Understanding ESG Requirements for Licensing Colorado Natural Medicine Businesses

By Juliana Todeschi, Joshua Kappel

Mar 4, 2025

Aspiring psychedelic business licensees in Colorado now have clarification on the ESG criteria required for natural medicine license applications, as the Colorado Natural Medicine Division (NMD) has finalized the rules for Natural Medicine Businesses. Applicants only need to create a plan for one of the three ESG categories (Environmental, Social, Governance) in their licensing applications; however, applicants may create a plan for more than one category if they choose.

With the NMD’s final rule announcement, applicants now have a clearer understanding of what exactly the NMD wants to see in the ESG portion of a licensing application. Notably, the ESG rules specifically try to incorporate best practices that honor Indigenous and Tribal communities that have kept these psychedelic medicines sacred for millennia. The final rules also mandate that once an applicant is licensed, the licensee must make their ESG plan publicly available, either by publication on their website or by any other means where it may be posted and seen by the public.

Read on for a breakdown of the ESG requirements. View the complete final rules here.

Environmental Impact Criteria

To meet the “Environmental Impact” criteria, the NMD requires that applicants “propose a strategic, measurable, achievable, real, and time-bound plan to incorporate principles of environmental resiliency or sustainability” into their proposed Natural Medicine Business. To satisfy this portion of the application, an applicant can demonstrate that the proposed Natural Medicine Business will do any one or more of the following practices if licensed:

• Engage in energy-efficient practices, such as sourcing energy from renewable sources and having all-electric appliances in their facility

• Employ sustainable agricultural practices

• Contribute to anti-pollution efforts such as the use of carbon offsets or biodiversity credits

• Use sustainable packaging (e.g., reduce plastic intake and engage in recycling plans)

• Engage in community trash clean-up efforts

• Sponsor a local environmental charity

• Engage in other environmental practices that “reflect resilience, sustainability, or are otherwise commonly accepted as positive environmental practices by a corporation”

While the NMD provided the above examples of what can satisfy the environmental criteria, this list is non-exhaustive, and an applicant may propose other ideas to satisfy the environmental criteria in their application.

Social Impact Criteria & Benefit Sharing with Indigenous Communities

To satisfy the “Social Impact” criteria, the NMD requires that applicants “demonstrate a strategic, measurable, achievable, real and time-bound plan to promote beneficial outcomes for Colorado and the Regulated Natural Medicine Program.” For this portion of the application, an applicant can demonstrate the following types of action the proposed Natural Medicine Business will take:

• The organization engages in “Benefit Honoring” (more details below)

• Inclusive hiring and contractive practices

• Plans to provide a livable wage to employees

• The applicant’s adoption and support of an incubator or accelerator program that seeks to assist Indigenous-owned businesses or a business owned by a member of a Federally Recognized American Tribe by providing:

  • Grants or access to capital (e.g., stewarding connections with funders and philanthropists)

  • Workforce re-entry training or programming

  • Cultivation, manufacturing, or retail space

  • Management training or other forms of industry-specific technical training

  • Mentorship from experts.

• Providing free or discounted services to historically underserved community members.

• Recruiting, hiring, and implementing a development ladder for Indigenous people, people from Federally Recognized American Tribes, or people from traditional communities that have connections to natural medicine.

While the NMD provided the above options as examples that can satisfy the social impact criteria, this list is non-exhaustive of what an applicant can do to demonstrate how they’ll socially benefit Colorado and the Regulated Natural Medicine Program if licensed.

What is “Benefit Honoring”?

Culturally understood within Indigenous communities as “benefit honoring,” this practice aims to share the benefits derived from a Natural Medicine Business with members of the Indigenous community, individuals in a Federally Recognized American Tribe, and persons local to Colorado. Given that the practice of engaging with psychedelics for therapeutic and ceremonial purposes are Indigenous practices, and members of these communities have been the keepers of this traditional knowledge well before the enactment of the Natural Medicine Health Act, it is important to ensure equitable access to the benefits derived from this burgeoning new industry, especially by those who have long stewarded the natural medicine and these practices.

Not sure where to start? Check out the organization Benefit Honoring for tools, tips and resources on benefit sharing with Indigenous communities that have long stewarded psychedelic medicines and their associated healing practices.

Governance Criteria

To meet the “Governance” criteria, an applicant must demonstrate the corporate governance practices the applicant will engage in if licensed. Again, while the NMD has provided a list of what can satisfy this portion of the application, the following examples provide a non-exhaustive list of what an applicant can do to satisfy the governance requirement.

Examples Relating to the Board of Directors:

• The applicant has gender equality on its board of directors and the board is composed of members of diverse backgrounds, including:

  • Members of communities disproportionately impacted by the War on Drugs

  • Persons with traditional Tribal or Indigenous history with natural medicines

  • Veterans.

• The applicant’s board of directors has transparent decision-making processes by hosting regular company-wide meetings or employing other policies that promote transparency to its employees and avoid board-related conflicts of interest.

• The applicant’s board of directors discloses their political contributions and lobbying efforts to avoid the appearance of bribery and corruption.

Examples Relating to Indigenous Community Benefit Sharing:

• Registering the Natural Medicine Business as a non-profit or benefits corporation that benefits members of historically underserved or Indigenous communities.

• The applicant has an Indigenous-led trust that receives at least some of the profits derived from the Natural Medicine Business, wherein three of the five directors are from Federally Recognized American Tribes or people from traditional communities that have connections to natural medicine.

The NMD also welcomes applicants who demonstrate how they will engage in other commonly accepted good governance practices, if licensed, to satisfy the governance criteria component of the application.

The NMD’s ESG requirements provide a framework ensuring that psychedelic businesses operate with sustainability, equity, and ethical governance at their core. By addressing Environmental, Social, and Governance factors, applicants can create businesses that honor tradition, support communities, and promote long-term sustainability within the natural medicine sector.

Need guidance on meeting ESG requirements for your Natural Medicine Business? Our Psychedelics and Emerging Therapies team is equipped to guide you through compliance and strategic planning. Contact us today!