Why ESG is a bust in cannabis, and how to fix it

Get real to produce meaningful ESG value

It is said of French intellectuals that they never let the facts get in the way of an elegant theory. Similar sentiments could apply to ESG boosters in the cannabis industry.

Despite what some will say ESG initiatives have not gained much traction in the cannabis sector.  For that matter, ESG’s reputation has taken a hit outside of cannabis, too.  

Why has this well-meaning, common sense strategy come up short? Here is what my cannabis clients say to me on the q.t.

> Reality bites - firms have more pressing issues to deal with, like growing good product, managing short term cash flow – and even survival.

> Social equity initiatives (a big part of the S in ESG) have not met expectations – there is no single villain to blame or playbook right now for getting this right.

> ESG has been poorly ‘marketed’ and understood – too often, advocates can come across as strident, obtuse or wokey to practical businesspeople.  Furthermore, ESG’s ill-defined nature and competing standards can be confusing in the hands of the wrong promoter.

Yet, we should still care about ESG principles and its practical elements, because-

- Ethically speaking, its always the right thing to operate in a responsible fashion.
- ESG can be an enabler of better business performance and corporate citizenship, when properly integrated into your business.  
- Companies may not have a choice but to be ESG compliant if they are competing in markets like the EU or looking to raise institutional money.

Here’s 5 steps to getting ESG back on the corporate radar and delivering real business & community value:

1. Jettison the term, ESG – Instead, start talking about issues that are on every manager’s agenda like cost reduction, brand building and employment engagement.  ESG compliance will become an output of these initiatives;

2. Break it down – Many ESG consultants will push an impractical menu of necessary short & long term activities.  The list could be so long and complex that it becomes intimidating not to mention insufficiently linked to immediate priorities.  Implement smaller ROI-driven projects that can be executed quickly;

3. Go for the low hanging fruit – In most cannabis companies it would be about enhancing your G (i.e. governance).  This would include bringing on more diversity and independence at the board.  Or, it could be about safeguarding and paying your employees better;
   
4. Avoid greenwashing and hypocrisy – If you are going to talk the talk you better walk the walk.  ESG should not be a fig leaf for executives gone wild;
      
5. Stay in your lane – Firms have lots to do in ESG without needing to ignorantly wade into politically-sensitive waters.  Just ask Unilever shareholders how they feel Ben & Jerry’s Middle Eastern misstep.  Before trying to save the World, look after your employees, be compliant with regs and pay your suppliers on time.

#cannabis #esg #cannabisindustry #csr