Covid-19 has played a role in 12% of the “corporate incidents” tracked by Sustainalytics in the first half of 2020 — and Amazon in particular has dealt with a high number of controversies and accusations, according to a new report.
Sustainalytics reported that the pandemic was a factor in 1,270 corporate incidents around the world by the end of June. Sustainalytics defines corporate incidents as company activities that generate “undesirable social, environmental or governance [ESG] effects.”
The majority of Covid-19 incidents — 89% — were related to four issues: occupational health and safety (OH&S), quality and safety, business ethics and labour relations.
OH&S issues accounted for the bulk of Covid-19 incidents (31%), with most incidents happening in the consumer discretionary sector. Amazon alone had 64 Covid-19 incidents, 51 of which were OH&S incidents.
“[Amazon] has faced accusations of imposing high production targets that have prevented workers from adhering to safety procedures, failing to offer adequate protective equipment and retaliating against workers who have raised related concerns,” the report noted.
As a result of this, Sustainalytics added, Amazon has been the target of protests, lawsuits, strikes and “pointed letters from U.S. senators and attorneys general.”
Sustainalytics has now changed its outlook for Amazon’s Category 3 OH&S event rating from neutral to negative, which may affect the company’s Controversy Rating and ESG risk rating.
The packaged foods subindustry had the most downgrades (17) — but only one reached Category 3 — followed by the medical facilities subindustry (16). Two Canadian medical facilities, senior care homes called Extendicare and Sienna Senior Living, had their ratings downgraded to Category 3.
Extendicare, Sustainalytics noted, is an example of how corporate incidents can change a company’s ESG risk profile.
“This publicly traded senior housing company has faced allegations of negligence leading to a disproportionate number of Covid-19 related deaths among residents at several Ontario facilities it manages,” the report said.
Extendicare has been the subject of regulatory investigations and is now facing a $40-million class action lawsuit, the report said. As a result of these controversies, Sustainalytics has downgraded the firm’s corporate governance and product governance risk scores, as well as its overall ESG risk rating.
In total, Sustainalytics downgraded 273 event categories for companies around the world for reasons related to Covid-19. Business ethics incidents led to the most downgrades (101), though those were limited to low and moderate adjustments.