Federal Grants Aim to Spur ESG Across the Domestic Hemp Supply Chain
By Eric Singular, Director, Hemp Business Journal
Last week’s inaugural Regenerative Cannabis Live event at the United Nations (UN) Headquarters in New York City marked a historic first as the UN opened its doors to programming dedicated to aligning the industrial, medical, and wellness uses of the cannabis plant with the peace-and-security organization’s 17 Sustainable Development Goals (SDGs).
Two years after having rescinded its 59-year ban of marijuana (under Schedule IV of the 1961 Single Convention on Narcotic Drugs), the UN welcomed industry stakeholders and delegations from the nations of Panama, Malaysia, Malta, and Paraguay for keynote and panel discussions about how the legal cannabis industry relates to the SDGs as a “blueprint to achieve a better and more sustainable future for all,” and how hemp and cannabis business leaders might best adopt a robust environmental, social, and governance (ESG) framework.
That the event largely focused on social and governance concerns was both intentional and prudent, but tacitly underscored a lack of peer-reviewed data to support the crop’s environmental impacts. While there is a growing body of research to support myriad health and wellness benefits offered by cannabinoids, the depths to which industry stakeholders can speak about the quantification and validation of hemp’s ability to sequester atmospheric carbon dioxide (CO2) and remediate soil remain shallow.
Yet, the ability to stress the potential environmental and economic impacts of hemp is critical in the conversation of ESG, whether for the purposes of raising capital or making the case to Fortune 500 companies that they should be incorporating hemp-based products and raw materials to meet their sustainability goals in the next decade. Platforms like Indigo Carbon and Nori are already generating carbon credits to trade on their voluntary exchanges from the farming of crops like cereal rye and triticale.
In 2021, there were 180.6 million acres of corn and soybeans grown in the United States. Compare that to the 21,000 acres of hemp grown for grain and fiber in the U.S. last year. With war, demand, and drought pressuring the global food supply, the U.S. Department of Agriculture (USDA) forecasted 218.9 million acres of corn, wheat, and soybean being planted in 2022. Aside from the opening of new markets for hemp as a plant-based food ingredient and renewable material, peer-reviewed research quantifying and validating the crop’s environmental impact is critically needed to make up the tremendous gap between those two figures.
Federal Grant Funding Available
The handful of service providers who offer carbon and soil monitoring solutions for hemp production do not come cheap. Fortunately, $360,000 has already been awarded in federal grant funds through USDA’s Natural Resources Conservation Service to Heartland’s Hemp4Soil program, which seeks to advance research on regenerative agriculture techniques that bolster soil health, as well as quantify the carbon sequestration of industrial hemp production.
Additional grant funds for hemp carbon and soil research may be on the horizon. In February, USDA announced the Partnerships for Climate Smart Commodities grant funding opportunity, making $1 billion available to agricultural commodities produced using farming, ranching, or forestry practices which effectively reduce greenhouse gas emissions or sequester carbon.
Through the grant, USDA seeks to fund pilot projects that provide voluntary incentives to:
- implement climate-smart production practices, activities, and systems on working lands;
- measure/quantify, monitor, and verify the carbon and greenhouse gas (GHG) benefits associated with those practices; and
- develop markets and promote the resulting climate-smart commodities.
The first funding pool for proposals seeking between $5 million to $100 million closed on May 6. An estimated 30% of the proposals submitted included funds for the domestic hemp supply chain, including the measuring and monitoring of hemp’s impact on soil and the quantification of CO2 captured from the crop’s production and utilization. The second funding pool for proposals seeking up to $5 million is open until June 10.
Equally important in USDA’s evaluation of the proposals for the implementation, measuring, and marketing of climate-smart commodities is meaningful involvement from small or historically underserved producers. In fact, the second funding pool is limited to pilot projects with an emphasis on the enrollment of small and/or underserved producers, and/or monitoring, reporting, and verification activities developed at minority-serving institutions.
Demographics of Hemp Producers
Any conversation about ESG in the hemp supply chain cannot ignore the role of racial equity in agriculture. While the number of American farmers increased 7% in 2017 (the year of the most recent agricultural census) to 3.4 million, producers are, by a large majority, White, with 94% of all farmers falling in that category. Hispanic or Latino farmers make up 3.3% of all producers, with American Indian or Alaskan Native (1.7%) or Black (1.3%) farmers respectively making up the remainder.
While the demographics of hemp producers falls fairly in line with overall farmers, there are a few noteworthy differences. Only 18% of hemp producers are female, though women make up 36% of overall farmers. Meanwhile, 6% of hemp producers are Black, compared to African-Americans representing 1.3% of total farmers nationwide. Likewise, Latinos also make up 6% of hemp producers, compared to representing 3.3% of total farmers. Also, 51% of hemp producers are between the ages of 35-54, though that age group accounts for only 29.6% of total farmers.
For decades, there have been ongoing tensions between the U.S. Department of Agriculture (USDA) and minority farmers. Each fiscal year, USDA’s Farm Service Agency (FSA) targets a portion of its direct and guaranteed farm ownership and operating loan funds to socially disadvantaged farmers to buy and operate family-sized farms and ranches.
Nationally, Black farmers have lost more than 12 million acres of farmland over the past century. In 1920, there were more than 925,000 Black farmers in the United States; by 1997, their numbers had fallen to below 18,500. Of approximately 3.4 million farmers in the United States today, only about 45,000 (1.3%) are Black. According to CNN analysis, 42% of Black farmers were rejected for direct USDA loans in 2021, more than any other demographic group.
A 1997 class-action lawsuit, Pigford v. Glickman, was brought against USDA alleging racial discrimination against Black farmers in its allocation of farm loans and assistance between 1981 and 1996. Settled in April 1999, more than 70,000 farmers were treated as filing late, and thus did not have their claims heard. The 2008 Farm Bill provided for additional claims to be heard. In December 2010, Congress appropriated a $1.2 billion settlement for the second part of the case. In 2004, the Black Farmers and Agriculturalists Association (BFAA) filed a $20.5 billion class-action lawsuit against the USDA for the same practices. The lawsuit was dismissed after the BFAA failed to show that it had standing to bring the suit.
Last March, Congress passed the American Rescue Plan Act (ARPA), a debt relief program that sought to address historic discrimination toward farmers of color. Section 1005 of the ARPA would have provided $4 billion worth of debt relief for loans which socially disadvantaged farmers had taken on to stay afloat while being passed over for financial programs and assistance that their White counterparts had an easier time obtaining. Multiple lawsuits have been filed challenging Section 1005, including one by Texas Agricultural Commissioner Sid Miller, and three federal district courts have issued preliminary injunctions requiring the FSA to stop issuing payments.
Programs to Promote ESG
Given the historical disadvantages faced by minority farmers in the United States, any project funded through the Partnerships for Climate Smart Commodities grant should ensure meaningful participation for underserved farming communities as the market and commoditization of industrial hemp blossoms for decades to come. Harold Singletary, CEO and Founder of Bright Ma Farms shares, “To champion a circular economy with economic impact and development for underrepresented and underserved minority farmers USDA must fail forward, with a systemic transformation we recognize needs to take place. We have to accelerate our efforts to bring financing that develops infrastructure, shared visions, contextual understanding and motivational experiences, building knowledge and spurring cooperation.”
While grant funds through the program span disburse over five years, the most competitive proposals will be those which ensure providence for underserved rural communities and socially disadvantaged farmers beyond that window. Cultivation is just one of the links in the domestic hemp supply chain where opportunities abound for the industry to be a steward of ESG. Processing is another key link in the hemp supply chain, where equity should be established through minority ownership.
As evidenced by the model of farming cooperatives, ownership of processing helps ensure greater market participation for producers, as well as a diverse flow of income and higher profits (rather than solely getting paid for one’s crop). As the domestic hemp industry is just beginning to take shape, the Partnerships for Climate Smart Commodities grant is timely in helping establish equity for socially disadvantaged farmers and underserved rural communities in the U.S. hemp supply chain. As John Kagia, New Frontier Data’s Chief Knowledge Officer has noted, “as a newly emerging industry, cannabis has the opportunity to get it right from the start.”
USDA is expected to execute awards for the Partnerships for Climate Smart Commodities grant by September 30. For more information about how the cannabis industry can align with the SDGs — whether by reducing inequality; prioritizing responsible consumption and production; promoting good health and wellbeing; or advancing peace, justice, and strong institutions — download New Frontier Data’s latest report, ESG + Cannabis: The Promise and Path to a New Paradigm, published in partnership with ESG consulting firm Regennabis.