Business Model Red Flags 
Leadership, Governance, & Culture 
Tool for Indicator Design 
Quality of Relationships 
RED FLAG # 23
The business’s commercial success substantially depends upon: operating in, lobbying for or expanding into markets where laws or regulations fall below international human rights and environmental standards
For Example
- Tobacco companies with growth strategies for markets without laws requiring warnings on packaging
- Food and beverage companies with growth strategies for high salt/ sugar products for markets without laws requiring nutritional information on packaging
- Alcoholic beverage companies engaging in sponsorship activities in geographies without laws on exposure of children to alcohol-related marketing
- Collecting or holding sensitive personal information in geographies with underdeveloped privacy laws
- Lobbying against laws that protect workers or communities from corporate human rights impacts (e.g. lobbying against increases in the legal minimum wage)
- Manufacturing (e.g., apparel, footwear, automotive, electronics) where labor is outsourced to jurisdictions where wages are well below living wage levels and/or working conditions are poor, to minimize costs
- Advancing circularity goals by diverting waste to informal hubs or collecting waste for “reuse” and “recycling” in geographies with lax or poorly enforced labor, health and safety protections (e.g., electronic, textile, plastic, battery waste)
- Low carbon transition plans/strategies that rely on projects (e.g., renewable energy, biofuels, nature-based solutions) in jurisdictions with absent or poorly enforced environmental or land rights
Higher-Risk Sectors
Various, depending on the subject of regulation, including: food, drink and tobacco sector; basic metal production sector; oil and gas production and oil refining sector; mining sector; mechanical and electrical engineering sector; technology sector, automotive sector, energy sector; textiles, clothing, leather and footwear sector; and professional services sector, including law firms.
In particular, when operating in, expanding into, or primarily sourcing from:
- geographies with less developed legislative and regulatory frameworks, including least developed and developing countries;
- geographies in which corruption, political instability or conflict affects the effective enforcement of laws (see, e.g. Transparency International’s annual Corruption Perception Index, International Crisis Group’s CrisisWatch, Freedom House’s Freedom in the World).
