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Is an unsustainable supply chain more vulnerable to fraud and adulteration?

As a panelist at Nutrition Integrates 2015, I was asked an excellent question from the floor about the reduced focus on sustainability across much of the food industry over recent years. I thought colleagues may be interested in my response…

The big issue is how to achieve the introduction of sustainability into our every day working practices across the food supply chain. I firmly believe that the Vulnerability Assessments which form part of BRC issue 7, provide us with a unique opportunity.

Horizon Scanning is the art of trying to predict where the next food industry crisis might happen; yet many of us have not yet considered the sustainability of our supply chains; and the risks inherent to an unsustainable supply chain. It is an unmistakable fact, that developing sustainability in the supply chain whilst  building resilience to fraud and adulteration are inextricably linked.

But first let’s clarify sustainability.

What is sustainability in the food supply chain?

For simplicity, let us consider water usage. Many other variables can be added but the principles are the same:

  • A Google Search of “what is water sustainability” presents an array of NGO and other sites explaining the challenges of water sustainability – but I cannot find a universal definition.
  • Lack of any universal definition throws up a challenge for any business hoping to introduce sustainability measures into its supply chain management.
  • If we cannot clearly standardise our definitions of sustainability, perhaps we should start by exploring the implications of an unsustainable supply chain.

Right or wrong

What are the implications of an unsustainable supply chain?

There are numerous implications but I will focus on three:

  • Price volatility

When a supply chain is unsustainable, you are more likely to experience price volatility. Drought in areas of your supply chain will result in reduced crop yields. Supply and demand are often evenly balanced across commodities, so small reductions in yield can have a disproportionate impact on prices, which will therefore result in an unknown amount of price volatility.

  • Raw material shortages

Drought may result in raw material shortages making it difficult to source enough of the raw material, or difficulties in sourcing from the preferred source. The quality of material available may decline, resulting in non-conformances for not meeting raw material specifications, making it difficult to achieve finished product specifications.

An everyday example of this is Hovis having to end a commitment to using British wheat in 2013 due to a poor harvest.

  • Contamination risks from over-pumping of irrigation water

Growing crops in water-stressed areas where irrigation is used, may become increasingly unsustainable if we have already reached what some have referred to, as peak water

Today, around 18 countries, containing half the world’s total population, are overpumping their aquifers. Among these are the big three grain producers: China, India and the US.

During recent decades, several of these countries have over- pumped to the point where aquifers are being depleted and wells are becoming dry. They have exceeded not only peak water, but also peak grain production. Among the countries whose use of water has peaked and begun to decline are: Saudi Arabia, Syria, Iraq and Yemen. In these countries peak grain has followed peak water.

Now that we have established some of the risks presented by an unsustainable supply chain, how can we begin to resolve them using the Vulnerability Assessments?

Solution Concept

How can food companies incorporate sustainability into Horizon Scanning and Supply Chain Risk Management Plans?

The implementation of BRC issue 7, requires “food businesses to have processes in place to access information on historical and developing threats to the supply chain which may present a risk of adulteration or substitution of raw materials” (clause 5.4.1).

A documented vulnerability assessment shall be carried out on all food raw materials or groups of raw materials to assess the potential risk of adulteration or substitution, taking into account economic factors which may make adulteration or substitution more attractive” (clause 5.4.2).

So what can food businesses do?

Include supply chain sustainability as a variable in BRC issue 7 Vulnerability Assessments.

The quid pro quo is, that an unsustainable supply chain introduces a substantial risk of price swings, raw material shortages and reduced raw material quality and these are the factors which will increase the risk of economic motivated adulteration (EMA) within the food supply chain.

Therefore, it will be beneficial to  include sustainability within your vulnerability assessments.

Move sustainability out of Corporate Social Responsibility (CSR) and into business risk management.

Sustainability has been seen as the responsibility of CSR over recent years. Some have questioned the commitment of retailers and food businesses to achieving CSR, particularly when economic circumstances deteriorate.
Looking at sustainability from the perspective of ‘supply chain vulnerability’ makes an irrefutable case for it being an important pillar within both business risk management, and supply chain management.

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