Social responsibility will be the key to success for the cannabis industry

by Tom Chervinsky

A social-licence reckoning is coming for the cannabis industry – and few of the major producers and retailers seem to be preparing.

Social licence is the idea that a company requires the ongoing consent and support of society in order to operate. No other industry demonstrates the concept more clearly than cannabis, where the successful campaign to legalize cannabis in Canada was built in no small part through the efforts of activists and elected officials to generate public understanding and support. Maintaining that licence will require the industry to do more than ‘be better than the illicit market’.

As the halo from legalization fades, the recent governance failures, excessive packaging, environmental and social impacts of cannabis are chipping away at the trust that consumers and governments place in the industry. To be sure, it’s been a rocky couple of years for the industry, and government regulation and oversight have substantially constrained the industry’s scope of action – sometimes ensuring minimum standards, but in other ways preventing more sustainable behaviours.

The challenge now is to see where the industry is headed and to build companies that are ready to earn and defend their place in society. As the novelty of the industry fades, it will be viewed in  a similar vein to the tobacco and beverage alcohol industries, who have long spent substantial time and capital to proactively address the social, environmental and governance issues that define their impact to consumers and regulators. The companies that understand this and build CSR and Sustainability into their operating models and culture today will be the ones that are best positioned as public attitudes shift.

These responsible companies will not only be better able to address the foreseeable accusations and concerns of media, regulators and the public – they will have integrated CSR principals into their operating model early, reducing the costs and benefitting from early investments. Just as it is easier to install a system into a house when it is being built rather than to retrofit it afterwards, it is easier to build and grow a socially responsible company from the beginning than to generate the cultural and operational changes later on. 

The good news is that studies have shown the value of taking Environmental, Social and Governance (ESG) factors into account – with investors noticing that companies which embed these principals into their business performing as well or better than the market. We also know that employers who embrace these principals experience better recruitment and retention as they address the desires of employees to work for a responsible company. In an industry competing for the best talent and struggling to recruit new capital investment, taking a sincere and meaningful approach to ESG (and social licence more broadly) will make recruitment and retention easier, while making companies more attractive to institutional investors. 

So what should cannabis companies who aim to be major players in the future of the industry be doing?

The first step is for companies to make an honest assessment of their business’ impact on society and the environment, and to decide where they would like to go. These decisions need to be rooted in the culture and values of the company, should be ambitious but achievable, and should be integrated across their operations and planning.

Next, cannabis companies need to get better at communicating their CSR ambitions and performance. This means moving beyond CSR as a gimmick to attract consumer attention, and providing an honest assessment of the challenges ahead, as well as the strategies being used to address them. It also means embracing consistent, and eventually integrated, ESG reporting – a vital element of accountability to investors and allowing analysts to compare the efforts and impacts of competing firms.

Third, companies should explore ways to expand their impact through their supply chains and community involvement. Simply cutting a cheque to a local charity – while a welcome act – is no longer considered sufficient in many industries. Companies should be looking at the challenges facing the communities where they operate and explore ways in which their knowledge and expertise can be leveraged to improve the lives of the people who live, work and play near their facilities.

Finally, the industry must continually evolve and evaluate itself. Social licence and responsibility are not the reward for completing a checklist, rather they are the result of meaningful and ongoing engagement with society. As the industry continues to mature, it will require ongoing efforts to ensure that cannabis companies are viewed as contributing more to our social fabric than they take.

The cannabis industry is facing substantial changes, but for those of us who believe that the industry will survive and thrive, now is the time to prepare for the challenges ahead.

Tom Chervinsky is a Principal at TJC Strategies and a Senior Associate with Cedar Water Strategies. A seasoned Public Affairs and Communications expert with a deep background in corporate social responsibility and advocacy, Tom has worked with some of Canada’s biggest businesses and industry associations to craft communications, CSR platforms, community engagements and government relations strategies that drive shared-understanding and build a common cause with customers, government, employees, and other stakeholders. Additionally, Tom has worked with a wide range of not-for-profits to drive meaningful social change, including work on democratic engagement, carbon pricing, extended producer responsibility, poverty and COVID-19.

Contact Tom.