Start with the issue of privacy. Food producers need only look to healthcare providers to see what's in store for them, according to Paul Kanneman, business practice leader with Grant Thornton LLP. Stringent new rules affecting that industry have made healthcare companies "obsessed with making sure that no personal information is released without screening," he says. "In several years, we can expect that same type of rigor for a [food] company."
New European privacy laws are yet another harbinger of additional pain for the food business. European regulators are implementing tight controls on the collection and use of data mined from consumers. Expect similarly rigorous rules for privacy protection to begin taking shape in the U.S., says Kanneman.
In fact, the consumer-protection movement is migrating to countries all over the world. China already has privacy laws that are even more stringent than those of Europe, according to Kanneman. (One can assume that they won't apply to the Chinese government, when it comes to monitoring its citizens.) The rest of the Asia-Pacific region is expected to fall into line, as is Latin America.
"Pretty soon you're going to have the U.S. surrounded by a whole bunch of countries adopting international standards," says Kanneman. The trend is part of a larger push for improved corporate governance policies, which include protections against the misuse of consumer information, as well as issues related to cyber-security.
For food producers, new privacy rules will likely have their greatest impact at the point of sale. Kanneman expects the payment-card industry (PCI) to be especially hard-hit. "Anyone who accepts credit cards today has a whole discipline around protecting privacy information," he says, adding that third-party audits can help to verify compliance. For the moment, the PCI is regulating itself, but that could change if new security breaches, incidents of fraud and violations by irresponsible merchants cause legislators to impose even tougher rules from the outside.
Privacy concerns extend well beyond the consumer, to corporate personnel. Information on employees and business partners is potentially at risk. As Kanneman points out, the food industry is well aware of the complexities surrounding employee data, given its propensity for hiring temporary workers.
"What you have is much more dynamic people management than you do perhaps in other industries," he says. Keeping track of the food industry workforce is a more complex challenge than one finds in more stable sectors.
The growing trend of corporate oversight covers hard numbers as well. Kanneman sees a similar international "surround strategy" occurring in the area of accounting practices. For years, he says, U.S. firms set the standards, typified by the Sarbanes-Oxley Act of 2002. SOX was Congress's response to the huge financial scandals of the 1990s and early 2000, including the collapse of Enron Corp., Tyco International and WorldCom. Since then, international standards have caught up to those of the U.S. Global food companies, which traditionally have been subjected to a higher level of regulation, must adjust to the new regime.
Kanneman views the modern-day governance chain as similar to that of the extended supply chain. In the case of the latter, supply-chain management evolved from a narrow focus on logistics and internal operations, to one that embraced multiple tiers of suppliers and other business partners. The development of electronic data interchange made possible the rapid transfer of data among links in the chain. It also raised expectations about industry's ability to keep tabs on the flow of goods, products and money around the world.
Similarly, the coming of the internet shifted the emphasis of corporate governance from internal controls to the broader world of global business. At the same time, it placed companies squarely in the sights of the public. Witness the outrage against BP plc following the 2010 explosion of the Deepwater Horizon oil platform in the Gulf of Mexico, and the resulting massive oil spill. Or the flak that Apple and other high-tech manufacturers have experienced from revelations of unfair labor practices at factories in China. It's not just the government looking over business's shoulder - it's the consuming public, too. And that phenomenon can have a direct impact on one's stock price.
Social media are here to stay. The latter-day version of "word of mouth" is an impulse traveling around the globe at the speed of light. For food producers, it can be "a net promoter or a net distractor," says Kanneman.
"Social media have changed the nature of the public's willingness to accept messaging from industry," he says. "The highest risk [today] is risk to reputation."
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On another topic, I was recently honored to be asked to participate in the inaugural meeting of the Material Handling & Logistics (MHL) U.S. Roadmap. This is an initiative sponsored by numerous associations and media partners, including SupplyChainBrain, to come up with a list of priorities and recommended actions for the MHL industry for the next 10 years. We met in Atlanta in April to get the ball rolling. Additional meetings are scheduled for the coming months in Washington, D.C., Los Angeles and Chicago, with results to be reported by the end of the year. The effort was inspired by a similar "roadmap" approach taken by the robotics industry in 2009, and spearheaded by Georgia Tech. It has the potential to be a valuable resource for MHL executives who are looking to cope with such critical issues as technology, regulation, education, infrastructure and talent development. Keep your eye out for the report. And if you'd like to contribute your views and expertise to the effort, don't hesitate to contact the group.
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