What does it take to commit to ESG?

In a survey we conducted at Apical in November of 2021, respondents from the Canadian cannabis industry expressed overwhelming support in favour of Environmental, Social, and Governance (ESG) initiatives.

This is something I have come to expect within the cannabis community: a desire to be inclusive, sustainable, and socially responsible.

I’ve hosted my fair share of discussions on building value into business. It’s become abundantly clear through these conversations that actioning these desires is somewhat more complicated than merely agreeing with the principles of ESG. But as a young, nascent industry, I believe we, the cannabis industry, hold a lot of promise to adopt, champion, and advance ESG practices across all consumer goods business verticals.

If you want to go fast, go alone.

Despite great hope in the early days of legalization, I’ve seen little in the way of meaningful progress towards long-term ESG adoption. Although companies are attempting to incorporate ESG into their business, these conversations are often siloed to specific people or departments within the company.

ESG is more than Corporate Social Responsibility or philanthropy, as some cannabis companies refer to their giving-back efforts. The three factors — environmental, social, and governance work to assess a business’s total impact — largely environmental societal — and the concept hasn’t fully landed with many businesses.

For the most part, I have noticed ESG being bandied about as a selling proposition, rather than a genuine desire to improve the way a business operates and contributes positively to the community. When companies constrain ESG to exist only within the four walls of their organizations, it becomes a competitive advantage they market to customers. When there is inter-organizational collaboration, it is in the form of a 3rd party organization taking a top-down approach that can sometimes feel disconnected from the day-to-day realities of running a budding cannabis business.

Now, amidst a global pandemic that brings new financial challenges, in addition to those that already existed for cannabis companies (hi, negative-margin products!), corporations are pushed to the brink with many folding or being eaten up by larger organizations. Therefore, the dream of initiating and implementing ESG policies has fallen to the wayside in light of making sure the business survives during these uncertain and highly competitive times.

If you want to go far, go together

ESG is especially challenging to implement because these practices rely heavily on the health of the corporate structure.

Most of the conversations taking place don’t consider an important factor in actioning values: the need for a community. Peer-to-peer support groups are a critical factor that pushes companies to pursue ESG improvement continually.

Since the hustle of operating a new business in the cannabis space can be overwhelming, it is hard to focus time and attention on some of the industry’s more pressing issues, such as fraud and a lack of transparency. With the rapid pace of work, ambiguous and yet stringent regulation, cannabis companies also face high turnover and burnout of human capital, making it hard to retain talent that keeps operations running. Amidst these challenges, cannabis companies also need to evaluate the impact of single-use packaging and the carbon footprint of indoor cultivation, working to minimize their impact on the environment. Mechanisms for assessing these metrics are global, but each company will create programs specifically addressing material issues.

The expression of ESG is unique to your company and dependent on the values you wish to prioritize. We all face the challenge of defining scope and materiality and have to wrestle with what we believe will do good versus what can be reasonably done in the confines of the business. The magnitude of the work is overwhelming, and no single organization can address needs across the entire supply chain. All the more reason to work together for holistic impact: For long-term and far-reaching results, this work must be done together, as a collective.

“Whether as business leaders or just plain people, change is hard,” says Steph Grimbly of SRG Consulting. Grimbly is a human-centred strategist. She leverages emerging practices and perspectives from social science to reveal why stakeholders behave the way they do and combines these insights with traditional business principles to develop human-centric strategies. “Even the best problem solvers in the most ideal circumstances are limited in how much information they can take in and make sense of. Layer on the ambiguity and uncertainty of completely new territory, and it’s no wonder the status quo is so sticky.”

There are things you can do today, and seeds to plant for tomorrow that will help you move closer to your goals.

“Fortunately, research in behavioural science offers us tools and tactics for making the most of our human condition. In the case of the cannabis industry tackling ESG issues, there are three principles that can reinforce both immediate action and long term commitment: implementation intentions, peer-to-peer support, and psychological safety.”

Psychologist Peter Gollwitzer introduced implementation Intentions in 1999. An implementation intention specifies the when, where, and how of a goal, such as eliminating single-use plastics. In a study conducted by researchers from Wharton, Stanford, Yale, and Harvard, when concrete information was provided to study participants about where and where their vaccination could occur, the vaccination rate increase by 4.2%. Making goals clearer and establishing a how-to means they are less likely to be postponed or forgotten.

Peer-to-Peer programs with members with different accomplishment levels are also shown to promote commitment to a stated goal. The driving force behind the success of peer programs rests on the accountability mechanism. In a study conducted amount a test group of Chilean Entrepreneurs, those part of a Peer-to-Peer group with the stated intention of saving, participants made 3.2% more deposits and doubled their bank balance. The implementation intention establishes the steps required to achieve something. Then, a peer-to-peer network engenders transparency on progress. If goals or targets aren’t met, more experienced members can provide support and guidance to facilitate progress.

“Both implementation intention and the peer support network are essential to success, but neither can work without a psychologically safe space,” says Grimbly. Psychological safety can refer to latitude, the acceptability of holding different views, and risk-taking, the ability to address tough issues or take risks without fear of reprisal. “You must set a very clear expectation that commitment does not mean an individual is expected by their peers to perform perfectly or immediately. Without negative or shaming pressure, an individual is more likely to try and less likely to procrastinate.”

Through recurring commitment building and networking sessions, the next cohort of Apical, the Ethical Cannabis Collective, is a beacon for longer-lasting, more resilient ESG policies by workshopping the implementation of ESG initiatives. Before the launch of our next cohort, we want to hear from you — have you leveraged these principles to further ESG policy implementation in your organization? Reach out or subscribe.