It’s clear now that the hemp industry has a focus on environmental and social sustainability. Because of that, there is more focus on Environmental, Social and Corporate Governance (ESG) and the environmental and societal impacts of the industry. With investor interest growing exponentially in this field, to ignore ESG in the hemp and cannabis industry is to be left in the dust. This article will examine ESG, what it means for the industry and how it may shape the future of hemp and botanical extraction.
Why ESG Integration is Critical to the Extraction Industry
While the hemp and botanical industries have always had a place in environmental and social fields, increased awareness surrounding these issues has only furthered the necessity for involvement and ESG integration. An example of this can be seen in the legal implications of cannabis. As the legalization of medical and recreational cannabis use continues to spread, realization of previously criminalized individuals who received harsh sentences for possession that would otherwise be unpenalized for the same actions today.
The hope is that ESG integration in the broad scope of the this industry may help to reform the harsh sentencing for those individuals facing lengthy incarcerations for otherwise legal actions in other areas of the United States and other countries. This issue has been prevalent since the beginning of the War On Drugs that has disproportionately affected communities of color. Studies show that certain communities are arrested at four times the rate other Americans despite near equivalent cannabis use between both communities.
Because this trend is inextricably linked with the criminalization of cannabis use, ESG integration in prevalent companies in the industry could be on the forefront of social change as legalization continues to spread. Not only will this accelerate the rate of policy change in the industry, it will bolster the reputation of those companies willing to incorporate ESG practices into their business as a leader in the push for this positive social shift.
Why ESG Integration is a Promising Investment Opportunity
As ESG practices increase in this industry, investors will continually take notice. The fact is that ESG Integration can be indicative of how a company serves its many stakeholders including their customers, workers, shareholders, etc.
Couple this with the promise of being a thought leader in the shift for cultural and environmental sustainability and you have a company that shows promise as a profitable investment as opposed to companies who are only contributing to those issues.
By openly integrating ESG into your business, you are likely to open doors that will provide opportunity for investment in a multi-trillion dollar category that is increasingly popular with younger investors who are looking for these principles. The social political environment surrounding the extraction industry has only accelerated in its attempt to increase awareness and action toward a more sustainable future in terms of environment and society.
With customers and shareholders continually driving this point home, avoiding ESG integration in the extraction industry is to be cut off from investors who understand the increasing value of these issues in a climate that will only continue to demand sustainable practices.
What Extraction Methods are Environmentally Sustainable?
Though ESG integration in this business is industry wide, there are niches that implement these practices more efficiently that may be more appealing to investors. Supercritical CO2 extraction is on the forefront of ESG practices as opposed to other extraction methods. In terms of impact, methods of extraction like ethanol and hydrocarbon are exponentially more detrimental in terms of CO2 emissions, energy use and customer health.
For example, customer interest in organic goods has drastically increased within the last decade. The ability to create safe, organic products from supercritical CO2 extraction is far more reliable than methods used to create ethanol extracted products. Denatured ethanol is a large contributor to this issue.
Chemical denaturants added to ethanol for the intention of avoiding excise tax are added intentionally to deter human consumption. But, denatured ethanol is commonly used in the extraction industry. This leads to the question of customer health after long term consumption of hemp and botanical extracts that could otherwise be avoided using more sustainable extraction methods like supercritical CO2.
CO2 extraction is also demonstrably less impactful on the environment when compared to other extraction methods. This can be seen both in CO2 emissions and energy costs. For example, at an extraction output of 1 ton per day of hemp, the rate of total energy use for ethanol extraction can be estimated at 5387 kw/hr as opposed to only 43.20 kw/hr with supercritical CO2 extraction. Couple this with an exponentially higher carbon footprint due to higher CO2 emissions and the opportunity for investor interest in terms of ESG practices being to narrow. This calls to question the necessity for more sustainable extraction practices like supercritical CO2 in order to compete in a market that continues to lean toward ESG.
Where is the Future of ESG Headed?
It appears that ESG practices are a firmly established aspect of the extraction industry that is here to stay. There is little evidence that the environmental and social progress made in this industry shows any sign of receding, and investors are taking note. Therefore, it is critical for any extraction business hoping to remain in the industry to adopt ESG integration into their practices.
There are clear practices that can be implemented to both new and existing extraction operations that can increase the contribution to the ESG movement as a whole. One of the easiest ways to do this is to implement supercritical CO2 extraction into your business.
This on its own can dramatically reduce CO2 emissions, drop energy use and take part in the increasing demand for health centric organic products that consumers are looking for. Adopting ESG could easily mean the difference between a profitable extraction business and being left in the dark in the industry as a whole.