ESG & The Cannabis Industry Article Series - Article 2
ESG provides a framework for navigating and adapting to changing business conditions – the underlying economic, social and environmental systems that comprise your organization’s business ecosystem. ESG has increasingly become equated to ‘the new risk management’, yet ESG provides much more value to an organization - especially those operating in the Cannabis and Hemp Industry - than merely identifying future risks to manage. In fact, there are several key value propositions that cannabis and hemp companies can immediately benefit from by proactively engaging on ESG issues within their operations and alongside their stakeholders. Let’s walk through some of them in deeper detail.
Strategically, ESG has become table-stakes for publicly traded companies due to changing regulations and stakeholder expectations. The increasing saturation of the Cannabis and Hemp Industry means differentiation is increasingly challenging. ESG provides a vehicle for brand differentiation – with consumers, investors and local communities – as well as supporting local ‘license to operate’ with your critical stakeholder groups. As the global community continues to demand corporate engagement on societal issues, the Cannabis and Hemp Industry is uniquely positioned to directly address a range of equity and inclusion, environmental justice, and associated issues through an ESG strategy. Lastly, engaging with your stakeholders on an active basis provides opportunities to unearth unmet customer needs, underserved markets as well as new products and services to address emerging stakeholder challenges.
Financially, ESG performance is impacting the balance sheets of public companies. This is due to the increasing integration of ESG performance into the crediting terms of major institutions and the investment mandates from the world’s largest institutional investors. As ESG disclosure regulations go into effect in major economies around the world, reduced litigation and compliance costs are a key benefit the Cannabis and Hemp Industry can capitalize on. Finally, with sustainable products commanding premium prices, the ability to meet consumer demands for more sustainable, traceable and ethically sourced products becomes another financial value-add by developing an ESG strategy.
Operationally, we know ESG can support business continuity in the face of increasing future environmental and social risks. In the present, immediate benefits include a greater focus on efficiencies and optimization through greater governance, oversight mechanisms and natural resource stewardship. As public market regulations continue to evolve, both on governance requirements and natural resource protocols, a focus on ESG is a focus on operationalizing the changes needed to adapt and thrive. With the cannabis landscape’s current patchwork of national, state and local regulations, an operational focus on ESG supports the policies, systems and accountability measures needed to navigate the associated risks and opportunities.
If you’re a cannabis or hemp company ready to capitalize on the strategic, financial and operational opportunities an ESG implementation can deliver to your organization, contact Regennabis at info@regennabis.com
Stay tuned for the next article in this Series.
