Podcast Diaries: The Cannabis Conversation E21

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The Cannabis Conversation. A European perspective on the emerging legal cannabis industry.

Welcome to The Cannabis Conversation with Anuj Desai, where I explore the new legal cannabis industry by speaking to the professionals that are helping to shape it. Today's episode is about cannabis and Corporate Social Responsibility. CSR is quite a popular topic for many businesses nowadays, and it will be good to understand how that is impacting on the new cannabis economy. Got a great guy called Toby Shillito, who's been in the cannabis industry for quite a while. He's got some great insight on the emerging trends, but also he talks a bit about the industry coming in from a system of prohibition, and how that provides opportunities too. Okay, let's get on with it. Enjoy.

So today I've got Toby Shillito on the show. Toby's here to talk about Corporate Social Responsibility in the cannabis industry. Toby has an MBA from London Business School, and he's an investment advisor to various businesses in this space. He's particularly passionate about how the cannabis industry can make a positive contribution to society. So he's the perfect person to speak to about CSR. With the brand new cannabis industry developing, Toby will tell us more about what businesses in the area can and should be doing in relation to CSR. Toby, welcome.


What actually is CSR?

Yeah, so Corporate Social Responsibility is all about businesses thinking beyond the traditional borders of the company, thinking about their position in society, and thinking about the power they have through their operations and their branding to affect society and the environment positively.

Fantastic. It's definitely a three letter acronym that's come more into corporate culture in the last few years in every industry, but it'd be interesting to find out how that's sort of happening in the nascent cannabis industry. What sort of approach are businesses that you're seeing taking towards CSR?

Well, generally we're seeing that as prohibition retreats companies have an opportunity to operate in the light. As they say, sunlight is the greatest disinfectant, as you have a responsibility as a company, yes, to return funds to your shareholders, but also a sensible and sensitive company will be thinking about their place in the world. And obviously you might start with thinking about their environmental impact. How is it that during their operations they create benefits to the environment, or perhaps more likely how they create negative environmental impacts, and how can they do something about that? And I think the main point is that as prohibition retreats, companies have an opportunity, and maybe even a duty, to be seen to operate within certain environmental limits. Now on a basic level, that's about doing some recycling, and managing your waste, and so on, but there's far more sophisticated levels you can take that to.

The top of the ladder of achievement, if you like, will be working with your suppliers to think about decarbonizing their impact on the planet as they provide goods and services, or raw materials to your company. And also then thinking beyond the use of the consumers. Now in a traditional business, there's not much incentive to think about how the stuff gets made that we then process, and not much incentive to think about how the waste materials after consumption are dealt with, but a thoughtful and forward looking company will have strategic ideas about where they fit within a particular value chain, rather than as a particular set of operations. And the best of the best are looking downstream and upstream, in terms of controlling neutralizing the harmful effects they have on the environment.

It's really topical actually, isn't it? I mean that David Attenborough documentary last year, Planet Earth, I think, where he revealed the extent of the plastic in the sea, really brought it to the forefront of everyone's attention. And one of the things that personally attracted me to the cannabis industry was the opportunity to be part of a new industry that can be built on today's standards, particularly in relation to sustainability and environmental factors.

Yeah, you're quite right. And in prohibition, if we're really honest about it, the cultivation part of the cannabis plant is environmentally devastating. First of all, prohibition forces cultivation indoors. That means, by some estimates, 8% of, for example, California's national grid power are being used on cannabis cultivation. This is unsustainable.

And that's lights, presumably.

Yes, exactly. So lights to replace the sun simply from the sense that you want to keep everything concealed and clandestine. So it's prohibition that creates the conditions for a less environmentally positive set of operations. So you've got the electricity, and don't forget, as consumers, we all go around thinking that our marijuana buds smell of the pine forest and the jungle, actually they're entirely a product through cultivation of burning fossil fuels. And you don't think of that when you're looking at a beautiful sparkling marijuana flower. So there's electricity, but it goes a lot more ... that's the obvious one, but it goes a lot more beyond that. Clandestine cultivators will not be taking any chances of recycling their materials. They'll be dumping them on the side of the road, probably in haste in another layer of plastic, probably in the middle of the night for someone else to sweep up. They certainly won't be going down to the municipal recycling dump and taking the risk of a people understanding what they're actually doing for a living as they perhaps more sustainably recycle or compost their materials.

Equally, as under prohibition cultivation is forced inside, you come away from all of the natural ingredients of a plant. We've talked about the sun being replaced by electricity. Very likely won't be using soil. You'll probably be using Rockwell or coconut husk. Now coconut husk is slightly less environmentally damaging the Rockwell, but it still involves plantations of low paid workers in countries such as Thailand and Sri Lanka packaging in plastic the hairs of the outside of the coconut shell to be transported thousands of miles and used as soil substitutes, and then probably chucked away, often by the side of the road. Rockwell is even worse. Rockwell is very a common cultivation material. It's wonderful in that, just like coconut husk, it allows a lot of light ... I'm sorry, a lot of air and a lot of liquid around the root zone. Fantastic. Rockwell is actually made by heating rocks to several thousand degrees centigrade, spinning them in giant like washing machine tumblers almost. And again, at the end of the process, packing them in plastic, transporting them thousands of miles. And at the end of the process, then being dumped probably quite unsustainably.

So that's a really good run down, and I'm sure there's lots more, on a compelling case of why prohibition is bad from an environmental perspective. What do you think the new businesses that are ... the legitimate businesses that are trying to grow for CBD and medical, what are they doing positively for the environment?

Yeah, good question. I mean the most obvious thing, of course, is that we can now go back into the sunlight. That's as close to a renewable energy resource as you get. That means you get a natural product, which is sun grown, and has all the conditions that you would expect from this plant over tens of thousands years worth of its evolution on the planet. Equally, you have an incentive to look after the soil. You're not going to throw away the earth you were using in an outdoor cultivation. So you want living soil, with all the earthworm castings, and the bone meal, all the vitamins and all the other things that can be added to an organic soil that will keep producing for you into the years without the expense of it being replaced. Those are pretty obvious opportunities. Also, the disposal of fertilizer, for example, previously would be probably just chucked down the drain, the excess, or the surplus, or the runoff. These days you can think much more widely about organic fertilizers, and go through the whole yearly cycle as any other sustainable farming operation at hand.

Fantastic. So that's a really good rundown on the environmental side and the growing side. And obviously, I think people are getting a lot more aware of agriculture and farming's impact on the environment. So there's a huge opportunity there, quite apart from the fact that the cannabis plant and hemp plants suck up more CO2 than your average crop.

Yeah, quite right. That cannabis plant evolved early on at a time when the planets carbon dioxide levels were about 1,500 parts per million, and they're now about 3 to 500. And so yes, the plant can absorb a lot more carbon dioxide than many of the others, because it evolved at a time when there were high levels of carbon oxide in the evolution of the planet.

Very interesting. Cool. And then what are the other sort of strands of CSR? Because that's very environmental. Is there a people side of it?

Yeah. I mean essentially the thoughtful companies will generally start with environment, because it's quite an easy win. And I think another point there is that under prohibition there's no branding, and there's no incentive for a producer to show that they have done things in a responsible way. Now we're all out in the sunlight, quite literally, the consumer demand will insist that brands only become popular if they're already covering these other bases. And yes, we might start with the environment, but there's a much more sophisticated ladder of opportunity and of achievement for companies that are aspirational in this area. And inevitably some of that will come back to self promotion and self branding, but let's not be too cynical. A lot of this is also win-wins between making more profit, and more sustainable profit into the future, as well as basing your operations in a more environmentally or socially sustainable manner. So you might also think about ... Aside from the environment, you might also think about the workplace that you operate in.

How is it that you treat your staff? How is it that you insist on health and safety standards, for example. How do you think about diversity in your workforce? How do you think about developing employees skills such that they have better paid and more satisfying jobs as they move through their careers? And again, in clandestine cultivation, it makes a lot of sense to traffic kids and to use child labor in very dangerous places, often taking over abandoned factories, leaving the kids there to sleep in hammocks, and to do all the work locked inside a very hazardous workplace, where you've got potential for fires, and poisoning yourself with the fertilizers, and a lot of other damaging things that can be done. These kids obviously are paid very little and treated very poorly. On the other hand, you can see the opportunities, in an open and transparent industry. Yeah, partly to support your brand, but partly simply because it's the right thing to do, and it makes economic and social sense simultaneously that you can see the rise of some women entrepreneurs now. That was really not a thing under prohibition.

Well, we had Jessica Steinberg on a few weeks ago, talking about women in cannabis as a kind of movement and a thing that's being cultivated, and actually reassessing what's happening with that. And it's not quite living up to the promise that everyone hoped, but there are loads of amazing female entrepreneurs out there doing-

I think it's probably just the beginning, and you can see in a risk taking, rather macho environment, the women perhaps will be excluded equally. So you have people like Hilary Black at Canopy, for example, who's been working this industry for 30 years, and is a fine, shining light for anybody else to follow. Got people who might otherwise be classified as disabled pushing the medical marijuana agenda. People like Ken Estes of the GrandDaddy Purp Collective in California, who has been wheelchair bound since, I think, the 1970s. He's a fantastic cultivator, and a fantastic advocate for the power of the cannabis plant to help with his injuries and those of other people. Equally, there's a very basic responsibility that if you have a job at whatever level it's wrong for you to have to be injured, or killed, or hurt in some way at work, generally. Engineering and electrical companies have been discovering this over the last couple of decades anyway. So the idea of wearing goggles, and gloves, and not exposing yourself to the toxic chemicals.

Even now, there's some research into the effect of indoor lights on your skin, in terms of various melanomas and so on. All of this is completely hidden under prohibition. And now there's this huge opportunity to take care of your workforce, from the basic trimmers upwards, and manage the business as you would a longterm operation. Again, under prohibition, it's very difficult to find the incentives to collaborate collectively. It's difficult to make longterm plans. It's difficult to get financing in place fully. And you have to cut corners and take risks. And it shouldn't be that the workforce bears the brunt of those risks.

Really interesting. What about the market place? What about the selling environment?

Yeah, so previously you were operating in a very inefficient market, with very desegregated producers and consumers. Supply chains were very messy. And of course, consumers were paying a prohibition premium for their product. And obviously at the other end of the chain, the consumers and distributors face prison time, with all the horrendous impacts on their family, and themselves, and their future that that entails. When prohibition retreats, you get to a point where now the products are analyzed to two decimal points. As a consumer, I can go and understand exactly the ratio of THC to CBD, for example, and I can choose the products that work for me, whereas previously you more or less had to grab whatever you could.

Or your doctors can choose them for you.

Indeed. Yeah, that's right. But now there's the analytical capacity and the scientific knowledge to show us that you can choose a particular thing for a particular ailment, or a particular mood. Then there's another element where it's quite normal now for analytical labs to have looked not just at the ratio of CBD to THC, but to be sure that the flowers or other derivatives that you're consuming are free of pesticides, heavy metals, E. coli from the processing, and solvents from the extraction. And all of that's hugely important because those are invisible to the human eye, and only through having samples analyzed in laboratories now can producers stand by their product and say, "No, this is really what we have here."

And that's very important. And we've had a few guests on to talk about CBD from a number of different angles, and it's a very important focus, I think, for CBD producers and retailers to ensure that customers know that their product is free of those things.

Yeah. It's about consumer choice, isn't it? Where previously there wasn't any. Equally, for the producers. I've never met a producer who wouldn't ... a clandestine producer who wouldn't love the opportunity to pay tax, and to be proud of what they do, to have their head above the parapet, and not to be facing criminal charges, but to be loud and proud about the things they have created. This is a natural product. Cannabis plant has co-evolved with humans over many, many thousands of years, and has followed us around the planet in all of our migratory paths over huge amounts of time. Now it can be monetized, not for the first time in its history, of course, but monetized in a very 21st century manner. And the fact that in Colorado the authorities receive $250 million a year in taxation with a population of five million people shows you the kind of economic power that the plant has.

Cool. Thanks Toby. That's great. Are there any other aspects of CSR that we've missed here?

Yeah, I mean so we've thought about the environment, we've thought about your workplace, we've thought about your marketplace, your position in the value chain. Let's think also about how your operations affect the local community around you. Now it's possible to offer albeit some of those low skilled jobs in areas of economic deprivation. Think of the Marleys buying up Claremont prison in California and being the major local employer for hundreds of miles around.

Cool. There's loads there to talk about. And I think it's good actually, because I think you hear the term CSR banded around a lot, and no-one really knows what it means. So it's good to understand it.

Yeah, I mean we've been a bit mechanistic, haven't we, about sort of break it down? But it's a mindset. And if the directors and owners of a company understand that they have a longterm position in society, and in fact they are benefiting from their license to operate, quite literally. And if they understand that as a reciprocal arrangement with society, that the one supports the other, then we come to the better face of capitalism, where capitalism creates innovation, and it creates wealth. And in fact, some of that wealth can trickle down if capitalism is managed well.

Sure. Okay, so I think that's been a really good comprehensive overview of some of the things that are going to be happening. What's your personal story in cannabis?

Okay. Well, essentially someone passed me a spliff in 1984. Moroccan hashish. I smoked it, and I didn't feel particularly high, but I felt calm and whole, and I felt thoughtful, and I felt relaxed and peaceful. I was 14 years old, and I smoked it throughout my teenage years on the weekends a little, not every weekend, but now and again, over the next sort of five years. And since then I've set up 20 grow operations in Northern Europe, and enjoy it very much well having normal jobs and everything else, enjoy it very much going back to school.

So you got an MBA [crosstalk 00:17:52].

Yeah, and I've graduated from a couple of universities, and I've even worked in the city a little bit, very undistinguished career. You don't hear that very often. Deeply undistinguished career in the city, but all the time growing in my attic or my shed.


So there was that too. Then I finished working conventionally eight years ago, gave myself entirely to the cannabis industry, and really my growing took off when I went to Spain four or five years ago, providing flowers and extracts for the Barcelona social clubs. And then I had the time and perhaps the resources to do it at scale. And with, I guess, more commercial arm ... with more commercial aims, and that's been very exciting. I'm very lucky. And again, this is going to sound ridiculous, but I wake up every morning, [inaudible 00:18:40] thinking about the cannabis plant, but more than that these days I wake up every morning feeling grateful because I never felt I would live to see the day when we can talk about these things openly, and where it's now accepted that this has a part, and this plant has a part in human society. And that's a legitimate thing that you can be proud about.

That's a very good tale, and clearly you have a deep relationship with the plant, which shows. And I think it works really well with the CSR perspective on it, because you care around how it will be featured in our society for years to come. So I think at the end, it makes a lot of sense.

There's an interesting threat coming though. Prohibition brings an awful lot of good ... Sorry, the end of prohibition brings an awful lot of good, some of the things we've talked about so far, but it also brings a threat to the plant, and most of the models of prohibition are based on governments who are reluctant, and actually slightly frightened to open the doors, as they would see it. And it's very tempting for a government that's thinking in that way to give a small number of licenses to apparently trustworthy large corporations. Now this means, if you like, the McDonaldsization of the plant, inevitably. A better model for liberalization is simply to say our population in this country has the human right to consume what they want to consume, consenting adults in public.

And you see that as a wave of the retreats of a lot of more realistic legislation. It's now okay to be gay. The legislation was designed moralistically perhaps from the 1950s onwards, was the government sitting in your bedroom or your living room. And I think at this point of history, the vast majority of the people have realized that it's better to be tolerant of other people's differences. Maybe they're not interested in the cannabis plant at all, but it's okay if some other people are. Liberalization of the plant also brings a threat, which is that the plant is subsumed by money, and returns on investments, and suits, and apparently structured organizations, and so on. Now, there's a big culture clash at the moment between obviously the old school clandestine, independent minded lovers of the plant who have risked their time, and have had to be very quiet in front of their family about what they do, who know what they're doing and who are prepared to take a risk, and are going to do that because the plant is in their world.

Now here come the suits, and the organization, and the structure, and that mix is going to be really uncomfortable. And the way that most governments have gone about killing prohibition is not based on the idea that people have a human right to consume a plant, and consenting adults in public in your own living room, but about the apparently safer, most Daily Mail proof methods to legalize. In the UK, for example, you'll see a very small number of permits given, oh really, to friends, and relatives, and so on of people in power. Often. I'm not a conspiracy theorist at all, but you can see how a government would think that way.

Are you referring to the soon-to-be ex-prime minister.

Well, that's right. And it's more netted in than that. Yes, that's right, but in general, people in power are giving other people with plenty of money and power the ability to make more money in power. And I think that's why a scared government will react reluctantly and act that way. And there have been huge debates like this in Canada. I remember six, seven years ago in Vancouver, being part of a system, which as an English person made me deeply alienated and uncomfortable. They were actually saying, "Wait, we voted for you. You have to do what we say." And that was really strange for an English person, apparently, from the cradle of democracy, where we'd rather vote for people and then get told what to do as a population. That's quite wrong. The Canadians, very clear, standing up and saying, "We want to be able to grow plants, each of us, whichever ones we choose in our backyard. We don't want to have to pick from a very limited range that the McDonald's to come will be providing for us."

Cool. Thank you, Toby. That's great. And look, I mean it's good to hear a very honest backstory to your involvement, and I'm not sure if it's kind of a moot question, but the one that I always ask my guests as my final question is what did your parents say when you told them what you did?

That's a really interesting one. So my dad was a provincial solicitor, very conservative, and neither of my parents had any exposure to cannabis or any other drugs at all other than alcohol, and this is something that, both my parents are dead now, but to the end of his life, we could never really talk properly about. It was only at the very end of his life, I spent the last six weeks with him, that we talked about my farming and other things, but there was never really a direct ... We had a very good and open relationship. There was never really a direct conversation about that because his understanding of the law is if the law says don't do something, you don't do something. Full stop.

My mom, on the other hand, was slightly more liberal and was a very keen gardener. And she died some time ago, and I regret very much never having had the opportunity to tour her around one of my gardens, but she would have been a little more ... she was a little more interested in the whole thing. Would never have consumed it herself, but it was a little more thoughtful about how other people live in different ways.

Oh yeah. I mean I can imagine it being quite difficult. It's a generational thing as well, isn't it? And respect for the law, and the rules, et cetera. So thank you for sharing that. It's very honest.

Well, it's a great shame that I couldn't be as proud and as open about the things I'm proud about having achieved ... some of the things I'm proud about having achieved in my life with them because the law doesn't allow it.

Well on that note, we shall bring this to a close, but thank you, Toby, for being very expansive and candid in your description of, chiefly, Corporate Social Responsibility in this area, but also your relationship with the plant. So I'm sure we could have you on to talk about a number of topics around this. So watch this space and let's see, but thank you, Toby.

Thanks [inaudible 00:24:35]. Thanks, that was very interesting.

No worries.

Okay. Thanks for joining me for that. Toby is a really interesting guy, and I thought it was a really great chat. He's very honest about a lot of things, and he holds great hope for where this might go, and obviously talks a bit about some of the concerns about corporate money coming in, et cetera. So it'll be an interesting ride. I think. We had the European CBD Expo at ExCeL center in London. Fortunate enough to meet key people who listen into the show at the expo, and it was big, it was in ExCeL, and it was a good event to see everyone there.

As I mentioned last week, I'm going to be working on the Product Earth festival, which is a kind of expo meets a music festival. It's on August the 23rd to the 25th, which is the August bank holiday weekend, at the National Agricultural Exhibition Centre in Stoneleigh Park, near Coventry. And it's a great place to learn more about legal cannabis, meet some people running businesses in the space, learn more about hemp, and there's a bit of music and camping alongside. So what's not to love? As always, if you're enjoying the show, please subscribe, share, et cetera, and I'll leave you until next week. Have a good one.


Show Notes:

In this episode, we speak to Toby Shillito, a Cannabis entrepreneur who has been deeply integrated within the space for 25 years, he holds an MBA from London Business School and is currently CEO of Sunshine Labs, a provider of legal Cannabis flowers and derivatives based in Europe, which seeks to carry out business responsibly.

Together, we speak about corporate social responsibility within the cannabis industry, what businesses can be doing and should be doing, the environmental impact of production, and the opportunities in which legislation brings.
Show notes: www.cannabis-conversation.com/blogs/episode21shownotes

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