In today’s world, environmental, social, and governance (ESG) is a core pillar of value creation for organizations of all sizes. Due to an evolving set of expectations from stakeholders and pending regulatory requirements, ESG is no longer a discussion—it’s a necessity.
In the cannabis sector, global spending on legal cannabis is expected to grow 230% to $32 billion in 2022, compared to $9.5 billion in 20171. To attract consumers, investors, and top talent, cannabis companies need to integrate ESG into their business operations.
ESG issues specific to the cannabis industry
Every industry has different driving forces behind the development of ESG Programs. The following issues are material to the cannabis industry:
As cannabis companies look to raise institutional capital through public listings, cannabis producers need to consider the ESG factors and start mapping out their ESG journey.
Ethics, anti-corruption, and money laundering are top issues in the industry. Having a strong governance structure will be important for the sector to maintain its market share.
Many class action lawsuits in Canada and the US relate to misrepresentation and disclosure concerns. These issues are related to a failure or perceived failure around the governance process of the cannabis sector at large.
Upcoming regulation on public companies to disclose and report on their greenhouse gas (GHG) emissions will put pressure on the entire supply chain to map out their carbon footprint. The cannabis sector will need to innovate its business model to reduce its carbon footprint due to high energy consumption.
Cannabis organizations are under increased pressure to demonstrate how they are giving back to the communities in which they operate when creating new businesses.
Investing in an ESG program is more important now than ever. The cannabis sector needs to be aware of the increased pressure to measure and report on ESG metrics and demonstrate impact on issues that matter. Forming an effective, sustainable ESG strategy and leveraging technology to support your ESG journey will optimize growth and set your organization for long-term success.
National Sustainability & ESG Leader, BDO Canada
Benefits of investing in ESG programs for the cannabis sector
Early integration of an ESG program strategically positions your organization for long-term success.