Is it true that cannabis is not sustainable, for example because of high water consumption? If so, what are more environmentally friendly alternatives? Magic mushrooms, maybe?
There are two very different ways cannibis is grown, and those have radically different environmental impacts. This is somewhat distinct from the legality differences.
Grown outdoors cannibis often is more problematic as a weed than for any other environmental impacts, because illegal growers often use remote "wilderness" ares to grow in, don't clean up sites and only use them for a short time, leaving behind many viable seeds and often whole plants. Legal growers are generally better because they use existing farmland and are more effectively regulated.
But in terms of water, electricity, fertiliser etc use, outdoor cannibis is better likened to commercial hemp farming for fibre or seed (pdf of paper can be downloaded, link is to abstract). In that regard it is a less damaging crop than most and is even used as a rest crop or for restoration because it roots relatively deeply and uses less water and fertiliser than alternative low value crops (like alfalfa or peas).
Grown indoors, normally hydroponically with artifical light, cannibis is just as horrible as any other kind of indoor farming. Especially when done illegally water use can be high due to single-use or open hydroponic systems, and electricity use is typically also very high (grow sites are more often detected through electricity useand especially by theft, than by water use). The few references I've found to legal indoor growing suggest it's expensive and thus only used for niche applications.
The more general problem with illegal production is that the penalties for drug production far exceed the penalties for environmental damage, resource theft, violation of occupational health and safety laws etc. So the producers typically ignore those laws and thus the damage can be unreasonably high (why bother with the fuss of a closed loop hyroponic system with all the pumps and filters if you're stealing the water anyway?)