The toxic milk scandal became open public in August 2008 with the disclosure that the baby formula produced by Sanlu was polluted with melamine, which caused kidney failure one of the babies who consumed it. However, until the Chinese Health Ministry affirmed on Sep 12, 2008, that the milk powder made by Sanlu was contaminated by melamine, neither the government nor the company took any activities to warn the public. Later, authorities inspections reported that the products of 21 other dairy products organizations were also contaminated with melamine. Even while the milk scandal unfolded, many countries like Hong Kong, Taiwan, Singapore, South Korea, Australia, and Indonesia rushed to ban Chinese dairy products. Overseas companies which sold China made products or products that used Chinese ingredients had to remember their products.
overview of food industry business ethics
Significance of business ethics
Nowadays, the problem of business ethics comes to people's mind more frequently especially in the food industry since food will be the essential items for human being and it'll affect our health directly. In 2004, the use of locks in the production of soya sauce was uncovered and made headlines in the press. Moreover, there is a lot more reports about China how they use very cheap material like industrial acid and petrol to mix to their food products as a way to minimize the release costs.
As a developing country, business in China is expanding very rapidly. It is now playing a more decisive role in interpersonal life and almost all people would be involved running a business activities. Because of this, unethical business behavior could have negative influence towards world. Hence, society is now more concerned with the issue of business ethics. Since the Chinese foods are now exported all around the globe, ethical practice of Chinese language enterprise issues will be the key factors to be success.
General belief on business ethics in food industry
There is a lot news recently that related to food safeness in worldwide. Therefore, consumers have three types of ethical concerns toward food industry.
Methods of Development and Distribution
1. Pet animal welfare in the beef products industry.
2. Use of child or bonded labour, or career of illegal immigrants.
3. The International Labor Firm (ILO) criteria provide useful benchmarks in this field.
4. Inappropriate use of the pesticides, antibiotics, and other chemicals.
5. Misuse of normal water resources and the consequent effect on local farmers
6. Good quality control of the food supply
7. Ensure the material resource and healthy to human
8. Use environmental friendly packaging as much as possible for the packaging
9. Inform the real gradients of the meals contented
10. Inform the general public immediately once bad food was produced and distribute to market
According to your observation toward Chinese language business, their purpose of the business is only producing profits whenever you can. The honest senses aren't relevance within the world.
Reason behinds the widespread sufferings of the infants
According to the case content, there exists several factors lead to this hazard.
In fact, Sanlu acknowledged the situation considerably beyond the serious ha affects hazard explored in 2008. Through the case content, there were several customer complained the problem to Sanlu about the sick effect of taking the milk by newborns. However, Sanlu chose not to start this reports to alarm general public due to they do not wanted to impact its sales and image. In addition, they were not eager to transfer the sophisticated dairy test machine from overseas.
Product with stable quality
High market share
exceeded the inspection for more than 3 consecutive times
However, past performance didn't reflect that you will see not problems in future. Since, the demand of Chinese language milk more than doubled and the milk source source has been polluted, the challenge acquired serious in 2008. If Chinese language government inspected the quality of Sanlu continuously, the situation will be under managed. In addition, the respond of the milk incident was too poor to control the situation. The Shijiazhang federal and the Communist Get together of China did not article about the said concern to the provincial and state level specialists till 9 Sep, 2008. At that time, about 53000 babies were already affected.
On the progressively development market and growth strategy of Sanlu
Since there is certainly high demand in dairy industry and there is not stringent control over the dairy supply, more and more farmer and agent joined the supply market to make money. The situation got worse after the Mengniu and Yili enter into the Hebei market because the way to obtain milk was firm in this fast development market. Since the milk demand from Sanlu and other company increased continuously, the marketplace collection station cannot get enough dairy for production. Since it is a profitable market to market milk to these suppliers, many middlemen aroused and sell the milk to Sanlu directly. These were not moral enough given that they had diluted the milk to boost the supply volume for additional profit and they added this melamine into the milk that was harmful to infants. Since not quality inspection from dairy station, this harmful milk was finally removed in to the market and lead to the dairy scandal finally. Sanlu also had a need to responsible on this concern since its progress strategy in market talk about made they ignore the quality control by milk station and make this incident.
Finally, the protected mistake of the dairy scandal did not made the problem dismissed. Reversely, it made a serious problem not no more than the image demolished of Sanlu its but also the image of Chinese dairy food, hundred thousand of farmer made not income and needed to kill all their cows as well as a large number of infant were suffered from Kidney rock. If proper action has been done, the situation will be better.
Sanlu and Government actions toward the dairy scandal
On September 17, 2008, the Chinese language Health Minister, announced that melamine contaminated milk had resulted in more than 6, 200 children falling ill in the united states and over 150 children suffered acute kidney failing. Six days later it was announced that four children acquired died and the amount of children slipping ill had risen to 54, 000.
On Sanlu's development and management actions
On Sept 12, 2008, the Hebei provincial administration ordered Sanlu to avoid production after preliminary investigation confirmed that melamine contaminated baby formulation was the reason behind kidney stones among children. The company was also purchased to avoid sales of most brands of its baby method, recall its products, and destroy all the merchandise which were unsold and recalled. Also Sanlu setup a fund of 800, 000, 000 yuan, which 700, 000, 000 yuan was approximated to be the reimbursement amount that the reimbursement amount that the company needed to pay to its customer such as refund, hospital expenses and settlement on tired or death of the newborns.
On Sept 15, 2008, Sanlu had issued a general population apology of its role in the dairy scandal. Zhang Zhenling (Zhenling), Vice President of Sanlu, read aloud a letter of apology at a reports conference in Shijiazhuang, "The serious safeness car accident of the Sanlu method milk natural powder for babies has triggered severe harm to many sickened babies and their families. We feel really unhappy about this. Sanlu Group expresses its most sincere apology for you. We solemnly declare we will recall all the infant milk powder produced prior to August 6. And then for those produced after that particular date, we will also make a recall if consumers have doubts and problems. "15 Later, Sanlu also sacked Wenhua.
On Federal actions
The Health Ministry up to date the earth Health Company, Hong Kong, and Macau's health departments, the brand new Zealand Embassy in China, and the press about the melamine contaminants in baby solution. The Ministry also declared that a free medical checkup would get to influenced children. It dispatched medical specialists to nursing homes across China to help treat the afflicted children.
Started from Sept 2008, the Chinese language government started a nationwide inspection of baby dairy powder. It announced that liquid dairy food including packaged milk and yoghurt would be checked for melamine contamination. On Sept 16, 2008, GAQSIQ released an inspection of all Chinese baby milk powder manufacturers and found traces of melamine in 69 batches of baby formulation produced by 22 companies including brands like Mengniu, 12 Yili, 13 and Bright Dairy. 14 After the inspection, these dairy companies were ordered to avoid new production and sales of milk products.
As the dairy scandal escalated, steps were also considered against some federal officials. Although some of these were sacked, a few of them resigned buying moral responsibility. On Sept 17, 2008, Ji Chuntang, Vice-Secretary of the Shijiazhuang Municipal Committee of the Communist Party of China (CPC) and Mayor of Shijiazhuang, was removed from his job. Previously, four officials including the Vice Mayor in charge of agricultural production, the Director of Shijiazhuang Municipal Canine Husbandry and Fishery Bureau, the Director of Shijiazhuang Municipal Food and Medication Administration, and the Director of Shijiazhuang Municipal Bureau of Quality and Complex Guidance were dismissed. On September 22, 2008, Li Changjiang, the Director of GAQSIQ, resigned.
On Sept 26, 2008, four executives of Sanlu including Wenhua were imprisoned for producing and selling sub-standard products. Milk retailers and suppliers were also caught for selling polluted milk to dairy companies. Jiabao, the then Top of the state of hawaii Council of the People's Republic of China, said, "The federal government will put more attempts into food security, taking the event as a alert. What we want to do is to ensure no such event happens in future, by punishing those responsible leaders as well as companies. None of those companies missing professional ethics or sociable morals will be let off. "16 In order to restore self-confidence among home and international consumers, the Chinese language government introduced a new set of quality control benchmarks which included rigorous boundaries for melamine in dairy products. Regarding infant solution, the limit was placed at one milligram of melamine per kilogram and the limit for liquid dairy at 2. 5 milligrams per kilogram.
On Oct 09, 2008, in order to stimulate the dairy industry of China, the Chinese language government announced a crisis rescue arrange for the affected dairy products farmers. The government planned to provide 300 million Yuan in subsidy. Furthermore, the interest for loans awarded to dairy companies to buy natural milk was also reduced by 3 percent for the period between Oct and Dec in 2008. Some local government authorities in China acquired also promised to provide a subsidy to the dairy farmers. For instance, the Hebei province had allocated 316 million Yuan (US$46. 4 million) as subsidies to dairy farmers.
The dairy companies in China had to recall thousands of tons of melamine contaminated milk products. Sanlu was ordered to recall its products soon after the Hebei provincial authorities found melamine contaminants in its baby method. After GAQSIQ got found melamine contamination in the products of 22 Chinese dairy companies, these were also asked to remember their products. On October 15, 2008, GAQSIQ bought recall of most dairy products created before September 14, 2008. According to a notice issued by the organization, "All supermarkets, shops, and all city, town, and village-level distributors will urgently remove and seal up all milk powder and water milk created before Sept, pending further tests. "
On Dec 27, 2008, it was announced by the China's Dairy Industry Relationship that the afflicted children and their families would get compensation from the 22 companies found guilty of producing and providing contaminated milk natural powder. According to the statement released by the Connection, "The enterprises offered to shoulder the payment liability. In so doing, they hope to earn understanding and forgiveness of the groups of the sickened children. The money for compensation is set up now and can soon be handed to the individuals who have guardianship of the sickened children through various stations. If the infants suffer from comparative after-effects, all medical fees will be included in the finance. " In a very letter delivered to the victims and their families by these 22 companies, the reimbursement amount was specifically brought up for ill children, for those who were experiencing kidney failure, as well as for people whose kids had died as a result of tainted milk powder. It had been also mentioned in the letter that dairy providers would set up a fund to pay the medical costs of the kids who were ill, until they reached the age of 18.
On January 22, 2009, two people were sentenced to death for their participation in the Chinese language dairy scandal. Wenhua was presented with a life imprisonment and three other professionals received imprisonment from five to fifteen years
In my own opinion, the federal government failed to supervise product quality dependable. The effectiveness of the regulatory environment in China is poor in disclosure the threat as well as makes quick action to avoid it. According to some research in the internet, there have been many federal departments to screen food protection in China. As there is no single company to look after all product protection regulations and enforcement in the country and there is no clear hierarchy of firms, the obligations of different departments often overlapped.
Recommendations to Sanlu to recuperate its goodwill as well as Chinese language dairy industry toward global
Investors who experienced already invested in the Chinese dairy industry were concerned about regaining consumer's self confidence. In this respect it means individuals are now thinking double before purchasing such products, therefore the key challenge now is to get back the consumers trust. "
As you can remember the truth from Hong Kong, Vitasoy dairy and Lemon tea also have problems with big hazard of the pollution in production collection and made the dairy becomes sour in around ten years old. We considered a favorite firm with market authority role, they can restore their goodwill step by step like Vita Corporation in order to achieve the customer self-assurance again as below.
However, the situation in Hong Kong is much better to turnover because the authorities and the legislation control is much tight and clear to follow. If Sanlu would like to gain back the image, both Sanlu and Federal needed to find something to help to guarantee the quality of their products is healthy and safe to customer utilization.
We believe honest business environment is the main element issue to recover the self confidence from public on the Chinese milk production
To avoid similar incident happen again, utilizing of new issues and legislation are necessary. For instance, AQSIQ should have regular and rapid inspection on the quality of products. The food industry inspection should maintain random and totally follow the international standard norm.
Laws and ethics
Nonetheless, only will depend on laws, it isn't sufficient to ensure the problem would not are present in future. It really is more difficult to rely upon enterprise to check out regulations in PRC such the corruption and education level is not high. There are many serves that are legal but unethical. And there's also many people use money to improve against the law to legal by cover the condition or override the checking from government. Just as the dairy scandal, the use of small amount of melamine was legal since it is not harmful to adult; there was no regulation onto it. It really is clear that laws and regulations cannot completely control human habit; as law is merely norm to regulate people act. However, for business ethics, the standard is much higher than that of laws. It is because as a highly honest company, their goals aren't only income but also care and attention of the public as well as their customer. Ethics is not concerned only with people's action. It is a standard for our center values. As a person or a business, not only is it legal, being honest is the main element which ultimately shows that their prices are of higher standard rather than get together the minimum necessity only. Like a ethical firm, Sanlu should use the idea that customer's babies are their babies, they will not give some dangerous materials or potential dangerous ingredient towards their own newborns. They should care and attention the health of all babies although add melamine and dilute dairy can be satisfactory to increase creation.
Education on general public
People's behavior is in fact inspired by norm, attitude and worth from the society and most likely are from their own family. Changes in norm, frame of mind and values are extremely important for enhancing business ethics. We believed that it is the value of Chinese enterprise was too famous on revenue, nor know plainly what ethical standard they needed. Hence, together with implementation of measures and regulations, education on both top management and employees will be the most fundamental way to do so. For example, federal government can improve more overseas expert and special to teach ethic and made speech in university to raise the matter of general public and know they can do it success like coca cola, nestle as well as P&G etc.
On Sanlu itself
Ethic knowledge training
Unethical issues can't be done by only 1 level. When the ethical criteria are enough in the company, they will perform a common inspection on other actions toward ethic venture. For instance, before employees go with their working positions, the business should provide ethics training, covering honest issues and dealing with the rules, conformity requirement and the organization values with their employees. Let employees realize the value of business ethics for the business as well as their own.
During training, conversations on circumstances of ethical problem and examination with employees are valuable in growing employees' knowing of business ethics and honest competency.
Furthermore, the business should talk information about the confirming mechanisms with all employees. When there is certainly any unethical action, employees can are accountable to the company immediately. This might be the most efficient way to find any problems and take prompt actions to solve them.
Quality control process and turmoil management
Since Sanlu's image was totally damaged in this incident, we recommend that Sanlu can transfer the present day of art assessment machine for tight quality control and the development chain should become more transparent toward public. They can set up a additional inspection team which is made up of outsiders from other dairy industry's expert and also overseas country representative to research the production route, sourcing as well as the healthy and safety level on its our products. Therefore, everyone may slowly gain back its self-assurance on Sanlu's milk products. Also, the management team should have a knowledge sharing about the investor's New Zealand industry about how they make the milk and ensure the mandatory process and ethical norm can be applied in Sanlu to restore the image from global market. Once the incident took place again, Sanlu ought to know how to reduce the negative result toward customer like stop development immediately, message public timely and remember all affected products from shop and dealers in order to show their superior experience in problems management. Like Vita group, we believe the market will accept their products again.
In summary, we believe that the critical factor on this incident and gain back image of Sanlu in the case is all about ethics. We assumed that the technology and knowledge in China are enough to produce healthy and basic safety products. However, their action has been affected by the norm to earn as much money as you possibly can in short time frame by legal but no honest actions. In order to decrease the negative image toward Chinese language product such as foods, drinks, electronic and toy. Chinese language federal government should pay more work on increase the ethical standard by education and control of the government officials. If indeed they cannot to take action, the short-term goal of Chinese enterprise toward earnings without matter on general public would have an impact on the development of the market of whole Chinese market.
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