Market risks
Guiding Definition
The potential that access to financial markets and buyers' markets will be adversely affected.
EXAMPLES
- Credit ratings of agricultural suppliers may decline with failure to implement risk mitigation processes, resulting in higher financing costs
- Price increases or price volatility of agricultural inputs/commodities
- Loss of contracts due to environmental or human rights impacts
- Decreased sales due to shifting consumer tastes
Business Risks - Market Examples
Deforestation and Land Use
IOI Group’s revenue fell significantly after its certification from the Roundtable on Sustainable Palm Oil (RSPO) was suspended in April 2016 following RSPO’s ruling that it was not meeting the certificate’s standards nor adequately protecting peat areas and forests. This led to 27 major purchasers to suspend contracts with the IOI Group, including major brands Unilever, Kellogg and Nestlé.
IMPACT
- Reduction in revenue due to reduced contracts with buyers
- Threat of downgrade by ratings agency
Livelihoods and Working Conditions
In 2016, the Consumer Goods Forum (CGF) passed the Social Resolution on Forced Labour, a commitment to fight forced labor throughout its global supply chains. Nestle, a signatory to the resolution, implemented an internal monitoring system to investigate human rights abuses.
IMPACT
- Cost of complying with human rights and labor certifications, including costs to implement internal monitoring policies.