Q3 2020 Food for Thought

As Activism Grows, Food and Beverage Companies Must Respond

The ongoing COVID-19 pandemic has already presented significant financial, operational, and workforce challenges for the food and beverage industry. And companies now face another challenge: social activism and civil unrest. 

Recent events — including the deaths of George Floyd in Minneapolis, Rayshard Brooks in Atlanta, and others around the country — have driven accelerating momentum for the Black Lives Matter movement and widespread protests across the US and in other countries. Demonstrations in cities and smaller communities have generally been peaceful, but at times have been accompanied by violence and property destruction.

At the same time, social media and the internet have become essential vehicles through which activists are seeking change and for businesses to take a stand on a range of social issues, including racial injustice and gender diversity. Activists have also demanded that food and beverage brands retire some enduring brand names and images that are perceived as racially insensitive.

Black Lives Matter and other social movements are not new. But the intensification of their efforts this year — supported by the public and joined at times by employees, shareholders, and others — coincides with the COVID-19 pandemic, which has put a spotlight on many brands, including food and beverage companies.

Given the many choices that consumers have, such activism can significantly harm these companies’ people, property, reputations, and bottom lines even if not directly aimed at them. And it’s vital that they think ahead about how their people, operations, and finances may be affected and take steps to prevent, mitigate, and respond.

Managing Reputational Risk

Modern consumers are increasingly willing to “vote with their wallets” — choosing to purchase (or not purchase) goods based on their espoused values. Similarly, investors and workers are increasingly making critical choices based on their perceptions of companies.

Even if your company has not yet been affected by recent activism, you should consider forming a crisis management team that includes senior leaders from departments across the organization, including risk management, marketing and communications, legal, and human resources.

Once activated, this team should:

• Catalog potential impacts on people, organizations, and finances. These impacts can vary, ranging from an isolated incident — such as a protest or looting — at a single location to a campaign waged on social media —for example, #boycottABCInc — that can cause substantial financial and reputational harm.
• Develop and test how you would gather information to proactively address or respond to a specific scenario. The team should also identify which member(s) will engage activists, consumers, and others in person, via traditional media, and on social media.
• Pay attention to communications, including the right tone for your messaging. Activists view the problems they are protesting against as long-term and systemic; if your response is seen as insensitive, inadequate, or hasty, the reputational and financial harm could be severe.

Protecting People and Property

Food and beverage companies’ employees and physical properties could come under threat by activists and others, whether they are targeting specific organizations and locations or amid wider rioting and looting in cities and smaller communities.

Among other items, response plans should consider the following questions:

• Should specific locations consider closing or changing hours of operations? Under what circumstances should such decisions be made?
• If a company location is involved in unrest, should employees and customers shelter in place or evacuate?
• If a company location is involved in unrest, which employees, leaders, and others should be notified?
• Are any security concerns or critical decisions affected by operational changes the company has made because of COVID-19, such as expanding outdoor footprints?

In the event that one or more of your locations becomes involved in unrest, it’s important to ensure that you have access to realtime information about which employees are working and where, and that you monitor communications from government authorities and local law enforcement agencies.

Before such unrest develops, you should also gather employees’ personal email addresses, mobile numbers, and other contact information, so you can reach them through multiple channels, if needed.

Company leaders and local managers should be ready to protect customers, fellow employees, and properties amid unrest. But being unnecessarily confrontational could cause additional damage to your brands.

Manager and employee training should include communication and safety, including avoiding engagement with activists, media, and others, and how to deescalate conflicts before they potentially turn violent. This is especially important as food and beverage companies face staff turnover, prolonged absences, and other workforce challenges brought about by the pandemic.

Understanding Your Insurance Coverage

Ahead of potential unrest or targeted campaigns by activists, it’s important to review a number of insurance policies that might potentially apply.

Workers’ compensation insurance will generally respond to claims of ‘s work-related injuries. Other forms of casualty coverage will generally respond to claims from third parties, including customers and visitors to insured locations. A general liability (GL) policy may provide coverage for first aid to injured third parties, bodily injuries, and damage to the property of a third party; it may also fund the defense of lawsuits alleging negligence. Umbrella and excess coverage may also respond, depending on the size of the loss. 

Physical damage, such as broken windows and doors, will generally be covered under property insurance policies. Business interruption coverage may also respond if an insured location is forced to close.

Property terrorism insurance might also apply, providing coverage for physical damage and business interruption resulting from acts that are motivated by politics, religion, or ideology. Political violence (PV) insurance, meanwhile, provides coverage related to war, civil war, rebellion, insurrection, coup d’état, and other civil disturbances. PV policies also typically provide coverage for strikes, riots, and civil commotion; this coverage may also be included in all-risk property policies and may be added to terrorism policies through what is commonly called a SRCC extension.

Directors and officers liability (D&O) insurance, depending on policy wording, may provide coverage for activity arising out of shareholder activism, including litigation. D&O coverage can also protect against shareholder suits alleging mismanagement by senior leaders and others.

Some forms of coverage, including D&O and umbrella and excess policies — and, in rare cases, GL policies — may include crisis response endorsements. These can reimburse insureds for the cost of crisis management and public relations support.

Access to specialized crisis management, security, and investigations services may also be available in emerging security and integrity incident response policies. These policies are designed to cover dozens of insurable events — and unlike traditional forms of insurance, they can respond not only following an insured loss but also upon the suspicion, allegation, or threat of such a loss.

Activism and unrest that directly and indirectly affects food and beverage companies can present both opportunities and risks for organizations depending on how they respond. Proper planning, preparation, and strategic action can help limit adverse effects on people, operations, reputations, and bottom lines and build better relationships with consumers, employees, shareholders, and other stakeholders.’