A Focus on ESG in the Cannabis Industry

April 19, 2022

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A Focus on ESG in the Cannabis Industry by Geoff Trotter

Understanding this key concept can drive business and brand value for your organization.

Supply chain management is a material issue for most industries and is particularly relevant to the changing conditions of cannabis industry supply chains. Shifting regulations, evolving distribution models, product quality testing, and labeling pressures mean that supply chain risks are more complex, and breakdown is increasingly more probable. 

ESG as a Source of Competitive Advantage

Cannabis companies must optimize supply chain engagement, collaboration, and oversight to reduce these risks as the cannabis market expands globally. To manage the complexity inherent in engaging environmental, social, and governance (ESG) issues across an enterprise, the composition of the Board and Management Team, and their associated experiences, credentials, and effectiveness, can have a profound impact on ensuring ESG becomes a source of competitive advantage.   

At Regennabis, our approach is based on a series of specific steps that all organizations should follow when developing an effective ESG program. These include: 

•Understanding why ESG is critical to commercial success

• Mapping an ESG journey that leads to desired business outcomes

•Gauging how an organization is being perceived

• Developing an ESG Strategy

• Communicating and disclosing identified methodologies and progress

Equipping an organization with a solid understanding of these five key areas is a precursor to an engagement with a client organization, which we call the “ESG Accelerator,” a four-phase multi-month programmatic approach to ensuring that an ESG journey is in place. 

Purpose-centricity

Tying this all together is “purpose” – the “why” of a business.

Purpose-centricity, in essence, ensures that the “Why we do what we do” statement is understood by all stakeholders and is the central tenet of an organization (which then flows throughout the business). It also further ensures that the organization builds from the inside out. But the first need is to understand what issues are material to the business from the outside in.

Organizationally, purpose and ESG go hand-in-hand — this is the start point of any transformational journey (or the bedrock of an organization that bakes purpose and ESG into their corporate DNA), from which a narrative that vocalizes an organization’s sustainability “intent” can be created. This also provides an insight into the intentions from the inside out. Most importantly, it ensures that the organization is embracing context-based sustainability. 

To be clear, Corporate Social Responsibility and/or philanthropy programs, in any business, are oftentimes not material to that business and hence could be viewed by many as being performative. The presence or absence of a robust ESG framework will serve as an indicator.

Creating shared value for all stakeholders is the desired end result of this approach. Remember, your investors will be increasingly demanding to see evidence of ESG frameworks and robust implementation. Yet, there is another parameter of value that has been often overlooked in the cannabis industry: brand value. And herein lies one of the industry’s greatest opportunities. 

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