Cannabis product differentiation through sustainability

This article was first published by the Sustainable Cannabis Coalition (SCC).

As national cannabis brands continue evolving in the U.S. consumer market, producers large and small will need to establish product differentiating factors to separate their products and brands from the rest of the pack, and to continue making space for themselves on retail shelves and in the minds of consumers. A focus on sustainability is one of those factors.

Consumers more than ever care about not just where their purchases came from, but the manner in which they were produced, and what the overarching brand or organization is doing to support social and environmental initiatives. Consumers are increasingly aligning with brands that place an emphasis on sustainability, and have even shown that they are willing to pay extra for sustainably produced products. This is especially true in the food and beverage industry, where a recent report by the International Food Information Council found 39% of respondents across 18-80 years of age said environmental sustainability had an impact on their purchasing decisions.

As a key segment of the food and beverage industry, the wine industry provides a great example for how a traditional, well-established industry can shift focus toward sustainable, carbon-reducing initiatives, while continuing to expand and meet consumer demand. 

Wineries successfully communicate sustainability efforts to consumers via branded websites, tasting events, wine labels, peer recommendations, and more. Sustainability certifications and logos on packaging and branded materials, such as demarcations to indicate Certified California Sustainable Winegrowing, add further credibility to these initiatives and can improve the likelihood of a consumer purchase, according to Wine Intelligence research.

On the scale of other global industries, the wine industry is not considered a particularly high emitter of carbon. However, those in wine have the added push to advocate for and effectuate environmental change due to increasing risks of climate change and impacts on (outdoor) wine-growing regions and appellations around the world.

Cannabis, on the other hand, as a burgeoning industry that is already considered a high emitter of carbon, is in a unique position to change the direction of its environmental impact and carbon emissions before the industry gets too established and change is harder to make. (While this article generally discusses initiatives that existing businesses can undertake, newer businesses can and should build them in from the outset, which will help reduce the need for them to revisit or pivot later on.)

Inspired by challenges shared with the wine industry, here are three steps that cannabis operators can take to create value-driving sustainability initiatives.

1. Understand energy utilization throughout cultivation and production

While wine grapes are primarily grown outdoors, cannabis cultivators have a multitude of indoor grow facilities to run and operate. A primary concern in these facilities is ensuring the plants are in a comfortable environment to facilitate growth and encourage high THC production, regardless of temperature spikes or humidity changes outside. In order to create this ideal environment for cannabis plants, a significant amount of energy is required – consider all of the high-intensity lighting, heating, HVAC units, fans, dehumidifiers, CO2 generators, and other tools required to keep a stable indoor environment humming.

Indoor grows are a significant source of carbon emissions for the cannabis industry. Researchers behind a study published in Nature Sustainability journal informed New Scientist that the emissions from growing 1 ounce of cannabis indoors is about the same as burning 7 to 16 gallons of gasoline, a metric that fluctuates depending on where in the U.S. it’s grown because of differences in the local climate. Another study, in the peer-reviewed Energy Policy journal, estimated that 1 kilogram of product (dried flower) is associated with 4,600 kilograms of carbon dioxide emissions into the atmosphere, or the equivalent of CO2 emissions expected for 3 million typical U.S. cars.

The biggest source of these carbon dioxide emissions? Electricity use to support indoor grow environments.

This is not to say that post-harvest production itself does not play a role. Wineries and cannabis operations alike still use energy to power basic operations (HVAC, lighting, etc.) as well as industry-specific tools or systems like refrigerated vaults or tanks, automatic bud trimmers or wine presses, and packaging or bottling machines.

To combat this, cannabis operators should first conduct an energy audit of their facilities to understand the drivers of power consumption and if there are one or two main energy suckers or if general inefficient operating practices are a contributing factor. Many groups, in cannabis and beyond, recognize the collection of data as the necessary first step to identifying and implementing practices to combat CO2 emissions and support sustainability initiatives. 

Once there is a true sense of where a facility’s energy use is concentrated, solutions for effecting change can be considered. In some cases, capital facility improvements might be necessary to switch old, inefficient grow lights, HVAC units, cultivation control solutions, or other systems over to more energy-efficient models, or to explore the installation of on-site renewable energy resources and battery backups.

2. Tackle problematic single-use plastic packaging

Packaging is another key area that is a typical source of CO2 emissions for the cannabis industry that can be the focus of sustainability initiatives.

If we think back to the wine industry analogy, we can see an exaggerated example of how packaging can be a significant contributor to a winery’s carbon footprint. The glass bottles that wine is traditionally packaged in represent 29% of all greenhouse gas emissions for the production of a single case of wine, as found in a study by the California Wine Institute and PE International. Glass bottles are such a significant contributing factor primarily due to their weight, which means more energy requirements to both manufacture and transport. For this reason, those in the wine industry are actively exploring alternative packaging options, such as bag-in-box packaging, kegs, and even lighter-weight glass bottles, which would reduce carbon emissions of traditional glass bottle use in production and distribution.

Though cannabis is not traditionally packaged in glass, it has its own packaging problem. Many products come in disposable single-use consumer packaging, which is recognized by the National Cannabis Industry Association as a significant contributor not only to greenhouse gas emissions, but also to overall waste as most ends up contributing to landfills and ocean pollution with obvious negative environmental impacts. 

For cannabis operators and producers, data collection is again a key place to start to understand how to optimize your packaging raw material inputs and needs. 

It can further be valuable to collaborate directly with packaging suppliers to understand which solutions utilize smaller amounts of plastic or alternative recycled plastic that can be adopted in lieu of plastic-intensive solutions.

3. Explore optimizing distribution models for increased efficiencies

Distribution of packaged products is an emission-generating activity that is not just limited to the cannabis or wine industries.

Nonetheless, it is a factor that should be considered when weighing sustainability initiatives.

Encouraging delivery service providers to optimize truck delivery routes, or making changes to owned fleet routes, can have several benefits from both an environmental and a bottom-line perspective. Reducing inefficiencies in delivery routes can minimize fuel consumption and associated costs, reduce the number of empty miles where trucks are still on the road with no product to deliver, and even highlight opportunities for fleet size reduction. Again, data collection is a great place to start when looking to begin optimization efforts in this area.

A connection can also be made between reducing the carbon footprint of delivering product and reducing plastic waste in product packaging. Lighter-weight products have less environmental impact from a shipping perspective because less energy is required to transport them around. Lighter-weight products also therefore can contribute to cost reduction in shipping costs that can positively impact margin capture and your bottom line. 

If correctly established, made part of a brand’s value proposition, and marketed to target consumers, sustainability can be the differentiating factor that tips the scales in the consumer decision-making process and drives repeat sales.

Data plays a key role in ensuring this connection is made. Systems, tools, and processes all need to be in place to support data collection around sustainability initiatives, to first help understand which areas are key contributors to your carbon footprint, where energy is being wasted throughout the value chain, and mitigation options. Then, to gauge the success of those initiatives in the eyes of your consumers, by capturing and analyzing financial figures like sales and bottom-line revenue, as well as perceptual and behavioral brand metrics like brand loyalty, recognition, and customer satisfaction.

Sustainability initiatives can positively impact the environment while capturing the attention of consumers and creating value for cannabis organizations. The opportunities are abundant, for those who know how to create them.

As a blossoming industry, cannabis can look to traditional, established industries for answers – a theme we at CohnReznick particularly like to explore. Read our recent deep dive into lessons cannabis can learn from wine, and subscribe to our cannabis updates for future insights.

Chris D’Arduini, Senior Manager, Technology+, Global Consulting Solutions

312.854.1223

Amanda Goldston, Senior Consultant, Technology+, Global Consulting Solutions

646.448.5473