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A Monster of a Lesson on Managing Risks in Supply Chains

The worlds of shareholder activism and international human rights have converged to unleash a campaign against Monster Beverage Corporation. For some time now, shareholder activists have been pointing out that Monster Beverage uses sugar cane that is produced in many areas of the world where there have been concerns about modern slavery. Unlike some of its competitors, Monster Beverage apparently has not revealed much about its supply chain and has not performed any audits of that supply chain.

While the actual facts surrounding the Monster Beverage campaign may be unclear, there is no doubt that the company’s record on international human rights is becoming a significant concern for shareholders. Monster Beverage should serve as a warning for those companies unaware of these issues and corporate compliance and in-house legal teams should begin educating themselves on how international human rights risks arise and strategies to mitigate potential liability. In a recent survey conducted by the International Human Rights Committee of the State Bar of Texas, half of all responding Texas in-house legal departments indicated that they were unaware of the risk posed to their company by international human rights issues stemming from their operations. Half of those who responded also indicated that their company had no policy related to these issues. Not surprisingly, 100% of the survey responders indicated they wanted more information on this topic.

There are those of us who have been practicing in this area for some time now and have considerable experience on these issues. There are also resources available to those who want to learn generally about the topic. One of the best resources is the Texas Bar’s International Human Rights Committee’s website, which can be found here.

Last, circumstances like Monster Beverage’s sugar cane supply chain may raise environmental concerns as well, which in turn may intersect with shareholder activism campaigns and human rights issues. If you have ever witnessed the burning of the sugar cane stocks, you can imagine how environmental issues could arise for companies using sugar cane. A lack of awareness or planning could lead to a real monster of a problem when activism, international human rights and environmental issues converge. Now is the time to gather information, analyze risks, and develop plans to avoid or mitigate potential consequences.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.