Food Supply Chain Fraud: The Economic, Environmental, and Sociopolitical Consequences

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Food Supply Chain Fraud: The Economic, Environmental, and Sociopolitical Consequences Louise Manning1 Reader in Food Policy and Management, Harper Adams University, Newport, United Kingdom 1 Corresponding author: e-mail address: [email protected]

Contents 1. Introduction 2. Defining Transparency and Trust 3. Food Integrity and Food Fraud in the Supply Chain 4. The Dioxin Incident in Belgium, 1999 5. Discussion 6. Conclusion References

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1. INTRODUCTION This chapter considers the consequences of food fraud across the supply chain in terms of the economic, environmental, and sociopolitical impacts that can arise from such incidents and as a result their impact on sustainability and food security. Much of the current literature focuses on the types of food susceptible to fraud and the private and public partnerships that need to be developed to address the problems that occur rather than their impact on the triple bottom line (TBL) specifically. A case study, the dioxin incident in 1999, is used to explore food fraud at a fundamental level and consider the issue in a more holistic way in order to demonstrate the depth and breadth of the economic, environmental, and social impact of fraudulent activity in the food supply chain. This chapter reviews the framing of the terms transparency, trust, moral hazard, and mendacious behavior before then considering the case study in more detail. These four concepts help frame the context and in turn the consequences of food fraud and how fraud impacts on sustainability and food security. Advances in Food Security and Sustainability ISSN 2452-2635 https://doi.org/10.1016/bs.af2s.2018.09.001

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2. DEFINING TRANSPARENCY AND TRUST Transparency as a construct arises from the desire of supply chain stakeholders to be in a position to make informed decisions (Dingwerth and Eichinger, 2010; Manning, 2018). Transparency is the condition of information visibility or disclosure that enables or conversely can impair ethical practices or principles (Turilli and Floridi, 2009). At the supply chain level, transparency encompasses quality and sustainability characteristics in order to increase public accountability (Mol, 2015) without loss, noise, delay, or distortion (Wognum et al., 2011). Sustainability information encompasses the TBL, otherwise described as the three P’s of profit-economic information, people and socially orientated information, and planet, i.e., information associated with environmental impact (Wognum et al., 2011). Disclosure of information to consumers about sustainability can take two basic forms: 1. Explaining supply chain activities where information is communicated to consumers in an effort to reduce value chain complexity. 2. Introducing labeling and certification systems that communicate from packaging or associated media compliance with a standard developed to provide assurance of the degree of sustainability of a given organization or activity in the supply chain (Mol, 2014). These labeling and certification systems can be considered as either business-to-business (B2B) or business-toconsumer (B2C) constructs, the former primarily to reduce supply chain risk, the latter to communicate to consumers the extrinsic aspects of how their food has been produced. Transparency specifically with respect to sustainability is assessed not only against normative criteria related to power, democracy, participation, accountability, and right-to-know but also in terms of reducing information asymmetries, and ensuring more effective environmental governance (Mol, 2014). Further, transparency links with personal autonomy, and becomes “a normatively loaded term” with innate meaning requiring organizations to fully disclose information that stakeholders need in order to make an informed decision to buy or not to buy, to invest or not to invest, or to collectively organize against a company or refrain from doing so (Dingwerth and Eichinger, 2010). Information provides context or meaning and the process of information development requires data to be collated, ordered, interpreted, and explained often by one supply chain stakeholder, e.g., retailer or food

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service organization, in order to determine its relevance and significance not only to themselves but also to others. This translation process has ethical dimensions in terms of what to disclose or not disclose, and what to assume or not assume and depends on trust especially where the process of interpretation is open to misrepresentation, malpractice, or fraudulent behavior (Manning, 2018). The nature of these disclosure activities influences the extent to which stakeholders, including consumers, believe that an organization has been open, honest, truthful, and transparent or alternatively deceptive. There are cultural differences in the acceptance of what individually or collectively is termed deception (Choi et al., 2011), suggesting there are both objective and subjective norms that bound notions of deception with subjective norms often having the stronger influence. Norms play a crucial role in the functioning of any socioeconomic system, such as food production and consumption, in particular the norms of trust and honesty (Galeotti et al., 2017). Trust is a key factor that mediates consumer concern about elements of food integrity, for example, the environmental impact of production or social issues such as animal welfare, and the use of technology (Goddard et al., 2018). Therefore, social trust is an important socioeconomic factor that frames the behavior of individual and collective supply chain actors and informal governance in a society (Cao et al., 2016). Indeed, they argue that strong social trust dynamics create a trustworthy business environment. This means that even if the individuals within a given organization are neither honest nor trustworthy they are less likely to behave in that way in their business interactions and to hide negative information about organizational performance, if there is influence and pressure by others within and outside the organization who hold those positive values. Moral hazard, the risk that in a transaction one party is not acting in good faith, results either from the provision of partial or misleading information or perhaps taking excessive risks to increase profit, because the individuals or organizations know that such risks are covered by insurance (Starbird, 2005). Moral hazard can also extent to excessive risk taking where risk is covered by the state (government) or other parties in the supply chain. In an imperfect operating market of information asymmetry, moral hazard is a realistic risk and food integrity is compromised if opportunistic suppliers breach agreements, especially if their action is without fear of identification or penalty (Wang et al., 2017). The concept of moral hazard lies at the heart of what it is to have integrity in the food supply chain.

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3. FOOD INTEGRITY AND FOOD FRAUD IN THE SUPPLY CHAIN The notion of food integrity suggests that the food supply chain should demonstrate accountability in terms of material source and origin, and the embedded characteristics of product and process authenticity at each stage of the transformation of materials into the finished product (Wang et al., 2017). The consultancy PWC (2008) differentiates between: (a) operational integrity—the ability of the supply chain to meet objectives for quality, operations (productivity), and financial (economic) performance and (b) reputational integrity—the ability of the supply chain to protect and enhance brand; manage and respond to customer and investor concerns; and comply with the growing burden of legislation associated with social and environmental ethics. Food integrity is “ensuring that food which is offered for sale or sold is not only safe and of the nature, substance and quality expected by the purchaser but also captures other aspects of food production, such as the way it has been sourced, procured, and distributed and being honest about those elements to consumers” (Elliott, 2014, p. 84). Improving food integrity enhances food safety, authenticity, quality, increases consumer trust in product claims and the honesty of brands (Goddard et al., 2018; Kleboth et al., 2016). Manning (2016) considers there are four elements to food integrity: product, process, data, and people integrity. However, terms such as food safety, food integrity, food defense, food fraud, food tampering, and so forth are often used interchangeably leading to confusion in the supply chain (Davidson et al., 2017). Food fraud can be described as the breach of trust between two parties and thus to avoid fraudulent behavior it is implicit that actors in the supply chain demonstrate they are trustworthy (Sarpong, 2014) and seek to do things “right” (Moyer et al., 2017). Food fraud is a collective term for multiple illicit activities (see Table 1). Food fraud can harm human health and erode consumer trust and confidence in food governance, social harmony, and undermine the value of a national food supply chain, brand, or particular product (Bouzembrak and Marvin, 2016; Spink et al., 2015). Charlebois et al. (2016) describe the link between food fraud and economic gain as a causal relationship especially for products that are valued, have marketability and are perceived as luxury items. However, van Ruth et al. (2017) argue that food fraud is a wider challenge than just economically

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Table 1 Types of Food Fraud Types of Food Fraud

Addition Adulteration Counterfeiting Diversion False or misleading statements made about a product for economic gain Misrepresentation of food, country of origin, food ingredients, or food packaging Overrun Overtreating (including adding more water than allowed by regulation) Simulation Smuggling Substitution Tampering Theft Underweight product Adapted from Spink, J., Moyer, D.C., 2011a. Defining the public health threat of food fraud. J. Food Sci. 76 (9), R157–R162; Spink, J., Moyer, D.C., 2011b. Backgrounder: Defining the Public Health Threat of Food Fraud, in Research Grants. Minneapolis, MN: National Center for Food Protection and Defense (NCFPD) (p. 7). http://www.ncfpd.umn.edu; Spink, J., Moyer, D.C., Park, H., Wu, Y., Fersht, V., Shao, B., Edelev, D., 2015. Introducing food fraud including translation and interpretation to Russian, Korean, and Chinese languages. Food Chem. 189, 102–107; Lotta, F., Bogue, J., 2015. Defining food fraud in the modern supply chain. EFFL 10, 114–122.

motivated adulteration (EMA) and as a result existing food safety management systems are not specifically focused on fraud control and mitigation thus creating vulnerability for organizations and supply chains as a whole. While food fraud is not a new phenomenon, as food businesses increasingly interact at a global level, and supply chains become more sophisticated and complex (Sarpong, 2014), food fraud becomes a more significant challenge (Aung and Chang, 2014; Bouzembrak and Marvin, 2016; Charlebois et al., 2017) with wide-ranging economic, social, health, and environmental impacts (Ellis et al., 2016). Food fraud is driven by economic opportunity and the low probability of discovery, as well as the low severity of punishment (Pustjens et al., 2016). Indeed, a food fraud incident can impact on product marketability and also have a negative economic impact at multiple points from organizational to specific supply chain, whole industry or a

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national or international level (Charlebois et al., 2016; Spink et al., 2016). Kendall et al. (2018) differentiate between indirect economic costs, e.g., loss of customer confidence or loss in brand value and direct economic costs which would include the cost of product recall. Thus, there are multiple factors that can contribute to the economic loss associated with a food fraud incident (Table 2). The supply chain practice of outsourcing and use of subcontractors, especially in emerging economies, where labor costs and the cost of regulatory compliance are lower, is seen as economically advantageous. However, in geographic locations, where regulatory and private controls are less strict there is a greater variety of organizational vulnerabilities to food fraud (Lotta and Bogue, 2015). Thus, the opportunities and motivations for food fraud are situational. Individuals are more likely to be honest when they stand to have less monetary gain from dishonest behavior and/or the probability of detection and the degree of punishment increase (Rosenbaum et al., 2014). Mendacious behavior is mediated by a number of factors including culture, acceptance of corruption, negative behavior, and self-interest (see Table 3). There is a growing regulatory focus on driving Table 2 Economic Costs Associated With a Food Fraud Incident Economic Costs Associated With a Food Fraud Incident. Cost of …

Associated loss of sales or factory closure while incident is scoped and brought under control Customer fines for nonsupply Destruction of materials associated with the incident Export markets closing Fall in share price or brand asset value Implementing new controls and mitigation activities, retraining, etc. Industry wide losses Insurance payments by insurers and the subsequent rise in insurance premiums for both individual businesses and industry sector Investigating the incident Loss of trust by customers and consumers Product recall (including the consumer) or withdrawal from the food supply chain Adapted from Galvin-King, P., Haughey, S.A., Elliott, C.T., 2018. Herb and spice fraud; the drivers, challenges and detection. Food Control 88, 85–97.

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Table 3 Factors That Influence Mendacious Behavior Factor of Influence

Altruism, i.e., the degree of benefit to the person being deceived Faceless or face-to-face interaction, i.e., the impact of cognitive distance is the perpetrator in a close or weak relationship with the victim Gender Group setting, i.e., cultural influences Intrinsic cost of lying—culpability Local corruption levels Magnitude of lie Moral spillover—influence of associated tasks on this particular task Risk of being caught being dishonest Self-interest Social or moral priming, e.g., religious priming, income, age Stake size, i.e., what can be gained by deception Subject matter Time of day Adapted from Rosenbaum, S.M., Billinger, S., Stieglitz, N., 2014. Let’s be honest: a review of experimental evidence of honesty and truth-telling. J. Econ. Psychol. 45, 181–196.

change in mendacious corporate culture, to create greater accountability of corporate managers, and to rescue and reconstruct corporate reputation and rebuilding public trust (Ranyard et al., 2017). Supply chain deja`-vu is the overwhelming sense of familiarity that embedded supply chain knowledge, especially with regard to food safety and legality, has somehow been forgotten or is no longer focused on and yet when an incident occurs is then collectively recalled and recognized as being truth, a tenet and an instrumental element of best practice. Wilful blindness, i.e., an avoidance of the truth reduces transparency in the supply chain means that individuals or organizations may intentionally remain unaware of facts or information that if they were aware would then make them liable. Sarch (2014) reflects on the term “wilful ignorance” and whether it is the moral equivalent of having full knowledge of the facts, i.e., there is still a degree of culpability even when a decision is made to avoid such knowledge. Schelling (1956) states that strategic ignorance

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may actually be a strength rather than a weakness in bargaining between organizations as the party that is behaving illicitly is then negotiating from a weaker stance, i.e., strategic ignorance allows actors to behave egotistically, exhibiting little moral concern and little interest in fairness (Wieland, 2017). Therefore, Wieland argues that strategically ignorant agents are blameworthy when their conduct is shown to be reckless and they are aware that they run an unjustified risk for both themselves and others by not being fully engaged with all the information available. Being blameworthy, i.e., deserving of blame is an interesting construct within the food supply chain. Green and Kugler (2012) argue that white-collar crime is somehow seen as less blameworthy and culpable than street crime. This suggests a sense of relative morality associated with fraud in the food supply chain compared to other kinds of crime, especially where the victim (the consumer, the retailer, the farmer) is perceived as faceless. Further fraudulent activity because of omission, i.e., failure to disclose may be seen by some as less concerning than actively and intentionally misleading others (Green and Kugler, 2012). Responsibility, blameworthiness, and accountability are important concepts in any food incident, particularly when consumer confidence has been lost or damaged (Regan et al., 2015), i.e., they believe that they have been the victims of mendacious behavior. Table 3 highlights the cultural relativity of perceptions of mendacious behavior and the factors of influence and a number of these have been described here. Trust, transparency, and active disclosure lie at the heart of food integrity and the ethical context within which food is produced. The last 30 years show examples of food incidents that started out as seemingly discrete problems and then quickly escalated into transnational issues. These incidents share the characteristics of the resultant cost of resource loss to the environment, a cost to human lives over a spectrum from death to concern, fear and dread, and the impact on the financial viability of supply chains and individual organizations. Thus, food recalls cause a sustainability challenge severely affecting the TBL at business, supply chain, national and even international levels. The bovine spongiform encephalopathy (BSE) incident in the United Kingdom, the horsemeat scandal of 2013 and the ongoing repeat offences of horsemeat substitution in Europe; the melamine substitution of milk powder incident in China of 2012; poultry product recalls in Europe for nitrofuran (Germany in 2002) all provide such examples where the economic, environmental, and social impact was severe. In 2002, when nitrofuran was detected in organic wheat used for animal feed in Germany at a level of 5.96 ppm, poultry products were recalled from 334 farms

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(Manning et al., 2006) leading to loss of resources, and disruption of supply chains. In order to reduce the impact on the TBL, timeliness of appropriate corrective action in the event of a product recall is crucial. The BSE inquiry report too reflected weak controls and stated that while the UK government took measures to address both the hazards to cattle and humans in the BSE incident, the measures were not always timely nor adequately implemented and enforced (Manning and Baines, 2004; Phillips et al., 2000). Further the report also concluded that: The Government was preoccupied with preventing an alarmist over-reaction to BSE because it believed that the risk was remote. It is now clear that this campaign of reassurance was a mistake. When on 20 March 1996 the Government announced that BSE had probably been transmitted to humans, the public felt that they had been betrayed. Confidence in government pronouncements about risk was a further casualty of BSE. Phillips et al. (2000)

The media can play a role in shaping consumer perceptions during a public health crisis in terms of communicating information and risk (Wilson et al., 2014). Risk is a social construct and the communication of risk is often determined through a politicized process and is “a juxtaposition of contested ways of making sense of the world” (Masuda and Garvin, 2006: 437). Rather than being a linear effect, Petts et al. (2001) suggest during a high profile product recall, risk communication is nuanced and actors actually compete with each other to advance a preferred view on a given issue and seek to mobilize their own actions especially when what is being promoted as the truth is a contested space. Risk communication does not occur in social isolation but as a response to the behavior of others (Bakir, 2005). Risk amplification is the sociopolitical activity that amplifies the risk perception from the expert viewpoint of low risk to a point where there is raised awareness and concern (Kasperson et al., 2003, p. 13) or more simply, the way in which social agents “generate, receive, interpret and pass on risk signals” (Kasperson et al., 2003, p. 15). Risk signals are filtered through social amplification stations such as individuals, institutions, the media, or NGOs (Masuda and Garvin, 2006). Reflection on the BSE incident demonstrates that governments can take a “political” policy decision in such circumstances rather than an objective science-based view (Manning and Baines, 2004). Subjective decision making will have an impact on trust and perceptions of the degree of actor integrity in decision making and paternalistic behavior. A case study is now explored in this chapter: the repeated dioxin recalls in the early 2000s in Europe and with particular emphasis on the dioxin incident in Belgium in 1999.

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4. THE DIOXIN INCIDENT IN BELGIUM, 1999 Dioxin is an overarching name for a range of stable, lipid-soluble polychlorinated/brominated dibenzo-p-dioxins including one particular chemical 2,3,7,8-tetrachlorodibenzo-p-dioxin otherwise described as TCDD (Lok and Powell, 2000). There have been repeated dioxin incidents in Europe over the last 2 decades associated with poultry supply chains linked in many cases to contaminated feed ingredients. The first reported incident in 1999 affected 11 feed mills across Belgium, France, and the Netherlands. The second reported incident in 2002 was linked to premix contamination that then went on to contaminate feed for laying hens. There were subsequent reported incidents in 2008, 2010–11, 2012, 2014, and 2015 (see Table 4). A real example of supply chain deja`-vu. This case study will focus on the first food fraud incident. Casey et al. (2010) assert that the 1999 Belgian food product incident is a clear example of where a minor incident becomes a major recall as a result of media reaction, consumer reaction, weak governance, and inaction of officials over a 12-month period (see also Shears et al., 2001). In January 1999, 500 tons of feed containing around 50 kg of polychlorinated biphenyls (PCBs) and 1 g of dioxins were distributed to animal farms in Belgium, the Netherlands, France, and Germany (van Larebeke et al., 2001). The 1999 dioxin incident highlights the lack of cohesive cooperation between supranational and member state regulatory authorities within the EU (Casey et al., 2010). As the 12-month timeline unfolded for the dioxin incident (see Table 5), a misalignment between the severity and depth of the incident, and the timeliness of response had significant implications for the TBL for individuals, organizations, and ultimately food supply. What led to the incident? A storage tank of fat at Verkest, a fat and oil processing plant and animal feed manufacturer based near Ghent in northwest Belgium, was contaminated with a substance containing dioxin on January 18–19, 1999 and media reports 5 months later suggest transformer oil or industrial oil was accidentally or deliberately mixed with the animal fat (Lok and Powell, 2000). Table 5 shows the timeline of events from January 1999 through to May 1999 when as late as May 28, 1999 chicken and eggs were finally removed from retail shelves and consumers were advised not to eat Belgian poultry and eggs and 5 days later this was extended to pork products on shelf. Greenpeace, the environmental group, released a statement expressing concern that the government had waited so many weeks before disclosing the incident and the risk to consumers (Lok and Powell, 2000).

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Table 4 Poultry Supply Chain Recalls as a Result of Dioxin Contamination Year Incident

1999

The contamination of food products with dioxin resulted from contamination of fat, which was distributed to 11 feed mills (9 in Belgium, 1 in France, and 1 in the Netherlands). May 28, 1999—14 countries involved

2002

February 27, 2002—dioxins (2.17 ng/kg—ppt) in premix for feeding stuffs for laying hens—two countries affected (no sampling date given)

2006

January 13, 2006—dioxins (5.71; 7.08; 7.5; 10.15; 13.32 pg WHO TEQ/g) in poultry meat from Portugal—one country affected (sampling date July 22, 2005)

2008

June 30, 2008—dioxins (1.23; 1.13 pg WHO TEQ/g) and dioxin-like polychlorobifenyls (7.68; 7.71 pg WHO TEQ/g) in egg products from Switzerland—three countries affected (sampling date April 15, 2008)— product past used by date

2010–11 April 28, 2010—RASFF notification—dioxins (1.35; 0.68; 0.69—2.8; 1.2; 3.8; 2.2; 1.3 pg WHO TEQ/g) in feed for laying hens from the Netherlands, with raw material from Ukraine with five countries identified as being concerned May 17, 2010—RASFF notification—dioxins and dioxin-like polychlorobifenyls (sum 14.89 pg WHO TEQ/g) in organic eggs from Germany (sampling date May 11, 2010) with two countries concerned December 15, 2010—dioxins and dioxin-like polychlorobifenyls (sum 8.12 pg WHO TEQ/g) in eggs from France (sampling date October 19, 2010) with two countries concerned December 28, 2010—dioxin discovered in animal feed in Germany with dioxins (in fat used for the feed: 123; 124 pg WHO TEQ/g) in vegetable feed fat for pigs and poultry from Germany (sampling date December 4, 2010) with nine countries concerned February 23, 2011—dioxins (1.17 pg WHO TEQ/g) in feed oil for the production of feed for livestock from Germany, with raw material from the Netherlands and Brazil (sampling date January 25, 2011) with five countries identified as being concerned July 9, 2011—suspicion of dioxins (in breeder chicken meat: 33.68; 430.9; 116.4 pg WHO TEQ/g) in hatching eggs, day-old chicks, and fattening chicks for slaughter and chicken carcasses from Portugal—four countries involved (sampling date July 22, 2011) August 15, 2011—dioxins (2.07 pg WHO TEQ/g) and dioxin-like polychlorobifenyls (sum: 12.31 pg WHO TEQ/g) in eggs (organic production) from the Netherlands—three countries involved (sampling date August 10, 2011) Continued

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Table 4 Poultry Supply Chain Recalls as a Result of Dioxin Contamination—cont’d Year Incident

2012

April 5, 2012—dioxins and dioxin-like polychlorobifenyls (sum of: 15.64 pg WHO TEQ/g) in organic eggs from Germany—two countries involved (first sampling date March 27, 2012) April 16, 2012—dioxins and dioxin-like polychlorobifenyls (9.89 pg WHO TEQ/g) in organic eggs from Germany—one country involved (sampling date April 5, 2012) June 19, 2012—dioxins (19.5 ng/kg—ppt) in organic eggs from Germany—one country involved (sampling date June 1, 2012) August 29, 2012—dioxins (8.15 pg WHO TEQ/g) in organic eggs from Germany—two countries involved (sampling date August 14, 2012)

2014

September 10, 2014—suspicion of dioxins in laying hens from the Netherlands—two countries involved (no sampling date given)

2015

July 10, 2015—dioxin-like polychlorobifenyls (22 pg WHO TEQ/g) in eggs from the Netherlands—two countries affected (sampling date June 15, 2015)

2015

September 1, 2015—dioxin-like polychlorobifenyls (6.13 pg WHO TEQ/g) in dried yolk powder from India—three countries affected (sampling date June 23, 2015)—distribution to third countries September 23, 2015—dioxins and dioxin-like polychlorobifenyls (7 out of 12 samples: sum >5 pg WHO TEQ/g) and nondioxin-like polychlorobifenyls (12 out of 12 samples: >40 μg/kg—ppb) in egg yolk powder from India—four countries affected (sampling date September 3, 2015)—company’s own check—not distributed

Adapted from The RASFF (Risk Assessment for Food and Feed) Portal. Available at: https://webgate.ec. europa.eu/rasff-window/portal/?event¼SearchForm&cleanSearch¼1.

The financial cost of the resultant global import restrictions was estimated at US$3 billion with over 30 countries affected by the product recall, and 7 million chickens and 60,000 pigs culled (Covaci et al., 2008; Flanders Today, 2011; Greenpeace, 2006). Risk amplification to consumers was driven by media communication. Early media reports described dioxin as a cancer-causing toxic chemical with levels in contaminated products, ranging from 140 to 700 times to 1500 times the normal or acceptable level despite the fact that the EU Commissioner for Consumer Affairs stated that the risk associated with consumption of the products was low (Lok and Powell, 2000). Covaci et al. (2008, p. 166) propose that three crises came together in June 1999:

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Table 5 Timeline for the 1999 Belgian Dioxin Incident Date Activities

January/early February

Illness and mortalities identified at a number of poultry operations in Belgium. Verkest, the feed supplier received complaints from customers. Some customers then instructed veterinarians to investigate the problem

February

Da Brabender firm, an animal feed producer, began noticing problems with its breeder hens used to produce 1-day-old chicks. The media reported the chicks had a nervous system problems and there were low rates of hatchability

March 3

Da Brabender contacted insurance company who appointed veterinarian to investigate and 2 weeks later they concluded the fat in the animal feed was the most likely cause of the problem

March 19

Da Brabender informed the Belgian Ministry for Agriculture that samples had been taken and were being analyzed by a Dutch laboratory

Late March

Belgian government began investigations of Verkest and multiple tanks were sampled and the samples sent away for analysis which proved negative for dioxin. Verkest was found to be violating some administrative and technical regulations such as labeling requirements and the public prosecutor was notified on April 12

April 21

Veterinarian appointed by the insurance company. Reports to Ministry of Agriculture that they feel dioxin is causing the problem. Five days later on April 26, more than 1 month after the samples were sent to the laboratory, analysis results confirmed this that dioxin was present at high levels in the animal feed as well as in chicken fat

April 26

Belgian authorities informed that dioxins detected in feed samples and implicated poultry farms constituted 25% of national production. It was determined that contaminated feed produced between 19th and 31st January 1999 and sent to eight Belgian feed manufacturers one in France and another in the Netherlands. All product sales halted

May 2 and 13

Belgian authorities inform regulatory authorities in the Netherlands and France. Sales of eggs and poultry from 10 affected producers stopped. Further investigations started into another 417 poultry farms Continued

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Table 5 Timeline for the 1999 Belgian Dioxin Incident—cont’d Date Activities

May 26

Analysis of results from breeding eggs and hens showed the presence of dioxins. Evident contaminated products were still on sale. Belgian authorities then recalled products from the other 417 farms

May 27

Flemish television notified that dioxins had been found in poultry products. European Commission Directorate-General (DG) for Agriculture informed of dioxin contamination of poultry products

May 29

International print media begin reporting on the crisis

May 28

Following criticism of the Belgian authorities’ management of the incident, they removed all poultry and eggs from Belgian stores

June 1

Belgian Minister for Agriculture and the Minister for Public Health resign. Belgian authorities extend the ban to include all food products containing poultry meat and eggs before a measure is implemented by the EC. The Belgian government launched an internet website entitled “Dioxin Contamination”

June 3

Commission Decision 1999/363/EC of June 3, 1999 implemented that established protective measures pertaining to poultry product from Belgium. Decision 1999/363 also addressed the considerable uncertainty as to the source of contamination and the ability to track and trace affected products

June 4

EC seeks to control increasing scope of the incident after being informed by Belgian authorities (2nd/3rd June) of concerns of pig and cattle holdings having been in receipt of contaminated feed. Commission Decision 1999/368/EC of June 4, 1999 extends the prohibition order to Belgian beef, pork, milk, and milk products from affected holdings. Belgian pork, beef, and milk products from nonaffected holdings also require special measures to be in place

June 7

Dutch Minister for Agriculture resigns

June 10

Anger with farmers led to road blocks at Dutch and French borders

June 12

Shelves being stocked with products from nonblacklisted farms

June 13

Belgian Government voted out of office in elections after 12 years in power

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Table 5 Timeline for the 1999 Belgian Dioxin Incident—cont’d Date Activities

June 22

German authorities identify imported meat containing dioxins from Belgium showing product recall and associated bans were not effective

June 30

Report released by Belgian government stated cost to the agrifood industry of crisis was $1.54 billion. This prompted the cabinet to approve emergency aid of $160 million for farmers and processors via payment for slaughter and destruction of contaminated products and livestock as well as interest-free loans. Further farmer blockades

June/July

Further discussion as to why Belgian authorities had not used the RASFF system for notifications. July 233 more pig farms put under restrictions; July 29th further 175 poultry and pig farms put on restriction

August– December

Restrictions slowly lifted. Finally completely lifted April 2000. By December 1999 more than 55,000 analyses had been undertaken

Adapted from Lok, C. Powell, D., 2000. The Belgian dioxin crisis of the summer of 1999: a case study in crisis communication and management. Working Paper No. 13, Department of Food Science, University of Guelph, Guelph, May; Covaci, A., Voorspoels, S., Schepens, P., Jorens, P., Blust, R., Neels, H., 2008. The Belgian PCB/dioxin crisis—8 years later: an overview. Environ. Toxicol. Pharmacol. 25 (2), 164–170; Casey, D.K., Lawless, J.S., Wall, P.G., 2010. A tale of two crises: the Belgian and Irish dioxin contamination incidents. Br. Food J. 112 (10), 1077–1091.

an economic crisis across the Belgian food sector, a political crisis for the Belgian government that resulted in ministerial resignations and pressure from the European Commission (EC), as shown in Table 5; • a media crisis with multiple risk signals where Belgian authorities were accused of “having deliberately served the economic interests of farmers’ unions and [the] meat industry instead of protecting public health” and the intervention of Greenpeace, who acted as a further risk amplification station; and • a perception crisis where the “mediatized misperception” exaggerated the health risk to consumers. What were the economic, environmental, and social consequences of this food fraud incident? On a personal level on June 2, 1999, two executives, father and son, Jan and Lucien Verkest were arrested and charged with merchandise fraud and falsification of documents including invoices which misled customers to thinking they were buying 100% animal fat (BBC, 1999; •

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Lok and Powell, 2000). At the close of the trial in 2009, the two executives were found guilty and given a 2-year suspended prison sentence, they appealed but lost that appeal in 2011 (Flanders Today, 2011). Five others were among the accused including, brother and sister, Jacques and Jacqueline Thill of the rendering company Fogra in Bertrix who each received a 1-year suspended sentence (Flanders Today, 2009). The media report noted that the siblings “delivered fat gathered from deep-fryers which was contaminated with PCBs, motor oil, and melted plastic. The court then considered the case of the civil parties, including the government that demanded €400 million compensation but no money was paid” (Flanders Today, 2009, p. 6). Other direct consequences were: (a) Economic impact as mentioned earlier the economic impact has been estimated at US$3 billion, several food companies went bankrupt, job losses, and demands for compensation, multiple aid packages were provided by the government to cover financial loss and the financial cost of transportation and incineration of products (Lok and Powell, 2000). (b) Environmental impact from the disposal of recalled food and the livestock culled as a result of the incident. (c) Sociopolitical impact which included the change of the government in Belgium on June 13, 1999, at the General Election; greater public awareness of food safety and a rise in consumption of organic food after the crisis; the introduction of Belgian national maximum residue levels for PCBs in feed and food and similar harmonized standards across the EU; in 2000 the introduction of a national monitoring program for products of animal origin (the CONSUM system); the creation of the Federal Agency for Food Safety in Belgium and revised controls on the recycling of animal fat (Covaci et al., 2008). Fraud in the food chain continues to occur with the associated economic, environmental, and sociopolitical consequences. Repeated incidents for dioxin (see Table 4) show that either the lessons from the 1999 incident were simply not learned or the financial benefits from fraudulent activity were so great that the lessons were ignored in favor of financial return. Indeed the 2013 horsemeat incident clearly demonstrated that illicit and opaque practice occurs in meat supply chains for economic gain. In 2017 there was a further fraudulent incident with significant TBL implications. This incident was associated with cleaning of poultry houses and the use of fipronil. On June 2, 2017, the Belgian Federal Agency for the Safety of the Food Chain or AFSCA was notified by an egg-breaking plant of a noncompliant result for fipronil. Four days later the investigation suggested

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two potential sources: (1) poultry feed and (2) a treatment against red poultry mite on farm with Dega-16 undertaken by a Dutch poultry service company (AFSCA, 2017). Two weeks later this link was confirmed and it was suggested that fipronil, a prohibited substance had been used in the mite treatment. Four months later, the economic cost of the incident was estimated as €65–75 million. 1.9 million birds were slaughtered and 77.4 million eggs were affected (Poultry World, 2018). Further economic and environmental impact was shown when the Dutch National Institute for Public Health and the Environment (RIVM) issued a press release that because fipronil was toxic to invertebrates all contaminated chicken manure from the affected farms (over 300) would need to be incinerated. However the lack of incineration facilities meant it would be months before the manure could all be disposed of (RIVM, 2017). The conclusions from the ministerial conference on the follow-up of the fipronil incident in Brussels, on September 26, 2017 agreed 19 measures that needed to be adopted to address food fraud and in turn reduce the economic, environmental, and social impact. These included that risk communication should be improved “via upstream coordination between Member States and the Commission on the basis of a common factual and accurate information line to be used through the appropriate channels (in particular social media and press) to ensure it reaches the general public in a harmonized and prompt way.” The review of these incidents clearly shows the economic, environmental, and sociopolitical consequences of a supply chain recall both more generally and especially with regard to food fraud recalls. A food safety recall is often based on the knowledge and understanding of scientific analysis of risk with industry accepted data underpinning the response, e.g., the pathogenicity or chronic health issues of certain microbial toxins, or heavy metals in a food. Conversely, with a food fraud incident, such as dioxin or fipronil, first its illegal use means that possible effects may not be clearly understood. The lack of certainty may require follow-up sampling for verification and seizing of data and documentation from suspect businesses before action can be taken. As the activity that has caused the contamination may be illicit the data available may be neither reliable nor legitimate with false documentation or no formal trail at all to follow. This means that the initial investigation can stall while investigators consider the incident or gain an appropriate level of data where they feel they can make sound objective judgments. This void means that other commentators, such as the media may develop complementary or opposing discourse and indeed socially

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amplify information leading to mediatized misperception occurring (Covaci et al., 2008). Therefore, it can be argued that a food supply chain fraud incident specifically can have both a temporary and a longer term sustainability and food security impact over and above those of known food safety or quality problems where a product recall is required. The themes that arise here are now discussed and conclusions drawn with a focus on the impact on food security and sustainability.

5. DISCUSSION Food security can be defined in many ways but to aid this discussion the United Nations World Food Programme (WFP, 2006) is used. They expressed food security as being: A condition that exists when all people at all times are free from hunger—that is, they have sufficient nutrients (protein, energy, and vitamins and minerals) for fully productive, active, and healthy lives.

Nutrient loss is defined as the nutrient content that is embedded within food loss and food waste (Spiker et al., 2017). Nutrient loss is a major food security concern if the nutrients captured within the food derived from the supply chain is somehow “lost” and does not reach the consumer. The nutrient loss example presented here is one of the supply chain recalls and crisis management as a result of food fraud. The loss of billions of dollars of otherwise nutritious food will impact on food availability, food prices, and access especially for financially or socially vulnerable groups. Thus, nutrient loss can be reduced by improving the infrastructure and governance of the food supply chain (Neff et al., 2015). Being aware of the context factors that influence the incidence of food fraud and how they can be mitigated lie at the heart of ensuring secure and sustainable supply chain and minimizing the TBL impact. Much of the current food fraud literature focuses on the types of food susceptible to fraud and the private and public partnerships that need to be developed to address the problems that occur rather than the impact of food fraud on the TBL specifically. Multiple context factors have been identified in the literature that influences both the TBL and the incidence of food fraud and these have been synthesized in Table 6. Six context themes, namely, demographic factors and ecosystem factors such as climate change or resource scarcity that influences the balance between food supply and food demand and where there is an imbalance, provide a rationalization for food fraud. Multiple market context factors need to be

ARTICLE IN PRESS Table 6 Context Factors That Influence the Incidence of Food Fraud Factors

Demographic characteristics: demographic changes now and in the future in the human population and the challenge to supply sufficient safe and nutritious food to feed a growing population Ecosystem characteristics: climate change, water security Market characteristics: supply chain characteristics, location, internal business, and wider working relationships, cost drivers, e.g., waste costs, marginal profitability driving cost reduction, financial volatility, global pricing, supply and demand, complexity, availability (e.g., seasonality or harvest variability) and influence on resource shortages, trends in consumer demand for cheaper foods, nature of the raw material (e.g., value of the material or size of the market), ease of access to raw materials (e.g., varietal substitutions), existing controls (e.g., routine testing or audits), brands are also under increasing pressure to reduce costs and boost profitability in this highly competitive arena. Demand for exotic foods compounding the situation. Historical incidents, economic factors, and price fluctuations from weather episodes, geographic origins with a history of issues in specific categories, the length and/or complexity of the supply chain, power dynamics as a result of pricing and supply strategies; power concentration in a small number of retailers; geographic and psychological distance between manufacturer and consumer, shifts in consumer preferences toward more convenient, healthy, and ethical foods which means foods have greater vulnerability to fraudulent misrepresentation Governance characteristics: public and private activities—regulation and private standards, emerging issues, or concerns (e.g., recent news or regulatory authority alerts) Business characteristics: use of technology increasing efficiency in use of raw materials; innovation stimulating product differentiation; greater responsiveness required to adapt to market conditions or changes in consumer trends, seeking to avoid tax, subsidies and tax benefits reducing purchasing power, financial volatility, storage, and distribution arrangements Product characteristics: physical form (e.g., whole, chopped, minced, or powdered); packaging mitigation, e.g., holograms Adapted from Wijnands, J.H.M., Van der Meulen, B.M.J., Poppe, K.J., 2007. Competitiveness of the European Food Industry, An Economic and Legal Assessment, European Commission; Davies, I.A., Crane, A., 2010. Corporate social responsibility in small- and medium-size enterprises: investigating employee engagement in fair trade companies. Bus. Ethics Eur. Rev. 19 (2), 126–139; Turi, A., Goncalves, G., Mocan, M., 2014. Challenges and competitiveness indicators for the sustainable development of the supply chain in food industry. Procedia Soc. Behav. Sci. 124, 133–141; Higgins, M., Ellis, N., 2015. ‘Who Said We’re Flogging a Dead Horse?’: Re-Framing Ethics & the Supply Chain; Lotta, F., Bogue, J., 2015. Defining food fraud in the modern supply chain. EFFL 10, 114–122; Hines, T., Murphy, L., 2016. Combatting food fraud with intelligent due diligence. World Food Regul. Rev. 25 (8), 20; Marvin, H.J., Bouzembrak, Y., Janssen, E.M., van der Fels-Klerx, H.J., van Asselt, E.D., Kleter, G.A. 2016. A holistic approach to food safety risks: food fraud as an example. Food Res. Int. 89, 463–470; Spink, J., Ortega, D.L., Chen, C., Wu, F., 2017. Food fraud prevention shifts the food risk focus to vulnerability. Trends Food Sci. Technol. 62, 215–220; Kendall, H., Kaptan, G., Stewart, G., Grainger, M., Kuznesof, S., Naughton, P., Hubbard, C., Raley, M., Marvin, H., Frewer, L.J., 2018. Drivers of existing and emerging food safety risks: expert opinion regarding multiple impacts. Food Control 90, 440–458, https://doi.org/10.1016/j.foodcont.2018.02.018.

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considered and in time these will be built into more robust food fraud vulnerability assessment tools. Governance factors and the increasing role of public–private partnerships will help to reduce the incidence of food fraud. Business and product characteristics also impact on the likelihood of a food fraud incident occurring. In order to reduce the likelihood of a food fraud incident and its resultant economic, environmental, and social impact a situational and organization or supply chain specific management strategy needs to be put in place to address these context characteristics and also the potential for moral hazard and mendacious behavior so that transparency and trust can be promoted.

6. CONCLUSION This chapter has reflected on the consequences of food fraud across the supply chain in terms of the economic, environmental, and sociopolitical impacts that can arise from such incidents and as a result their impact on sustainability and food security. Six thematic context factors that influence the incidence of food fraud and its impact on the TBL and food security is drawn together. These context factors or characteristics are concerned with governance, demographics, market characteristics, ecosystem factors such as climatic issues, and the characteristics of the business and the product. The characteristics can have influence both independently and in consort, thus the potential for food fraud to occur is situated, changes over time, and requires both preventive and reactive response. A case study, the dioxin incident in 1999, has been used to explore food fraud at a fundamental level and consider the issue in a more holistic way in order to demonstrate the depth and breadth of the economic, environmental, and sociopolitical impacts of fraudulent activity in the food supply chain. The media has a clear role in shaping and reframing consumer perceptions and their reactions to a food incident, more especially when the risk or extent of the problem is unknown. Resource loss more widely, but nutrient loss specifically associated with the resultant food waste, is a key concern especially when as described in this chapter those nutrients are then lost to the human population. Responsibility, integrity, and accountability in supply chains engender trust and ultimately organizational viability. The victims of fraud incidents such as dioxin, horsemeat, or fipronil are not faceless. They are the farmers, and consumers, among others, who have been misled. Mendacious behavior in whatever form ultimately impacts the TBL and more work needs to be done to improve supply chain governance

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in this area. Integrity and accountability can be driven by the consumer who demands that the food they purchase is produced in line with defined standards, including those that address ethical corporate behavior. Shareholders should recognize that their investments are underpinned by effective resource management, fraud mitigation, and waste reduction strategies and raise their expectations in terms of how corporates operate and deliver sustainable value in this context. Supply chain governance is at times prescriptive, considering preventive approaches to protecting the consumer, the brand, and reducing wider negative externalities should a problem be realized. However, such governance also needs to be more mindful, agile, and reactive to situational changes that provide opportunity, rationalization, and motivation for food fraud to occur.

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