By Counsel Lolla Stovall
Cannabis production and sales is one of the hottest industries around, with an annualized growth rate of more than 20% for several years running. Marijuana stocks have experienced impressive runs, and it seems that another state or city legalizes recreational marijuana use daily.
The success of cannabis startups and the greater acceptance of cannabis use have created an acquisition bonanza. Total M&A activity for the cannabis industry in 2021 was nearly four times that of 2020, with more and more public companies emerging as buyers. And expectations for 2022 are equally bright.
Even with all this financial success and easing of legal restrictions, cannabis still faces a challenge – meeting the expectations of climate change activists. So, what are the industry’s prospects in the coming year?
Making cannabis more green
Despite revolving around a plant, the cannabis production industry itself is far from green. Much cannabis production takes place indoors, relying on high-powered artificial lighting and large-scale air conditioners to speed up growth and increase production. Large-scale production requires enormous amounts of energy and has a significant carbon footprint. And water usage is no better.
So, just like Bitcoin mining, which consumes more energy annually than the country of Austria, cannabis production has come into the sights of climate change activists. But, the cannabis industry is innovating, finding new ways to increase production more sustainably. And with more innovation, company values will rocket upwards rather than just going up in smoke (apologies to Cheech & Chong).
Can cannabis be cleantech?
You don’t need to look any farther than company IP portfolios to see the greening trend. Although cannabis remains a controlled substance under federal law, the U.S. Patent Office issued 873 patents containing the word cannabis in 2021, with another 45 since the beginning of 2022. Not all of these are cleantech, naturally, but many are.
Review these patents, and you will see references to “space intensive agriculture with lower power and water usage” (U.S. Patent No. 11,212,970; Jan. 2022), “energy efficient greenhouses” (U.S. Patent No. 11,006,586; May 2021), and advanced water-efficient hydroponics (U.S. Patent No. 11,195,015; Dec. 2021). Clearly, the industry understands that sustainability is not only politically necessary, but also financially rewarding.
The less rewarding side of green innovation, particularly when it is built into patents or other IP rights, is that it will invariably lead to litigation, as has happened in so many other industries (pharmaceuticals being a primary example). We can already see this playing out in the Canopy Growth Corp. v. GW Pharmaceuticals PLC case currently pending in Texas regarding a patent on cannabis extraction techniques. So for every two steps forward, there may be a small step back.
Rolling it up
Cannabis and cleantech may have a tenuous relationship at present, but the industry is heading in the right direction. Ongoing advances in growing techniques and resource use optimization will help make the industry as green as its well-known symbol. And that green will translate into even more when it comes time to sell the company or take it public.