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A review of the business resilience issues facing the food sector in 2020

The past year has seen a range of issues coming to the fore that have had a significant impact on business resilience and continuity in the food sector. Three in particular stand out and will continue to have a major impact throughout 2020, namely food allergies; food fraud; and climate change. Victoria Cross provides an overview…

Food allergies

The rise in food allergies in recent years has been well documented. Between 1995-2016 there was a five-fold increase in peanut allergies in the UK. Food allergies now affect around 7 percent of children in the UK – and hospital admissions for children suffering from allergic reactions have risen every year for the past five years.

In September the inquest into the death of Owen Carey on his 18th birthday highlighted the ongoing issue of allergies in the food service sector. Owen, who had a dairy allergy, ordered grilled chicken from Byron. He told staff about his allergy, but they didn’t tell him the meal contained buttermilk, which caused a deadly anaphylactic reaction.

Commenting after the Coroner’s Court hearing Owen’s sister told the BBC: "It's simply not good enough to have a policy which relies on verbal communication between the customer and their server, which often takes place in a busy, noisy restaurant where the turnover of staff is high and many of their customers are very young."

For non-pre-packed food, such as that sold in a restaurant, information for every item that contains any of the 14 allergens must be provided, but according to the UK Food Standards Agency, this could be either on a menu, chalkboard or information pack, or through a written notice explaining how customers can find out more information, for example by asking a member of staff for details.

Food business operators (FBOs) with high employee turnover, such as those employing casual staff in a foodservice environment, have the task of ensuring that every new recruit is inducted in the organization’s food safety processes and then follows them unfailingly at all times.

This is no easy task – and there is no ‘one size fits all’ solution to create a food safety culture within a business – a programme that works for one FBO won’t necessarily work for another. Similarly, activities that work for one part of a business might need adapting for another. Tailoring might also be necessary for employees in different roles, in different locations or in any number of ways specific to the organization.

But perhaps the crucial factor in determining the strength of a food safety culture is the attitude and style of the local leadership. If the local restaurant manager doesn’t demonstrate a strong commitment to food safety, then it is unlikely that their employees will either, even if the senior management team at regional and head office recognises its importance.

Food allergies and how businesses should respond to them isn’t something that is going to go away. This will continue to be a real cause for concern for all sectors of the food industry – not least from calls for tighter legislation following high-profile tragedies such as Owen’s.

Food fraud

Food safety issues are just one aspect of food fraud, which is growing worldwide as a result of our complex global food supply chain. This has the potential to affect business resilience and business continuity in many ways. For example, food containing unlisted or impure ingredients can impact on allergies, banned ingredients can make foods non-compliant with regulations and illegal in key markets, and fraudulently labelled food can undermine or destroy companies operating legitimately.

Food fraud, or food crime as it is also known, is usually defined as ‘the deliberate adulteration, substitution, tampering or misrepresentation of food’ and is estimated to cost the food industry $49 billion worldwide each year.

The most infamous case of food fraud in the UK was the 2013 horsemeat scandal, where a number of products from well known, high profile food businesses were found to contain horsemeat rather than beef.

This resulted in a major government commissioned review into the quality and integrity of the UK’s food supply networks. This led to the establishment of the National Food Crime Unit (NFCU), part of the Food Standards Agency.

As head of the NFCU, Darren Davies has emphasised that that the most effective way a food company can protect itself is by knowing its supply chain – but this is easier said than done.

In February it was reported that sick cows slaughtered illegally in Poland had entered the food chain of 12 other EU countries, while in Malta the local pork industry is on its knees as imported mass-produced pork is falsely labelled and sold as local Maltese produce.

Incidents such as these are occurring worldwide, costing businesses billions in lost revenue and reputational damage, despite the efforts of organizations like the NFCU. Blockchain is often held up as the way forward for improving food traceability and supply chain integrity but there will always be criminal activity that will undermine such efforts and seek to exploit the complexity of the international food system. For this reason, food fraud will continue to be a potential threat to food businesses for the foreseeable future.

Climate change

Finally, the issue that overshadows all others – and not just for the food sector – climate change. This has the potential to impact on virtually every aspect of food production, distribution and supply worldwide – reducing the availability of raw materials and ingredients, creating the likelihood of shortages and increasing the possibility of food fraud, to name but a few.

Rising sea levels and worldwide average air temperatures, as well as a steady decline in sea ice coverage, are all well documented – as are increases in extreme weather events. What used to be called ‘once in 100 years’ events are now becoming much more frequent.

These changes to the planet will have a massive impact on the food industry in terms of crop failure or decrease in yields, deforestation, and water or power cuts causing transportation, production and storage issues.

Other factors to consider include:

  • Low resilience in the global food supply chain – just three of the world’s edible plants – rice, maize and wheat – provide 60 percent of the world’s food energy intake;
  • Soil loss – at the current rate of global soil loss we have just 60 years of harvest left;
  • Fisheries collapse – 30 percent of global fish stocks are at biologically unsustainable levels;
  • Meat consumption – between 1960-2010 world consumption of meat rose from approximately 75 million tonnes to 300 million tonnes, with a huge and growing impact in terms of deforestation for grazing and Carbon Dioxide levels.
    While everyone and every company can make their contribution to combating climate change there is also action needed now to mitigate the ongoing effects.

Businesses are generally insured against the impact of extreme weather events, but prolonged interruption of business can affect market share, confidence, share price, and reputation – none of which are covered by insurance.

For this reason, natural disaster preparedness is a growing concern. For example, if a food business has a factory or facility in an area prone to disasters or disruption (such as flooding) how resilient is the business? What plans are in place to ensure continuity of production, supply and operation?

Likewise, how resilient is a business to events in other countries? Are there arrangements in place to source alternative ingredients if there is an interruption in supply from the country of origin?

But it’s not just the day-to-day practical considerations. A 2018 study of 60 institutional investors by auditors EY found that nearly 8 out of 10 considered climate change to be a significant risk.

This combination of practical and investor pressure has led to an acknowledgement that chief financial officers must give more attention to better preparing their organizations to deal with increasing incidents of weather related loss/business interruption. It also means they will be held increasingly responsible by boards and shareholders if they don’t anticipate climate change related disruption – and have not taken any proactive measures to prevent such disruption.

The author

Victoria Cross is Managing Partner, Instinctif Partners. Contact her at victoria.cross@instinctif.com

With over 100 years of collective experience in working in the field of risk, issues & crisis management and business resilience, the team at Instinctif Partners fuses risk identification, assessment and mitigation, with incident and crisis management preparedness. This builds strategic, operational and reputational resilience into organizations and equips their teams with the tools to perform at their best.

www.instinctif.com



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