Coffee and gold rise up the reputational risk agenda

Supply Chain Risk Outlook

In the last two years, cobalt has dominated the headlines as the chief commodity that brands need to watch in their supply chains. But our research reveals that coffee supply chains and gold supply chains need to be watched carefully for an increasing risk to corporate reputations..

NGOs and the media are intensifying their scrutiny of commodities used in brand supply chains, but how do companies anticipate where the next reputational flashpoints will occur? We’ve found that part of the answer could lie in social media and tracking the issues being amplified by the press, activist groups and individuals on the ground.

Using over 1,500 days’ worth of data from Twitter, we looked at the volume of mentions of 12 key commodities, alongside terms including child labour, forced labour and occupational health and safety.

Overall, analysis of the data shows that reporting on these issues continues to grow.  The average number of tweets linking social risks to six of the highest profile commodities used by brands – cobalt, cocoa, coffee, cotton, gold and palm oil – increased by 123.62% between 2015-2017 (an average of 13.93 tweets per day) and 2018-2019 (31.15 tweets per day).

Twitter spikes in 2018 show scrutiny of commodities on the rise

Mapping the results against our commodity risk scores, we’ve narrowed down the countries and issues likely to be the subject of new high-profile campaigns targeting brands with cobalt, gold and coffee supply chains.

Cobalt’s reputational risk profile a concern for ICT sector

Tech firms remain highly dependent on cobalt from the Democratic Republic of Congo (DRC), and as the world’s primary producer it sits firmly in the crosshairs of the media and NGOs.

Tweets linking cobalt supply chains to labour rights issues increased from an average of 14.12 mentions per day across 2017 to an average of 36.17 mentions over 2018.

Reports linking industrial and artisanal mine production to child labour and poor working conditions are commonplace, which is reflected in DRC’s rating of ‘extreme risk' in our Commodity Risk Assessment for cobalt. However, while its score has remained consistent over the last three years, scrutiny of tech supply chains in the country appears to be increasing, leaving brands in the ICT sector highly exposed to association with labour violations.

Illegal mining in Latin America could take the shine off gold

Mentions of labour violations linked to gold supply chains have, however, outstripped cobalt over the last year, indicating that labour rights in gold production are increasingly being tracked by the media and civil society. In 2018 and early 2019, the precious metal accounted for an average of 79.27 tweets per day, an increase of over 400% compared to 2016 and 2017.

Our commodity risk scores for gold supply chains show that of the world’s six largest producers, only Australia is categorised as ‘low risk’ for issues including child labour, forced labour and occupational health and safety. Four of the remaining countries – China, Peru, Russia and South Africa – receive ‘high risk’ scores, while DR Congo is again rated as ‘extreme risk.’ Other global producing countries – including Colombia, Mexico, Indonesia and Ghana – are also closely tied to these issues.

Key gold producers register high levels of social risk

Analysis of the spikes in twitter activity reveal that gold’s links to human rights issues are primarily driven by ongoing allegations of violations in illegal mining operations in Latin America. Without strict traceability measures in place, companies sourcing from markets such as Colombia, Peru and Venezuela could face the risk of association with poor working practices, or even of gold appearing in their products that was produced in mines run by armed groups that fund conflict, or by organised criminal enterprises.

Chatter around labour rights in coffee production on the rise

Twitter mentions of coffee and social issues have also doubled to an average of 28.94 a day in 2018 / 2019, making coffee supply chains another key area brands need to watch.

Research from our Commodity Risk Service shows that labour rights violations on coffee plantations across the world are common. Of the 15 countries featuring in our coffee risk assessment, three – Brazil, Colombia and India – received ‘extreme risk’ scores for social issues, while 10 others were rated ‘high risk.’

Discrimination against vulnerable groups, including women and migrant workers on farms, is the highest risk issue identified across the 15 countries. However, over the last five years child labour has also been identified on coffee plantations in 12 of the 15 countries we assessed.  

Ongoing commodity risk assessments an essential tool for brands

Of course, reputational risks in the commodity supply chain will not just be confined to cobalt, gold and coffee supply chains, but they do stand out. We’ve seen spikes in social media action related to rubber and tuna too, and inevitably other commodities will be subject to high levels of scrutiny in the months ahead.

What is clear, is that it could be time for brands to expand the arsenal of tools at their disposal to understand how and where reputational damage could strike, so they can adjust their responsible sourcing strategies accordingly. It might just keep them one step ahead of an unwanted headline.

*Note: our analysts compiled anonymised data from twitter, focusing on the number of individual tweets referencing one of the 12 commodities included in the assessment alongside social risk related search terms. Verisk Maplecroft did not assess user information and did not include information on twitter accounts in the study.

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Stefan Sabo-Walsh

Head of Commodities