By Sheldon Baker, CEO Baker Dillon Group LLC05.03.22
Marc Ross is the head of impact and ESG at Vicente Sederberg (VS) LLP. He provides counseling and consulting to the cannabis, hemp, and entheogen industries on all things ESG (Environmental, Social and Governance), CSR (Corporate Social Responsibility), JEDI (Justice, Equity, Diversity, and Inclusion), community engagement, employee engagement, strategic philanthropy, sustainability, and other associated areas.
With a mission to drive the inclusion, measurement, benchmarking, reporting, and continuous improvement of all of these important elements, Ross draws on nearly 30 years of legal practice in the public, private, and non-profit sectors to help build more sustainable, profitable, and responsible businesses, as well as reducing potential liability from a variety of stakeholders.
The 420 Area Code (420AC): Provide some background about Vicente Sederberg LLP and its expertise in the nutraceutical, cannabis, and CBD categories.
Ross: Vicente Sederberg (VS) has been at the forefront of cannabis law and policy for over a decade. We have extensive experience working with federal, state, and local cannabis and hemp laws and regulatory programs, some of which our attorneys played roles in developing. We offer a full suite of legal, policy, regulatory, and corporate services, advising clients from every sector of the industry, as well as policymakers and regulators domestically and abroad. The VS hemp and cannabinoids department helps clients navigate the wide range of state and federal policies governing hemp and hemp-derived products, including the Farm Bill, the Federal Food, Drug, and Cosmetic Act, and the FDA’s ever-evolving technical requirements for developing, researching, manufacturing, and marketing novel therapeutic products.
420AC: You have been able to create a nice niche for yourself from an environmental point of view.
Ross: It has certainly been an interesting road, and it has afforded me the opportunity to engage on the issue from several angles, first, with traditional environmental law roles in government and with a large law firm, then as in-house environmental counsel at what was then one of the largest companies in the world. Next, I transitioned to the non-profit sector, founding and leading a national environmental advocacy organization in the music industry, before returning to the private sector in the early stages of the cannabis industry to provide thought leadership and actionable guidance on ESG matters. By taking chances and following my instincts into new fields that interested me, I have had a rather unconventional but exciting and intentional career as an environmental professional.
420AC: What is ESG and what does it look like in the cannabis industry?
Ross: ESG denotes a formalized, analytical program for measuring and reporting metrics around a company’s environmental, social and governance practices. Generally, ESG in the cannabis industry looks a lot like what many people think of as Corporate Social Responsibility, which is a programmatic approach to stakeholder engagement, sustainability, and other initiatives. While many cannabis companies have developed employee volunteerism opportunities, programs to engage communities and customers, and efforts to promote social justice and equity, many others have not. Not many cannabis companies have reached the stage of developing and measuring their ESG impacts using methods recognized by other industries, and none are formally reporting their metrics to any of the internationally recognized ESG reporting frameworks. That said, there are a handful of large U.S. and Canadian cannabis operators starting on the ESG path by measuring baselines of their impact and issuing formal ESG reports.
420AC: You have been quoted as saying that there is a perfect storm brewing around ESG in the cannabis industry. Can you please explain that statement?
Ross: The perfect storm I see brewing involves three primary stakeholder groups that are simultaneously applying pressure on companies to do better when it comes to measuring and reporting ESG: investors, cannabis workers and consumers, and governments.
Investors are growing increasingly curious about the cannabis space and starting to ask questions about ESG metrics for the companies they are targeting. This is because it has been demonstrated that companies with a handle on their ESG impacts are typically better-run companies. Institutional investors, who are largely still on the sidelines due to the federal illegality of cannabis, are going to do the same once they enter the picture. They will be looking very closely at ESG factors in screening their investments, as they routinely do now for ethical and business reasons.
The second stakeholder group is cannabis workers and consumers, the majority of whom are Millennials. Studies conducted by Deloitte and research firms such as Endelman find Millennials are largely driven by social and environmental issues when it comes to the places they choose to work and the products they choose to buy. With the largest transfer of wealth in the history of the planet taking place from Baby Boomers to Millennials, this conscious-driven generation is going to broadly impact how business is conducted around the planet. Those companies committed to positive ESG impacts will win the wars for talent and customers.
The final stakeholder group, governing bodies, are making concerted efforts to get companies reporting their ESG impacts to provide transparency to investors. Such reporting is already required in the EU regarding climate impacts, and reported social impacts are in the plan for 2022. Meanwhile, the U.S. Securities and Exchange Commission is poised to begin requiring companies to report their climate impacts as well, with a proposed rulemaking to be issued this spring. Cannabis industry members that are getting in front of these ESG matters are well-positioned to win investors, talent, and customers, while those companies lagging behind may find themselves the subjects of additional regulation and enforcement actions.
420AC: What is the most pressing part of ESG for the industry?
Ross: The most pressing ESG matter is the lack of environmental metrics. While many within the industry are rallying to address social issues like diversity and equity, the environmental impacts from mostly indoor cultivations and legacy practices are raising red flags and attracting warranted criticism. Most businesses do not want to measure their environmental impacts including carbon emissions from indoor warehouse grows, depletion of aquifers in water-scarce regions, and massive amounts of waste not being recycled, reused, or reincorporated into products. These are all potential black eyes for the industry as it works to win hearts and minds on the road to federal legalization. On the flip side, there are a lot of opportunities for companies to increase efficiencies and reduce costs by embracing environmental sustainability issues.
420AC: How will federal legalization impact a company’s exposure to environmental legal issues?
Ross: I see three major developments arising from federal legalization. First, I expect much greater enforcement from the feds, and in turn, the states, when it comes to environmental compliance. We are just now starting to see an uptick in enforcement of bedrock environmental laws against cannabis companies. Once federal legalization happens, companies won’t be able to hide behind mere compliance with cannabis regulations but will also be subject to the full panoply of environmental, health and safety regulations. In states that have primacy over laws such as the Clean Water Act, the Clean Air Act, and the Resource Conservation and Recovery Act (RCRA), there will be added pressure to get the industry into compliance and added incentive to assess fines against recalcitrant operators.
Second, federal legalization and the authorization of interstate and/or international transportation will likely result in some cannabis operations migrating to more efficient locations with more environmentally friendly practices. For example, some companies may decide it does not make sense to grow cannabis or hemp at scale inside of large warehouses (or even greenhouses) in northern states when large-scale outdoor cultivations in the south or abroad could be more cost-effective and have less environmental impact.
Third, federal legalization will unleash a whole host of capital, grants, and tax incentives for operators implementing more efficient and environmentally friendly practices and R&D. For example, cannabis operators that currently cannot take advantage of renewable energy subsidies from the federal government will be able to take advantage of such financial tools to create a greener industry following legalization.
420AC: In your mind, what does the ideal ESG program look like for a cannabis company?
Ross: An ideal program would measure, benchmark, and report on all material ESG factors that impact the business’s operations. The company would obtain third-party assurance of their metrics and then report those metrics against one of the internationally recognized frameworks, such as the Value Reporting Foundation (formally called the Sustainable Accounting Standards Board), Global Reporting Initiative (GRI), Taskforce for Climate Related Financial Disclosures (TCFD), Carbon Disclosure Project (CDP) and/or the UN Sustainable Development Goals (UNSDGs). True leaders would also identify a path for continuous improvement across all areas of ESG.
About the Author: Sheldon Baker is CEO of the Baker Dillon Group LLC and has created numerous nutraceutical brand marketing communications and public relations campaigns for many well-known supplement and food industry companies. For interview consideration or brand marketing consulting, contact him at Contact@The420AreaCode.com.
With a mission to drive the inclusion, measurement, benchmarking, reporting, and continuous improvement of all of these important elements, Ross draws on nearly 30 years of legal practice in the public, private, and non-profit sectors to help build more sustainable, profitable, and responsible businesses, as well as reducing potential liability from a variety of stakeholders.
The 420 Area Code (420AC): Provide some background about Vicente Sederberg LLP and its expertise in the nutraceutical, cannabis, and CBD categories.
Ross: Vicente Sederberg (VS) has been at the forefront of cannabis law and policy for over a decade. We have extensive experience working with federal, state, and local cannabis and hemp laws and regulatory programs, some of which our attorneys played roles in developing. We offer a full suite of legal, policy, regulatory, and corporate services, advising clients from every sector of the industry, as well as policymakers and regulators domestically and abroad. The VS hemp and cannabinoids department helps clients navigate the wide range of state and federal policies governing hemp and hemp-derived products, including the Farm Bill, the Federal Food, Drug, and Cosmetic Act, and the FDA’s ever-evolving technical requirements for developing, researching, manufacturing, and marketing novel therapeutic products.
420AC: You have been able to create a nice niche for yourself from an environmental point of view.
Ross: It has certainly been an interesting road, and it has afforded me the opportunity to engage on the issue from several angles, first, with traditional environmental law roles in government and with a large law firm, then as in-house environmental counsel at what was then one of the largest companies in the world. Next, I transitioned to the non-profit sector, founding and leading a national environmental advocacy organization in the music industry, before returning to the private sector in the early stages of the cannabis industry to provide thought leadership and actionable guidance on ESG matters. By taking chances and following my instincts into new fields that interested me, I have had a rather unconventional but exciting and intentional career as an environmental professional.
420AC: What is ESG and what does it look like in the cannabis industry?
Ross: ESG denotes a formalized, analytical program for measuring and reporting metrics around a company’s environmental, social and governance practices. Generally, ESG in the cannabis industry looks a lot like what many people think of as Corporate Social Responsibility, which is a programmatic approach to stakeholder engagement, sustainability, and other initiatives. While many cannabis companies have developed employee volunteerism opportunities, programs to engage communities and customers, and efforts to promote social justice and equity, many others have not. Not many cannabis companies have reached the stage of developing and measuring their ESG impacts using methods recognized by other industries, and none are formally reporting their metrics to any of the internationally recognized ESG reporting frameworks. That said, there are a handful of large U.S. and Canadian cannabis operators starting on the ESG path by measuring baselines of their impact and issuing formal ESG reports.
420AC: You have been quoted as saying that there is a perfect storm brewing around ESG in the cannabis industry. Can you please explain that statement?
Ross: The perfect storm I see brewing involves three primary stakeholder groups that are simultaneously applying pressure on companies to do better when it comes to measuring and reporting ESG: investors, cannabis workers and consumers, and governments.
Investors are growing increasingly curious about the cannabis space and starting to ask questions about ESG metrics for the companies they are targeting. This is because it has been demonstrated that companies with a handle on their ESG impacts are typically better-run companies. Institutional investors, who are largely still on the sidelines due to the federal illegality of cannabis, are going to do the same once they enter the picture. They will be looking very closely at ESG factors in screening their investments, as they routinely do now for ethical and business reasons.
The second stakeholder group is cannabis workers and consumers, the majority of whom are Millennials. Studies conducted by Deloitte and research firms such as Endelman find Millennials are largely driven by social and environmental issues when it comes to the places they choose to work and the products they choose to buy. With the largest transfer of wealth in the history of the planet taking place from Baby Boomers to Millennials, this conscious-driven generation is going to broadly impact how business is conducted around the planet. Those companies committed to positive ESG impacts will win the wars for talent and customers.
The final stakeholder group, governing bodies, are making concerted efforts to get companies reporting their ESG impacts to provide transparency to investors. Such reporting is already required in the EU regarding climate impacts, and reported social impacts are in the plan for 2022. Meanwhile, the U.S. Securities and Exchange Commission is poised to begin requiring companies to report their climate impacts as well, with a proposed rulemaking to be issued this spring. Cannabis industry members that are getting in front of these ESG matters are well-positioned to win investors, talent, and customers, while those companies lagging behind may find themselves the subjects of additional regulation and enforcement actions.
420AC: What is the most pressing part of ESG for the industry?
Ross: The most pressing ESG matter is the lack of environmental metrics. While many within the industry are rallying to address social issues like diversity and equity, the environmental impacts from mostly indoor cultivations and legacy practices are raising red flags and attracting warranted criticism. Most businesses do not want to measure their environmental impacts including carbon emissions from indoor warehouse grows, depletion of aquifers in water-scarce regions, and massive amounts of waste not being recycled, reused, or reincorporated into products. These are all potential black eyes for the industry as it works to win hearts and minds on the road to federal legalization. On the flip side, there are a lot of opportunities for companies to increase efficiencies and reduce costs by embracing environmental sustainability issues.
420AC: How will federal legalization impact a company’s exposure to environmental legal issues?
Ross: I see three major developments arising from federal legalization. First, I expect much greater enforcement from the feds, and in turn, the states, when it comes to environmental compliance. We are just now starting to see an uptick in enforcement of bedrock environmental laws against cannabis companies. Once federal legalization happens, companies won’t be able to hide behind mere compliance with cannabis regulations but will also be subject to the full panoply of environmental, health and safety regulations. In states that have primacy over laws such as the Clean Water Act, the Clean Air Act, and the Resource Conservation and Recovery Act (RCRA), there will be added pressure to get the industry into compliance and added incentive to assess fines against recalcitrant operators.
Second, federal legalization and the authorization of interstate and/or international transportation will likely result in some cannabis operations migrating to more efficient locations with more environmentally friendly practices. For example, some companies may decide it does not make sense to grow cannabis or hemp at scale inside of large warehouses (or even greenhouses) in northern states when large-scale outdoor cultivations in the south or abroad could be more cost-effective and have less environmental impact.
Third, federal legalization will unleash a whole host of capital, grants, and tax incentives for operators implementing more efficient and environmentally friendly practices and R&D. For example, cannabis operators that currently cannot take advantage of renewable energy subsidies from the federal government will be able to take advantage of such financial tools to create a greener industry following legalization.
420AC: In your mind, what does the ideal ESG program look like for a cannabis company?
Ross: An ideal program would measure, benchmark, and report on all material ESG factors that impact the business’s operations. The company would obtain third-party assurance of their metrics and then report those metrics against one of the internationally recognized frameworks, such as the Value Reporting Foundation (formally called the Sustainable Accounting Standards Board), Global Reporting Initiative (GRI), Taskforce for Climate Related Financial Disclosures (TCFD), Carbon Disclosure Project (CDP) and/or the UN Sustainable Development Goals (UNSDGs). True leaders would also identify a path for continuous improvement across all areas of ESG.
About the Author: Sheldon Baker is CEO of the Baker Dillon Group LLC and has created numerous nutraceutical brand marketing communications and public relations campaigns for many well-known supplement and food industry companies. For interview consideration or brand marketing consulting, contact him at Contact@The420AreaCode.com.
