Discuss CFA Institute Sustainable-Investing Exam Topic 4 Question 13

A retailer facing a consumer boycott due to its poor working conditions will most likely face:

ASignificant liabilities.

BGreater operating costs.

CAn adverse impact on revenues.

Suggested Answer: C

The OTM provides several examples ofsocial factor materiality, particularly labor practices and consumer perception. It notes:

''Companies facing controversies overworking conditions or labor rights violationscan experiencereputational damage and consumer boycottsleading to animmediate fall in sales revenueand market share.''

While costs or liabilities may arise later, thedirect and measurable impactof a boycott is on revenue --- the firm's top line. The manual cites real-world examples (e.g., apparel and retail industries) showing that adverse public reactions directly depress revenues before longer-term financial or legal implications materialize.

Hence, the verified answer isC, as it most accurately captures the primary financial effect of a consumer boycott.

Reference:2021-Final-Book.pdf, Chapter 4 --- Social Factors (Material Impacts of Social Issues section).

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20 comments · newest first

Ettie 1 month ago

True, but A could lead to long-term problems for them.

Stevie 1 month ago

I feel like C is the most direct impact. Revenue drops fast.

Jennifer 2 months ago

But B is also a factor. They might need to spend more to fix things.

Rebecka 2 months ago

A could be true too. Legal issues might arise.

James 2 months ago

I agree, C makes sense. Customers will avoid shopping there.

Howard 2 months ago

I think C is the best choice. Boycotts hurt sales.

Vicky 2 months ago

Not sure if it’ll hurt them that much, some people just don’t care.

Sabina 2 months ago

Wait, are people really boycotting them? That's surprising!

Tamekia 3 months ago

A is a big possibility too, lawsuits can be expensive.

Nakita 3 months ago

I think B is more likely, higher costs to fix issues.

Valda 3 months ago

Definitely C, revenue will drop for sure.

Evelynn 3 months ago

I doubt they’ll change much, boycotts rarely last long.

Talia 3 months ago

Wait, are we really surprised by this? Retailers always cut corners.

Isreal 3 months ago

A is a possibility, but I’m not sure it’s the biggest issue here.

Laurene 5 months ago

I think B makes sense too, costs will rise trying to fix things.

Terry 5 months ago

Definitely C, revenue will drop for sure.

Kattie 6 months ago

I feel like all three options could be relevant, but I lean towards C) as the most immediate consequence of a boycott.

Leota 6 months ago

I practiced a similar question, and I think greater operating costs could be a factor too, but it seems less direct than the impact on revenues.

Rebecka 6 months ago

I'm not entirely sure, but I remember a case study where a retailer faced significant liabilities due to legal actions from the boycott. So maybe A) is also a possibility?

Tyra 6 months ago

I think the answer might be C) An adverse impact on revenues, since boycotts usually lead to decreased sales.

CFA Institute Sustainable-Investing Exam - Topic 4 Question 13 Discussion