Growing Hemp? Don't Get Left Behind - Learn How to Certify Responsibly in today's marketplace
The hemp industry in the United States has faced its fair share of challenges and turbulence. From failures and setbacks to hopeful financial projections, the market has seen its ebbs and flows. As the industry matures and becomes more established, businesses must begin to approach hemp cultivation and production as they would any other agricultural commodity. This means adhering to strict standards and regulations and ensuring that all operations are above board and compliant. Similar to how auditors perform due diligence in mergers and acquisitions to ensure everything is on the up and up, certification inspections in the hemp industry serve a similar purpose and should not be compared to the farmer's knowledge and expertise alone. In this blog post, we'll explore this correlation and why it's essential for the continued growth and success of the hemp industry.
As entrepreneurs, venture capitalists, and agriculturists, many of us make up the foundation of the 2018 Farm Bill "Green Rush." We've witnessed the ups and downs of the hemp industry, from ambitious promises of billion-dollar profits to snake oil salespeople peddling false cures for everything under the sun. We've attended trade shows like NOCO Hemp Expo and MJ Biz Expo, hoping to stay ahead of the curve and turn a profit in this emerging market. But as the industry matures, we must begin to approach hemp cultivation and production with the same level of due diligence and regulatory compliance as any other agricultural commodity. Auditors performing certification inspections play a crucial role in ensuring that all operations are above board and compliant, but it's important to recognize that their expertise lies in due diligence, not necessarily in farming itself. In this blog post, we'll explore the correlation between certification inspections and due diligence in business mergers and acquisitions, and why it's essential for the continued growth and success of the hemp industry.
As we move forward in the hemp industry, it's important to recognize that we're no longer in the Wild West phase of the market. While passion, good intentions, and stories have played a significant role in the industry's growth and success thus far, it's time to start treating hemp like the agricultural commodity it is. This means adhering to strict standards and protocols, ensuring quality and transparency, and employing confident language that aligns with concepts like sustainability and ESG. False promises and claims are no longer acceptable, and transparency is key to earning consumer trust. As we embrace this new era of hemp as a serious business, it's important to remember that, like in any business transaction, due diligence is essential. Auditors performing certification inspections should not be compared to farmers in terms of knowledge and expertise, but rather viewed as conducting a necessary form of due diligence, similar to the process of merging or acquiring another company. If we want hemp to continue to thrive and gain recognition on the global marketplace, we must approach it with the same level of professionalism and accountability as any other commodity.
As the hemp industry continues to expand, it is becoming increasingly important for players in the space to understand the importance of due diligence and quality control. Many of us involved in hemp are passionate about the plant's potential to heal, promote sustainability, and make a positive impact on the world. However, as the industry matures, it is essential that we recognize the need for structure, quality, transparency, and assurances when it comes to hemp production and distribution.
One area where this need is particularly evident is in certification inspections. As hemp auditors perform their due diligence, it is important to understand that their role is not to compare their knowledge and expertise to that of farmers. Rather, their purpose is similar to that of a due diligence team in a merger or acquisition scenario. They are there to ensure that the final product is safe, of high quality, and meets industry standards.
The passion in the restaurant industry can serve as an example for this post, as it shares similarities with the hemp industry in terms of the need for investment, dedication and passion.
For instance, imagine a restaurateur who has a passion for food and seeks investors to support their business venture. Despite providing a detailed business plan and ROI projections, the restaurant fails a safety inspection due to minor violations such as empty soap dispensers and incorrect signage. While the restaurateur may be tempted to blame the inspector for not understanding their passion, it is important to acknowledge that the inspector's primary responsibility is to ensure consumer safety. By correcting the minor issues and addressing the inspector's feedback, the restaurateur can ultimately ensure the success and sustainability of their business.
Similarly, in the hemp industry, it is crucial to prioritize quality and safety standards in order to compete on the global marketplace. While passion and good intentions are important, they must be backed by validation and transparency. As such, auditors play a key role in upholding these standards and ensuring that the industry can continue to grow and evolve in a responsible manner.
Financial due diligence:
During the hemp audit, the auditor will review the financial records and statements of the farm to ensure they are accurate and reliable. This may include analyzing financial reports such as the balance sheet, income statement, cash flow statement, and tax returns to assess the financial stability of the farm.
Financial due diligence during a hemp farm audit is an important aspect to ensure that the business is financially stable and capable of operating effectively in the long-term. Our auditors will review the financial records and statements of the farm to ensure that they are accurate and reliable, and to identify any financial risks or areas of concern that may impact the farm's ability to operate effectively. This can include the analyzation of any number of records, from the balance sheets to income statements, this is to best understand the financial health of the business.
One of the main reasons for conducting financial due diligence during a hemp farm audit is to ensure that the farm has the liquidity to manage any potential recalls that may occur in the future. In the event of a recall, the farm will need to have sufficient funds to manage the recall process and to mitigate any potential damages or losses. This is particularly important in the hemp industry, where consumers are becoming increasingly concerned about the safety and quality of the products they purchase.
Financial due diligence is a crucial component of the audit process for hemp farms seeking certification under programs such as the Responsible Hemp Standard. In addition to ensuring financial stability and liquidity for potential recall processes, financial due diligence helps to ensure that the farm can meet the demands of large global brands or other high-volume contracts, if applicable. This is essential to prevent any avoidable hiccups that may arise due to financial instability or lack of resources. By reviewing the financial records of the farm, auditors can identify any potential risks or areas of concern that may impact the farm's ability to meet these demands and work with the farm to develop strategies to mitigate these risks.
For most farms, securing large contracts is a top priority in order to ensure stable revenue streams and profitability. This is particularly true in the case of hemp, which has become a commodity on a scale that was not a reality prior to recent legalization efforts. As a result, farms must operate as commercial agri-businesses, producing at scale and working with third-party certifying bodies to ensure that their product meets the standards necessary to secure these contracts. Through financial due diligence, auditors can play a crucial role in helping farms achieve this goal and ensure that their certified product can be used for the masses.
Legal due diligence:
The auditor will review the legal documents and contracts of the farm to ensure that they are valid and enforceable. This may include reviewing contracts with suppliers, employees, and customers, as well as leases and other agreements, to ensure that the farm is in compliance with all relevant laws and regulations.
Hey, I totally get it - the hemp industry is still growing and evolving, and there are some non-traditional brokers out there who may not have the same level of transparency or standards as the more traditional agri-brokers. That's why legal due diligence is so important for hemp farms! Our auditors will carefully review all legal documents and contracts to ensure that they are valid and enforceable, and that the farm is complying with all relevant laws and regulations. This includes verifying land ownership, checking for any legal restrictions on expansion, and making sure that any contracts with suppliers, employees, or customers are legally sound. We want to make sure that you can rest easy knowing that your hemp farm is legally sound and protected from any potential legal risks.
Operational due diligence:
The auditor will review the operational processes and procedures of the farm to ensure that they are efficient and effective. This may include reviewing inventory management, production processes, and quality control procedures to ensure that the farm is producing safe and high-quality hemp products.
It is important for each person on the farm to not only understand their own role but also the roles of their colleagues, particularly those in quality assurance and quality control. This helps to ensure that all aspects of the crop production process are being handled appropriately and that there is no risk of contamination or other issues that could compromise the quality of the final product.
In addition to ensuring high-quality products, understanding roles and processes can also contribute to positive attrition rates. When workers return to the farm year after year, they become more familiar with the processes and procedures, which can lead to fewer accidents, equipment breakdowns, and other issues that can increase production costs.
Operational due diligence also encompasses inventory management and production processes. An auditor will review these processes to ensure that they are efficient and effective, which can help to reduce waste and maximize productivity. This, in turn, can help to reduce costs and improve the overall profitability of the farm.
Regulatory due diligence:
The auditor will review the regulatory compliance of the farm to ensure that they are adhering to all relevant laws and regulations. This may include reviewing licenses, permits, and other regulatory filings to ensure that the farm is compliant with all necessary regulations.
In the current hemp industry, there is a lack of uniform regulations and standards, which can lead to confusion and distrust among consumers. That's why working with globally recognized programs like the Responsible Hemp Standard (RHS) is crucial. By undergoing regulatory due diligence, our auditors can help ensure that the farm is compliant with all relevant laws and regulations, including those set forth by RHS. This can provide transparency to consumers, building trust and confidence in the quality and safety of the hemp products they are purchasing. Additionally, being compliant with RHS and other recognized standards can open up access to certain markets that require certification, ensuring that the farm is able to reach a wider range of consumers.
In addition to regulatory compliance, the auditor will also review the farm's adherence to Good Agricultural Practices (GAP) and Good Agricultural and Collection Practices (GACP) for the hemp plant. This includes evaluating the farm's procedures for planting, growing, harvesting, and handling the hemp plant, as well as the measures in place to ensure the quality and safety of the final product. By adhering to these standards, the farm can demonstrate their commitment to producing a safe and high-quality product, which can help to build consumer confidence and increase market access.
Environmental due diligence:
The auditor will review the environmental impact of the farm to ensure that they are complying with all relevant environmental laws and regulations. This may include reviewing environmental assessments and permits to ensure that the farm is operating in an environmentally sustainable way.
Environmental sustainability is becoming increasingly important in today's global markets, as consumers and businesses alike are becoming more aware of their environmental impact. Many countries and regions have strict regulations regarding environmental compliance and sustainable practices, and failure to comply can result in exclusion from certain markets. By conducting environmental due diligence, our auditors can help the farm identify any areas where they may not be in compliance and work with them to develop strategies to mitigate these issues.
Environmental sustainability is a key aspect of ESG (Environmental, Social, and Governance) investing, which has gained significant momentum in recent years. Companies that score well on ESG criteria are often seen as more attractive to investors and may have greater access to capital and markets. By demonstrating a commitment to environmental sustainability, farms can improve their ESG scores and potentially access these markets and investors.
Cultural due diligence:
The auditor will review the culture and values of the farm to ensure that they align with the values and goals of the certification program. This may include reviewing employee satisfaction surveys and conducting interviews with key personnel to assess the farm's commitment to ethical and sustainable practices.
In today's modern markets, social compliance has become increasingly important for businesses looking to expand their reach and access new markets. Consumers and stakeholders are becoming more conscious about the impact that businesses have on society and the environment, and are demanding greater transparency and accountability from companies.
Participating in a globally recognized agricultural standard, such as the Responsible Hemp Standard, means that farms must adhere to certain social compliance requirements, including the prohibition of forced or compulsory labor, child labor, and discrimination. These practices may not necessarily be a major concern in the US, but they are still prevalent in other parts of the world, and it is important for farms to demonstrate their commitment to ethical and sustainable practices.
By conducting cultural due diligence, auditors can help ensure that the farm's culture and values align with the values and goals of the certification program. This includes assessing the farm's commitment to ethical and sustainable practices, as well as reviewing employee satisfaction surveys and conducting interviews with key personnel. By doing so, auditors can help identify any areas of concern and work with the farm to develop strategies to improve their social compliance and overall sustainability practices.
Thanks for taking the time to read about some critical aspects often not considered in the stabilization of hemp, primarily that of due diligence. As you can see, there are many factors to consider when certifying your farm for the global market. But don't worry, our team of experts is here to help you navigate the process and ensure that your farm is not only sustainable and profitable but also socially and environmentally responsible. Whether you're looking for consulting services to get ready for the audit or more information on the Responsible Hemp Pledge (RHP) and the Responsible Hemp Standard (RHS), we've got you covered.
Responsible Hemp Pledge:
The Responsible Hemp Pledge is a non-profit organization that provides resources and support for farmers looking to navigate the certification process. The pledge is designed to help farmers commit to ethical and sustainable practices and offers financial assistance to those who meet the requirements. By working with the pledge, farmers can access a network of resources and support to help them achieve their certification goals. If you're interested in learning more about the Responsible Hemp Pledge, reach out to our team for more information.
Responsible Hemp Standard:
The Responsible Hemp Standard (RHS) is a certification program designed to ensure that hemp is produced in an ethical and sustainable way. The RHS is currently in its second year of the pilot phase and is being developed with input from industry experts, farmers, and other stakeholders. By adhering to the RHS, farmers can demonstrate their commitment to sustainability and ensure that their products meet the highest ethical and environmental standards. If you're interested in learning more about the RHS and how it can benefit your farm, reach out to our team for more information.
Consulting from FS Origins:
At FS Origins, we offer consulting services to help farmers prepare for the audit process and achieve certification. Our team of experts has years of experience in the industry and can provide guidance and support throughout the certification process. By working with us, you can ensure that your farm is operating in an ethical and sustainable way and is well-positioned to meet the demands of the global hemp market. If you're interested in learning more about our consulting services, reach out to our team for more information.
At FSO, we believe that the future of the hemp industry depends on responsible and sustainable practices. By committing to ethical and sustainable farming practices, farmers can ensure that their products meet the highest standards and are well-positioned to succeed in the global marketplace.
Whether you're looking for support and guidance through the certification process, or you're interested in learning more about the Responsible Hemp Pledge or the Responsible Hemp Standard, our team is here to help. Reach out to us today to learn more about how we can support your farm's journey towards sustainability and success.
Reach out to us today to join the global movement towards responsible hemp production, and let's make a positive impact together!