the web, here are the stories we’ve been reading this week:
KOB4: “New Mexico is eight months out from legal marijuana sales, and the state is already anticipating all shops will be completely sold out of cannabis within the first two weeks.” Read more
Yahoo! Finance: “Tilray CEO Irwin Simon expects marijuana legalization in the U.S. to happen within the next two years.” Read more
Modesto Bee: The city of Modesto launched a new cannabis education and tourism campaign. Read more
41NBC: In Georgia: “Macon-Bibb County will be getting a GMP-certified medical cannabis cultivation and production facility, on which construction should begin shortly.” Read more
Times-Union: A proposed ban on cannabis retail garnered little support in upstate New York. Read more
A pair of Ohio lawmakers officially put their plans into action July 30 by formally filing adult-use cannabis legislation in the state’s House—the first of its kind in the state.
Democratic Reps. Casey Weinstein and Terrence Upchurch, both representing Northeast Ohio districts, first introduced their 180-page bill two weeks ago, which includes four major components: decriminalization, a cannabis excise tax, commerce and licensing, and medical cannabis.
More specifically, the Ohio Medical Marijuana Control program would remain intact, and licensed operators could pursue additional licenses to enter the adult-use market.
According to a memo Weinstein and Upchurch sent to fellow House members two weeks ago, the bill would enable municipalities to restrict the type and number of cannabis establishments operating within their jurisdictions and require the Department of Commerce to adopt rules related to the licensure of cannabis businesses. And the bill would impose restrictions on the cultivation, processing, transportation and sale of cannabis.
Also, the legislation would allow adults 21 and older to buy and possess up to 5 ounces of cannabis and grow as many as 12 plants for personal use.
“It’s time to lead Ohio forward,” Weinstein said in a joint press release issued Friday. “This is a big step for criminal justice reform, for our veterans, for economic opportunity, and for our individual liberties.”
On the map, Ohio’s neighbor to the northwest, Michigan began commercial sales of adult-use cannabis in December 2019 and has attracted Ohioans’ business since. Meanwhile, Pennsylvania state lawmakers are knocking on legalization’s door to the east.
As for criminal justice reform, Ohio’s jails and prisons incarcerated 68,528 people in 2019. As of 2014, Blacks (1,625 per 100,000) were 5.6 times more likely to be locked up than white Ohioans (289 per 100,000), according to the U.S. Bureau of Justice Statistics.
In states that have already reformed cannabis prohibition, incarceration rates, especially for non-violent criminals, such as those who possess cannabis, have decreased dramatically. In Colorado, cannabis arrests plummeted 68% from 2012 to 2019.
The Ohio legislation would allow for adult cultivation and possession of cannabis and would allow for the expungement of conviction records for previous cultivation and possession offenses.
“This bill is much needed in Ohio, and it’s time for Ohio to become a national leader in marijuana decriminalization and legalization,” Upchurch said in the release. “This bill is more than just about legalization; it’s about economic and workforce development; it’s about decriminalization; and it’s about health care. The time is now, and I look forward to getting this done in a bipartisan fashion.”
The bill would also levy an 10% cannabis excise tax on retailers and microbusiness, with the revenue aimed to be distributed, in part, to secondary education and road infrastructure, as well as up to $20 million annually for two years to be used for clinical trials researching the efficacy of cannabis in treating medical conditions of veterans and preventing veteran suicide, according to the release.
With the Ohio Legislature in session through the end of the year, the bill now awaits committee assignment.
助理编辑Andriana Ruscitto：“巨石首席创意总监Andreas Neumann描述了该品牌如何利用非大麻销售来推动其核心大麻业务。”阅读更多
两周前，代表俄亥俄州东北部地区的民主党众议员凯西·韦恩斯坦（Casey Weinstein）和特伦斯·厄普丘奇（Terrence Upchurch）首次提出了他们180页的法案，其中包括四个主要组成部分：非刑罪化、大麻消费税、商业和许可以及医用大麻。