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Food Fraud: Are Your Company Ethics at Risk?

Sally Bernstein, PwC.

Sally Bernstein is a principal in PwC’s retail and consumer practice, with over 25 years of experience. She leads PwC’s US Food Supply and Integrity Services practice focused on helping clients build capabilities related to delivering on their brand promise.

Morning coffee procedure: New filters in the coffee machine, check. Fresh cup from the dishwasher, check. Milk in date, check.

Most of us almost subconsciously consider food safety as part of our daily routine. But what about food fraud? What about the integrity of what you are eating? How “local” are the local farmers mentioned on the milk carton? And that fair-trade coffee you carefully selected, have you validated who it’s fair to?

Moving from your morning coffee to the world of business, I propose that food fraud is more damaging to a company’s brand and revenues than unsafe food. While the latter is close to a worst-case scenario for any business in the food industry, the cause can usually be pinpointed and addressed by appropriate training of staff, adherence to relevant standards of hygiene or re-worked processes, for example. There’s a chance the organization’s reputation can be salvaged.

Food fraud, however, means that someone (or multiple parties) somewhere is motivated to adulterate or counterfeit the food for financial gain.

It suggests greed for easy money at the expense—financial and sometimes health—of the consumer. Food fraud points to bacteria in the system. That’s not something the consumer will forgive quickly and the brand in question may never regain consumer trust. And it’s also hard to fix because it can and does occur all along the food chain, and can and sometimes does involve several parties. Stamping out food fraud requires a “no tolerance” stand from leadership and an ethical organizational culture to support it.

Food fraud costs

Food fraud is a big and growing problem, costing the global food industry an estimated US$30 to $40 billion every year. Well-known food fraud incidents, such as horse meat being passed off as minced beef and melamine being added to dairy products, have motivated the food industry to take action, resulting in measures such as food fraud assessment requirements (see below) and a recent increase in regulation in numerous jurisdictions.

Globalization and increasingly complex supply chains are creating huge opportunities and rewards for fraudsters.

The collision of megatrends—particularly climate change, resource scarcity, urbanization and demographic change—are increasing vulnerabilities and making it easier to profit from fraud.

Today, even the most basic foods can involve huge numbers of suppliers around the world.

Food fraud comes in many flavors, too; dilution, substitution, concealment, mislabelling, unapproved enhancement, counterfeiting or gray market production/theft/diversion. Its scope is broad, but whatever the packaging, it’s money that motivates the fraudsters, which brings us back to the ethics in food-related organizations and supply networks.

Food farmers and growers, food processors, distributors, retailers and restaurants alike should be asking themselves about the kind of business culture they encourage. Do they cultivate bacteria in the system or nutritious fodder that fuels a healthy, ethical business environment?

Fighting food fraud from farm to fork

 Tackling food fraud starts with the leaders of organizations in, or supplying, the food industry. They need to face up to the threat and truly understand the extent of the risk to their industry.

Then comes their commitment to quality, transparent and honest food.

That means building an ethics culture so that the organization is alert enough to be able to see fraud coming, prevent it and manage it effectively, and then working with suppliers and third parties who share similar ethical values and structures.

What does this involve?

  1. Understand the potential fraud risk factors. There are two main elements here: opportunities and motivations for criminal activity. These are determined by the company’s internal and external environment, not least its accepted code of conduct.
  2. Assess the existence of fraud control measures within your organization and along your food supply chain, from animal feed and primary production to manufacturing and catering. What controls and checks exist? Are there any?
  3. The balance of numbers one and two above will give you a profile of your company’s potential food fraud vulnerability and can form the basis for the development of interventions to mitigate identified vulnerabilities.
  4. Naturally, fraud vulnerabilities change over time, so the above process will need to be repeated periodically. What organizations will gain from most is building resilience to fraud into their overall food safety systems. This will involve setting a long-term plan to reduce public health risks from identified food fraud vulnerabilities. Establishing the underlying culture and ethics that protect and control the organization will necessarily be part of that.

Recognizing that current food safety management systems are not always designed for fraud detection or mitigation, the Consumer Goods Forum’s Global Food Safety Initiative now requires food organizations to carry out food fraud vulnerability assessments as part of their certification schemes and to have a documented food fraud mitigation plan.

As a final word, taking a leadership stand against food fraud is not only an ethical, reputational or regulatory consideration, it’s a question of growth, too.

Leading companies understand that future growth will depend on both safety and integrity in their supply chains, and trust in their brands. So, they proactively choose to become the companies their customers, and probably their employees, want of their food providers—before their competitors do—by addressing safety and fraud risks broadly they create an advantage. They identify and tackle weaknesses wherever food trust issues could arise, creating greater integrity, quality, traceability and transparency throughout the supply chain.

In so doing, they differentiate themselves from the pack and remain most relevant to their customers by giving them the greatest confidence in their food. That’s doing smart business ethically.

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© 2016 PwC. All rights reserved.

 PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.

The content is for general information purposes only and should not be used as a substitute for consultation with professional advisors.

Author Biography

Sally Bernstein experience spans the food value chain and includes supply chain resilience, strategic risk management, regulatory response, recovering and responding to unexpected events and building ethical culture and risk management programs. Sally was named on Ethisphere’s 2015 list of the “100 Most Influential People in Business Ethics.”

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