Signs and Signals of an Ethical Cannabis Business

Professionalism and cannabis are not the first two words you would think go together. After all, culture has often depicted cannabis entrepreneurs as dealers and dark figures in society. But it's clear that the cannabis business is evolving from the days of dealers and shady individuals. Now, with select banking access the cash will soon be behind us, but what about the dark figures? 

Today’s headlines often still refer to the cannabis industry as either a high-risk, lucrative industry or still as the rough patch of business operators. But as someone who’s witnessed and participated within the industry, I know diamonds in the rough do exist. And things are getting better: Through each stage of the “Green Rush,” market consolidation and competition have caused more bad actors to be pushed out of the market as new professionals enterhence, an improving landscape.

As most business schools and Fortune 500 companies illustrate, business ethics and corporate values are of high importance, especially when dealing with consumer goods. Trust is everything.

Here are a few indicators of ethical companies in cannabis that I have observed through my experience:

The Fundamentals Clearly Show “Ducks in a Row”

Companies that are proactive as opposed to reactive in categories such as compliance, employee satisfaction, service ratings, and other methods of tracking internal performance often illustrate a sense of having it together. It is also an indicator of a drive to always improve—and a good sign that a business will be around for the long haul.

When you think of companies and reflect on whether they have their ducks in a row, do they ensure that deadlines are met? If not, does their messaging contain proactive accountability and instill confidence in their customers? Companies that do the little things right and have a proactive nature about fundamentals often keep themselves from situations that cause them to stray from ethics.

Cannabis companies that provide benefits to the community by raising money for local causes, establishing volunteer programs for employees, or donating to worthy charities are good signs that they are ethical businesses with plans to be around for the long run.

Thorough, Accountable Procedures Are Common—Not Cutting Corners

Companies with record-keeping practices that are organized and quickly accessible tend to meet a foundational threshold. However, those that stand out use those records and information to perform at an above-and-beyond approach. 

Companies that promote the use of this information to be provided with clear incentives internally, while also delegating decision makers and incentivizing them toward “doing the right thing” for the organization, tend to provide a more thorough approach to each and every smaller business decision.  Those add up and create patterns for success. Good decision history should routinely be highlighted and low-quality decision history should be respectfully discussed for improvement. Teams that focus on “do your best everyday” as opposed to “we did a good enough” will develop a tracked accountability and diligence process for teams to self-recognize behavior, process, and identify where they could be cutting things short.

Inspiration Contains Compassion, Authenticity, and Transparency

Many are in the cannabis industry for reasons other than profit. The topics that inspire leaders and founders tend to show a clear indicator as to what types of values are within their organization. Sometimes, the inspiration is related to compassionate use or medicinal focus of healing people. On other occasions, the inspiration is related to pioneering and setting a new standard of best practices. 

Whichever rationale the leaders or founders have is likely correlated to how much responsibility the founder or leaders take when they approach business on their day to day. This is an important overall pulse to monitor in cannabis companies as the products and services will represent this responsibility both directly and indirectly. Word-of-mouth reputation and authenticity is big within the industry and an approach that appears overtly corporate or focused on an unethical inspiration won’t resonate with the mass consumer or business-to-business partners.

Read more of Mike Martinez’s thought leadership.

They Highlight Their Partners

In general, cannabis compliance legally enforces products to go through much more extensive lab testing for quality and health assurance than grocery store produce. However, companies that communicate the cleanliness of their process or product sources are good indicators of where their values are. 

Good actors often will utilize recyclable materials for sustainable packaging or are proactive on product labeling, indicating a sense of transparency on what goes into the product. For non-vertically integrated companies, the supply source is important—they have to be a trusted partner, and the relationship with that trusted partner’s supply source serves as a temperature gauge on how volatile product quality can be. Cannabis companies that follow best practices of relationship management and ensure fair pricing to the source partner will craft a synergistic alliance where both companies can focus on their expertise to sustainably grow together as true partners. Again, word of mouth matters and treating partners right is important.

Learn more about Yes Studio’s approach to Venture Capitalism.

They Put Their Money Where Their Mouth Is

Cannabis companies that provide benefits to the community by raising money for local causes, establishing volunteer programs for employees, or donating to worthy charities are good signs that they are ethical businesses with plans to be around for the long run. Others who consider profit sharing with a selected cause or participate in fair trade, fair pricing, and fair practice share a commitment to create something more than just the product itself and intend to improve the industry. Taking the stance to improve the environment, literal or not, is an active measure of values for the company. A short-term expense to the bottom line that creates a message of “we’re doing things different for the betterment of others” tends to resonate and create a larger commitment to act upon the greater good.

Some warning signs to steer clear from:

  • Internet search of names or brands contains scandals, complaints, or negative press
  • List of references does not have much detail or good stories to provide
  • Lawsuits or ownership disputes
  • History of bribery, corruption, or fraud
  • History of theft or violence
  • History of municipal fines or late payments
  • Lack of transparency
  • Poor communication and response times
  • Reputation for overpromising and under-delivering
  • Signs of erratic or uncommitted behavior

With ethics often stemming from the top, when monitoring cannabis organizations and their teams, you should ask yourself:

  • Do the individuals or team fulfill a general correlation to the following adjectives: trustworthy, loyal, respectful, integrity, responsible, and provides excellence? 
  • Can they easily provide a third-party list of three to five personal references? 
  • Does the leadership have ethical companies they benchmark off of from other industries?
  • Does leadership create focus groups or surveys for staff to hear constructive feedback?
  • Do they have a process to implement constructive feedback from the team?