What Might Cannabis Companies Lose When Cutting DEI As A Cost-Cutting Maneuver?

Like any industry, scores of cannabis companies face difficult decisions as the market trends down. In many cases, roles are reduced or made redundant, as evidenced by the ongoing wave of cannabis layoffs announced in recent months.

Often, non-essential and non-revenue generating components, including corporate social responsibility (CSR) and diversity, equity and inclusion (DEI), are some of the first to go or face cutbacks.

A pragmatic business decision is justified, but some caution that cutting DEI efforts go against cannabis community ideals and can undercut long-term business potential.

Non-Generating Components Go First

Cannabis is a unique industry in numerous ways, but its reaction to downtimes and underperforming numbers is not.

"In our experience, employees who are not revenue producing or critical to the operations of a cannabis company are generally cut first during layoffs," said Liesl Bernard, CEO of temp staffing firm CannabizTeam.

Talent acquisition and training join CSR as the first departments usually cut, said Anya Varga, chief people officer at Ayr Wellness Inc (OTC: AYRWF).

"It's hard to put a number to it, but I would imagine we are still at a moment where most companies look here first during tough times," said Varga, calling the decision a "delicate balance."

In most cases, companies first look towards the non-essential business sectors as it looks to scale back or re-align their focus.

"Too often, leadership considers cuts to 'nice to have' programs while focusing only on 'mission-critical' activities," said Marc Ross, head of impact and environmental, social and governance at Vicente Sederberg LLP.

Professionals in the space are reportedly noticing the effects.

"The commitment and budget put towards DEI and social equity and things associated with that nature has definitely been suffering," said Tahir Johnson, director of social equity for the Marijuana Policy Project.

A Case For DEI and CSR

DEI advocates feel inclusive efforts have long-term, often unquantifiable benefits for the business.

Johnson, CEO of the soon-to-launch dispensary Simply Pure Trenton NJ, doesn't see the cutbacks as malicious. However, he questions the long-term effect rolling back CSR and DEI initiatives have on a business.

"You can't calculate how many dollars you make from those things," said Johnson.

Varga agrees, saying that while cutbacks are necessary, lost talent from cutbacks or not focusing on DEI isn't worth it.

"It becomes the snake that bites its own tail," she said.

Several sources highlighted various studies highlighting the benefits of DEI.

A 2018 McKinsey report concluded that ethnic and culturally diverse teams are 33% more likely to outperform on profitability.

Kadijah Means, an equity and intentionality consultant, said cuts to sectors traditionally considered non-essential undermine the importance of inclusive work culture. She also finds the move detrimental to the business.

Means highlighted a 2022 McKinsey study of why employees resigned during The Great Resignation period. A lack of inclusivity and unwelcoming workplaces ranked fourth (14%) among survey respondents across six countries.

She said that employers should consider embracing inclusivity considering the time and cost of hiring new staff.

"When the cost of replacing employees can be six to nine months of their current wage, investing in retention strategies like DEI today will improve employee experience and save time, money, and energy," said Means.

Tahira Rehmatullah, an industry investor, co-founder of CBD brand Commons and member of Trailblazers DEI advisory board, offered a similar opinion.

Rehmatullah, a Benzinga Cannabis advisory council member, said, "Diversity continues to breed really good business: better decision making, more collaborative viewpoints and opinions to make the business stronger."

In 2019, an analysis of healthcare industry reviews since 1999 concluded that diversity improved patient care and financial results. The study also noted improvements in team innovation, communication and risk assessment.

The Importance Of Authentic Buy-Ins At The Top

Sources say they feel companies embrace DEI but aren't building it into their company ethos. Chaney Turner, chair of the Oakland Cannabis Commission and founder of advocacy and education group Beyond Equity, said DEI "Is a hollow word."

They called DEI "A term thrown out to make people feel good without actually doing the work."

Turner implores companies to invest in programs that support equity and inclusion in the workplace, including executive positions. According to Marijuana Business Daily's 2021 women and minority industry report, 13.1% of cannabis executive positions were held by people of color, down from 28% in 2019.

Turner feels that a DEI department isn't the same as company leadership buying into equitable business practices throughout the organization. In many cases, they feel DEI roles can tokenize the position and objective, indicating that some companies may not understand the objective.

"I don't care about your DEI; I care about the whole structure," said Turner, reference the need for a culture buy-in from leadership. They feel, "DEI is just telling me that you see me."

Simply Pure's Johnson agrees, saying that if company ethos embraces inclusivity, efforts can persist despite industry setbacks.

"If it's part of the fabric, if it's not just a press release, then it's not gonna go away," said Johnson, adding companies with inclusivity in its fabric will continue to consider such efforts even in a down market.

Cannabis may want to take an example from other industry leaders, said Common's Rehmatullah. She noted Patagonia and Ben & Jerry's, feeling both brands embrace company ethos exuded by their leadership.

She implores those committed to equity and inclusion to take on similar mindsets.

"Are you actually reflecting on what it means to be that future leader," Rehmatullah asked rhetorically.

Turner doesn't place the blame on the companies, but rather the laws passed by lawmakers.

"We have to hold our elected officials accountable," they said, saying that regulations have allowed for businesses to operate with "loopholes" ranging from equity to cannabis prices.

For change to occur, Turner said both the public and cannabis companies seeking change need to speak with their lawmakers. They shined a light on upcoming opportunities for change in Oakland, as well as other parts of the country.

"We have a mayoral election coming up very soon in November," said Turner.

Photo by Thirdman

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