The best way to evaluate if a cannabis business is socially responsible is to start with management's "mission and purpose."
That's according to Will Muecke, a partner at cannabis-focused private equity firm Artemis Growth Partners. Muecke discussed the topic Thursday as part of a panel event at Benzinga's virtual Cannabis Capital Conference.
Going Through A Checklist
Social responsibility has become a top priority in the business community and the cannabis sector is no exception. It is important to understand why a cannabis entrepreneur is starting a business and if they are in it just to make money, Muecke said.
As a private equity investor, Muecke said he also looks at the corporate structure and governance, he said. It is also important to understand the policy of inclusion and who is being hired.
Also important in the evaluation process is determining who the cannabis company serves.
But at the end of the day there is no way to quantify the degree to which a company is or isn't socially responsible, he said. Investors should "come up with your own toolkit" before entering an investment, be it a public or private company.
A socially responsible cannabis company will be able to identify all of its stakeholders and show they are all valued, Tahira Rehmatullah, President of cannabis consulting firm T3 Ventures said. One of the broader groups of stakeholders that need to be properly taken care of is the community where the company operates in.
The community needs to benefit from job creations and more responsible companies are able to create a higher number of jobs, as opposed to just a "few opportunities for a small subset of people."
There are many "objective metrics" that investors can look at to determine if a cannabis company is acting in a socially responsible way, Steve DeAngelo, lifelong cannabis activist, entrepreneur and The Last Prisoner Project co-founder also said. At the basic level, understanding who certifies the company, how it manufactures and packages its products, and how the facilities generate electricity represents a good starting point.
Looking at management's intentions is "really important" and something to be applauded because "intention often sets outcome," he said. But at the same time, "intention is hard to assess" so investors should "take a look at everything that goes into whatever it is that company does on an operational basis."
Hiring Released Prisoners
Cannabis companies should always be open to hiring released cannabis prisoners
and this would be a "meaningful" gesture to solidifying a commitment towards social equity, DeAngelo also said.
Certainly, hiring released prisoners isn't an easy process but should represent at the minimum a "baseline commitment," Rehmatullah added to the conversation. In the early days of cannabis legalization, this posed more of a problem as the industry wanted to give the impression it is "pristine."
Fortunately, a lot of activists including DeAngelo have been working to address this stigma to the point where hiring released prisoners is now "inherent in every organization."
Statistics looking at the board of director compositions shows a "clear correlation" between the diversity of board members and the performance of the company, DeAngelo said. In addition, consumers are demanding now more than ever that companies operate in a more socially responsible way.
Consumers can spend a few minutes researching a company online and will certainly voice their approval of a company through their spending habits.
These are selling points that can be emphasized to investors who may not be fully aware of the importance of social responsibility.
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