Can sustainability be profitable?

By Alex Halperin
Jan 25, 2021

The cannabis business isn’t especially green. 

For decades, outlaw growers had little incentive to curtail their power or water use or avoid dumping pollutants. The old ways don’t carry as much weight as they once did, but underground growers’ methods and habits still influence procedures at licensed cultivators, many of whom have hired staff from the legacy market.

Amid the complications of running a licensed cannabis business, environmentalism isn’t a top priority.

But, for many cannabis operators, cleaning up their act makes financial sense. As competition intensifies on the licensed market, the lower production costs that can come with energy savings can be a competitive advantage. As an added bonus, environmental consciousness is attractive to an important segment of consumers. 

This has created a fortuitous situation for the industry: More than many businesses, cannabis growers and operators are positioned to improve their environmental practices and, at least in theory, save money at the same time.

Every cultivator “has an opportunity to improve,” said Derek Smith, executive director of the Resource Innovation Institute, a non-profit promoting energy efficiency in agriculture. (The group offers a tool called Cannabis PowerScore that enables cannabis growers to benchmark their energy use.)

Enter the Sustainable Cannabis Coalition (SCC), a new group of companies which aims to promote more efficient practices throughout the supply chain.  At the moment, “I don’t think [sustainability] plays a role in the C-suite at all,” SCC co-founder Peter Dougherty said.

In recent years, Dougherty said, many operators have expanded too quickly without standardizing their operations for maximum efficiency. To remain competitive, he said, growers need to cut their cost of production from $500 to $100 per pound. 

“The only way to do that is with sustainability and standardized practices,” he said. “It’s an economic imperative, not a philosophical imperative.”

Dougherty, a longtime tech executive, is CEO of Orion Partners, which has a platform called Gro IQ that uses artificial intelligence to help indoor and greenhouse growers to optimize their crops. He’s also chair of the National Cannabis Industry Association’s facilities design committee.

“An opportunity to improve”

Other founding SCC members include companies that specialize in making grows more efficient in terms of lighting, facility construction, water use, emissions and climate control among other variables. 

“To play at the commercial level, you have to start looking at all of those types of inputs,” said Michael Salaman, president of GrowGeneration, a publicly traded retail chain and SCC member that supplies commercial growers with hydroponics, lighting and control systems. 

While every company wants to cut costs, not all efficiency efforts have gone over well with growers. Notably, some in California have bristled at a proposed mandate for commercial operations to switch from traditional high-pressure sodium bulbs to light-emitting diodes (LEDs). The growers fret LEDs would hurt product quality and cost millions to install. (Once installed, LEDs cost far less to power.) 

Growers are making the switch at an “explosive” rate, Salaman said. The increasingly cutthroat market conditions Dougherty highlights suggest growers who resist change do so at their peril.

However, the industry’s current alignment of financial and environmental prerogatives won’t necessarily last forever. Last summer, scientist Evan Mills and cannabis consultant Scott Zeramby, collaborated on a report which found indoor growing “does not appear to be defensible on energy and environmental grounds.” It also criticized subsidies offered to indoor grows to become more efficient, as a way to “legitimize polluting activities that could be performed outdoors with virtually no energy use.” 

If similar sentiments catch on with regulators or the public, it might not be so easy being green.