The cannabis processing and cultivation industries are rapidly growing. Hemp and both recreational and medicinal marijuana products are now legal in the United States. This rapid growth and legalization comes with increased regulatory scrutiny, including in sustainability and environmental areas. Cannabis businesses that fail to comply with these regulations could face legal action, enforcement actions, fines, penalties, and negative publicity. However, cannabis businesses that are well-prepared may be exposed to litigation, enforcement actions, fines, penalties, and other penalties. Those who take a proactive approach might be able to reduce or even monetize the risks. Continue reading to learn about seven common environmental impacts that can affect cannabis processors and cultivators, as well as how to manage them.
Pesticide Misuse
As with conventional agriculture pesticide misuse by cannabis growing operations poses a direct risk to wildlife, fish (really any life in nearby water bodies), consumers and employees. While research is ongoing, it is still not clear what the effects of long-term and short-term exposure to pesticides through cannabis consumption (eating or smoking) are.
Pesticides are well-regulated, including under Federal Insecticide, Fungicide and Rodenticide Act. However, cannabis remains an illegal substance under federal law. The United States Environmental Protection Agency (EPA), has not approved any pesticides that can be used on the cannabis plant. The state pesticide programs attempt to fill the EPA’s void. Arizona Department of Agriculture (ADOA), has created a document that describes the requirements for registered pesticide products that can be used on hemp. These requirements include, among others, that active ingredients be exempted from the requirement of a tolerance under FIFRA rules at 40 C.F.R. Part 180, Subparts D and E; that the pesticide be labeled as expressly for use on crops intended for human consumption; and that the pesticide’s active ingredients must be allowed by EPA for use on tobacco.
Similar issues arise under federal and state worker safety and worker Right to Know laws. Employees must be informed about the chemicals present, proper handling, and risk management procedures. Since growing cannabis has not always been legal, growers did not always choose pesticides that were “approvable” by EPA. In the past, clandestine growers used banned and blood thinners/rat-poisons against crop-eating mammals. They also did not properly dispose off pesticides and wastes. The EPA provides a Pesticide/Herbicide Factsheet to its site investigation teams for cannabis grow sites. This focuses primarily on improper pesticide applications and/or disposal. This is especially important if the land is being sold as part a corporate investment. The buyer must do its due diligence to identify legacy waste, pesticide issues, and cleanup liabilities.
Land Use and Habitat Impacts
Large illicit grow operations, as seen in pesticide misuse, have caused or exacerbated habitat and land use issues in the areas they are located. Many have made significant changes to the landscape including ground cover, erosion impacts, new roads, diversion and drainage of wetlands. Some states, like Colorado, have taken steps to encourage indoor growing and discourage outdoor.
Local regulations, such as zoning laws, govern the location of cannabis cultivation and processing. There may be special procedures for obtaining zoning approval. For example, approval by a planning commission or governing board is required. A public hearing with the opportunity to comment is often required. Local governments can also impose zoning conditions for cannabis facilities. This includes, but is not limited to, buffer zones and density conditions, hours, hours of operation, odor controls requirements, required operating permits, storefront characteristics, and necessary operating permits. This means that requirements can differ greatly from one jurisdiction or facility to another. As such, it is important that cannabis businesses properly assess and understand them in order to make smart investments and use their resources effectively.
Waste Management Issues
The vast majority of cannabis processors and cultivators produce a variety of waste streams. They are therefore subject to a host of waste management regulations. Manufacturing operations produce waste similar to those produced by non-cannabis companies, such as food and medicinal tinctures. Grow operations produce agricultural waste, which must be managed and disposed as a regulated or schedule substance (e.g., pursuant the Drug Enforcement Agency (DEA), or state-level programmes). They also produce mercury-containing hazardous waste from the use of ultraviolet (UV), lights. This requires special handling and management. Due to the use of THC extract chemicals, which can be toxic or flammable, cannabis processors may also produce hazardous waste. Many jurisdictions consider marijuana flowers and stalks, roots, trimming, leaves, residue, or wastewater hazardous waste. The most common EPA violations in cannabis are those involving improper or inadequate documentation regarding cannabis waste and/or its disposal.
Water issues
Like conventional agriculture, cannabis processors and growers face two major water problems: how do they obtain sufficient water and what to do about process-water releases. Both indoor and outdoor grow operations have been affected by water resource depletion. The average outdoor cannabis grow operation consumes approximately 6 gallons per plant per day. Before legalization, illegal grow sites didn’t have access to water utilities. They were usually located in remote areas and depleted of local surface water. The increased demand for water supply infrastructure can also be caused by indoor grow operations. These facilities can also cause problems for water treatment facilities that are not specifically designed to treat and monitor cannabis waste products, fertilizers and pesticides. Municipal wastewater treatment facilities treat large cannabis grow operations as industrial dumpers. They may be required to pay surcharges due to higher treatment costs or monitoring cost resulting from waste streams. It is crucial that cannabis grow operations plan for how they will dispose of wastewater and how they will obtain water rights. This will ensure that their plans are practical and feasible.
Energy Use
Many indoor cannabis cultivation operations require high-quality electricity service and infrastructure. Indoor cannabis cultivation uses a variety heavy-load electric devices such as UV lights, which can be on for up to 16 hours per day. There are also irrigation systems, HVAC systems, air filtering, and HVAC systems that manage humidity and plant organic smells. For example, Denver saw a doubling of electricity consumption due to cannabis grow operations in the three years following legalization. This is close to 5% of total electricity usage for a city of 2.8 million people. High electricity demand is not the only reason for high carbon dioxide (CO) levels.2The significant and worrying (and significant) footprints of cannabis grow operations is particularly concerning. It is estimated that indoor cannabis grow CO2The annual emissions could be between 0.5 and 15 million metric tonnes, which would roughly equal the number of additional cars on roads. The large electricity demand and high potential CO emissions are significant.2The footprint program will likely be reduced for other industries, or have an indirect cost impact on electricity providers that are already highly-regulated.
Air Quality Impacts
Both the air quality of local communities and workers working in cannabis plants can be affected by the operations. VOCs are released from cannabis plants during growth and processing. This is due to the evaporation solvents used in the THC extraction process. VOCs are commonly known as an ozone precursor, as they have the potential to react with nitrogen oxides (NOx) to form ground-level ozone, which is a regulated pollutant under the Clean Air Act’s National Ambient Air Quality Standards (NAAQS). Processing cannabis can also lead to hazardous air pollutants (HAPs). The cannabis plants produce vapors. Terpenes are substances that give rise to the various flavors and aromas found in cannabis plants. However they can also cause harm to employees when they react negatively with ozone (O).3), commonly causing irritation or inflammation to eyes and airways.
These air quality issues may mean that cannabis operations may require one or more air permits at various stages such as construction, operation, or installation and use of equipment. Each type will require different types of monitoring, recordkeeping and other conditions. In order to ensure compliance, the facility must also manage changes that could necessitate permit revisions. As a relatively new industry with an evolving regulatory framework, cannabis businesses must ensure they adequately review and stay up-to-date on changing rules and guidance—both related to air quality issues and others.
ESG Considerations
All the above points highlight the environmental challenges faced by the cannabis industry, which can often lead to public backlash from an increasingly environmentally- and sustainability-minded public. Customers, investors, workers, and the general public are driving cannabis operators to be more aware of their environmental, socio, and governance opportunities and risks. And while it may be easy to focus on the ‘E’ in ESG, there is also an emphasis on achieving Social justice in the cannabis industry via corporate responsibility and service-based actions, particularly in order to remedy the racial injustices associated with cannabis’ history so far. ESG allows cannabis companies to identify and address the evolving issues they face, including cybersecurity, diversity, equity, inclusion, and environmental. This could be a risk to their sustainability.
The ESG regulatory framework for the United States is still in development. Recently, the Securities and Exchange Commission (SEC), announced a proposal for rulemakingThe 2022 update is expected to be made to the Federal Trade Commission’s (FTC) Green Guides. Companies that want to adopt and leverage ESG principles to increase their goodwill, receive financial incentives, or achieve any other goals should ensure they are aware of how ESG programs are evaluated. False or misleading statements made to customers, investors or other stakeholders can quickly become the basis for litigation if they aren’t backed up by sufficient data and actions.
Next Steps
As the cannabis market matures, more regulation will follow. This will bring with it additional risks and opportunities. These risks and opportunities can be managed, mitigated, or monetized if cannabis companies take a few easy steps.
- Take stock of environmental and sustainability impacts – Conduct a risk assessment to identify the elements of your business that interact with the environment (or ESG), as well as the associated impacts and liabilities.
- Develop an internal compliance management system – Prioritizing the risks faced by your business allows you to tackle challenges based on their materiality to your business, while continuing to grow and expand your business.
- Identify opportunities, not just risks – Compliance does not have to be a cost center; it can be an opportunity driver as well. Experts in environmental and ESG can help you identify opportunities such as tax incentives for renewable energy that will help you achieve both your short-term goal and long-term goals.