With China stepping in the transform from traditional designed overall economy to modern market economy, a lot of unethical and immoral habits can be found in its economic area through the process of economical system alteration and social change. It may cause by immature education level and economics development too quickly. Sanlu Milk Incident, which has seduced great attention from all Chinese people, especially that from the Party Central Committee, is attributed to many aspects. Although it might be a serious occurrence of Chinese business toward global market, but it may wake up the attention of Chinese government and management toward ethical business on the responsibility on customer.
description on the dairy scandal
The toxic dairy scandal became general public in August 2008 with the disclosure that the infant formula made by Sanlu was contaminated with melamine, which caused kidney failure among the babies who used it. However, before Chinese Health Ministry confirmed on Sep 12, 2008, that the milk powder produced by Sanlu was polluted by melamine, neither the government nor the company took any actions to warn the general public. Later, federal government inspections reported that the merchandise of 21 other dairy organizations were also polluted 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 were required 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 often especially in the meals industry since food will be the essential items for human and it'll affect our health and wellness immediately. In 2004, the use of hair in the production of soya sauce was exposed and made headlines in the press. Furthermore, there is a lot more news about China the way they use very cheap material like professional acid and oil to mix within their food products if you want to minimize the introduction costs.
As a growing country, business in China is expanding very rapidly. It really is now playing a far more decisive role in interpersonal life and many would be involved in business activities. As a result, unethical business patterns could have negative affect towards contemporary society. 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 understanding on business ethics in food industry
There is a lot news just lately that related to food basic safety in world wide. Therefore, consumers have three types of honest concerns toward food industry.
Methods of Development and Distribution
The creation of food raises a number of issues that have to be considered. The packaged food industry essentially contains manufacturing using farm produce. Clearly cleanliness, quality control, health and safety concerns are of great importance. Listed below are among the problems that should be regarded as per my knowledge:
1. Pet animal welfare in the beef products industry.
2. Use of child or bonded labour, or job of unlawful immigrants.
3. The International Labor Organization (ILO) specifications provide useful benchmarks in this field.
4. Poor use of the pesticides, antibiotics, and other chemicals.
5. Misuse of drinking water resources and the consequent impact on local farmers
6. Top quality control of the food supply
7. Ensure the material source and healthy to human
8. Use environmental friendly packaging as much as possible for the packaging
9. Inform the actual gradients of the food contented
10. Inform the general public immediately once harmful food was produced and distribute to market
According to our observation toward Chinese language business, their goal of the business enterprise is only generating profits as much as possible. The moral senses are not significance within the population.
Reason behinds the widespread sufferings of the infants
According to the situation content, there is several factors lead to this hazard.
On Sanlu
In fact, Sanlu acknowledged the challenge very good beyond the serious ha impacts hazard explored in 2008. From case content, there were several customer complained the problem to Sanlu about the sick aftereffect of taking the milk by newborns. However, Sanlu select not to unveiling this reports to alarm general public due to they do not wanted to affect its sales and image. Furthermore, they were not happy to import the sophisticated milk test machine from international.
On Government
First, we assumed that Chinese government has too much assurance on the home governance by the organization especially on Sanlu these big companies. One of the regulations put in place was the inspection-free insurance policy. A company wouldn't normally be required to go through inspection for a period of three years if it can meet up with the following three requirements:
Product with stable quality
High market share
transferred the inspection for more than 3 consecutive times
However, past performance did not reflect that you will see not problems in future. Since, the demand of Chinese milk increased significantly and the milk supply source has been polluted, the challenge acquired serious in 2008. If Chinese government inspected the grade of Sanlu continuously, the problem will be under managed. Furthermore, the respond of the dairy event was too slow-moving to control the situation. The Shijiazhang federal and the Communist Party of China did not report about the said issue to the provincial and condition level specialists till 9 Sep, 2008. In those days, about 53000 infants were already afflicted.
On the progressively expansion market and growth strategy of Sanlu
Since there exists popular in milk industry and there isn't strict control over the dairy supply, more and more farmer and agent became a member of the supply market to make money. The situation got worse following the Mengniu and Yili enter the Hebei market because the supply of milk was firm in this fast growth market. Because the milk demand from Sanlu and other company increased gradually, the market collection train station cannot get enough milk for production. Since it is a profitable market to sell milk to these providers, many middlemen aroused and sell the dairy to Sanlu immediately. They were not moral enough since they got diluted the milk to boost the supply volume for additional profit and they added this melamine in to the milk that was harmful to infants. Since not quality inspection from dairy station, this harmful milk was finally eliminated into the market and lead to the milk scandal finally. Sanlu also needed to responsible on this concern since its growth strategy in market talk about made they disregard the quality control by milk station and get this to incident.
Finally, the covered error of the dairy scandal did not made the challenge dismissed. Reversely, it made a serious problem not only about the image demolished of Sanlu its but also the image of Chinese language dairy food, hundred thousand of farmer made not income and had a need to kill all their cows as well as thousands of infant were suffered from Kidney natural stone. If proper action has been done, the problem will be better.
Sanlu and Authorities actions toward the dairy scandal
On September 17, 2008, the Chinese language Health Minister, declared that melamine contaminated milk had resulted in more than 6, 200 children falling ill in the country and over 150 children endured acute kidney failure. Six times later it was announced that four children got died and the amount of children falling ill had increased to 54, 000.
On Sanlu's development and management actions
On Sept 12, 2008, the Hebei provincial administration ordered Sanlu to avoid production after initial investigation verified that melamine contaminated baby method was the explanation for kidney stones among children. The company was also bought to avoid sales of all brands of its baby method, recall its products, and ruin all the products which were unsold and recalled. Also Sanlu setup a finance of 800, 000, 000 yuan, which 700, 000, 000 yuan was projected to be the settlement amount that the payment amount that the company had a need to pay to its customer such as refund, medical center expenses and reimbursement on tired or fatality of the newborns.
On Sept 15, 2008, Sanlu acquired issued a public apology of its role in the dairy scandal. Zhang Zhenling (Zhenling), Vice Chief executive of Sanlu, read aloud a letter of apology at a information discussion in Shijiazhuang, "The serious safety car accident of the Sanlu formulation milk powder for infants has triggered severe injury to many sickened infants and their families. We feel really sad relating to this. Sanlu Group expresses its most honest apology to you. We solemnly declare we will remember all the newborn milk natural powder produced prior to August 6. And for those produced from then on date, we will also make a recall if consumers have questions and concerns. "15 Later, Sanlu also sacked Wenhua.
On Authorities actions
The Health Ministry informed the globe Health Group, Hong Kong, and Macau's health departments, the New Zealand Embassy in China, and the press about the melamine contamination in baby method. The Ministry also declared that a free medical checkup would get to affected children. It delivered medical specialists to hospitals across China to help treat the damaged children.
Started from September 2008, the Chinese language government began a countrywide inspection of baby milk powder. It released that liquid milk products including packaged milk and yoghurt would be examined for melamine contamination. On Sept 16, 2008, GAQSIQ announced an inspection of most Chinese baby milk powder designers and found traces of melamine in 69 batches of baby solution produced by 22 companies including brands like Mengniu, 12 Yili, 13 and Bright Dairy products. 14 Following the inspection, these dairy firms were ordered to avoid new development and sale of milk products.
As the milk scandal escalated, steps were also considered against some authorities officials. Although some of these were sacked, a few of them resigned buying moral responsibility. On September 17, 2008, Ji Chuntang, Vice-Secretary of the Shijiazhuang Municipal Committee of the Communist Party of China (CPC) and Mayor of Shijiazhuang, was taken off 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 Medicine Administration, and the Director of Shijiazhuang Municipal Bureau of Quality and Complex Supervision were dismissed. On Sept 22, 2008, Li Changjiang, the Director of GAQSIQ, resigned.
On Sept 26, 2008, four professionals of Sanlu including Wenhua were arrested for producing and retailing sub-standard products. Dairy traders and suppliers were also arrested for selling polluted milk to dairy companies. Jiabao, the then Premier of the State Council of the People's Republic of China, said, "The government will put more attempts into food security, taking the occurrence as a alert. What we want to do is to ensure no such event happens in future, by punishing those in charge leaders as well as businesses. None of these companies missing professional ethics or public morals will be let off. "16 In an effort to restore self-confidence among domestic and international consumers, the Chinese language government introduced a new group of quality control standards which included demanding limits for melamine in dairy products. In the case of infant formula, the limit was set at one milligram of melamine per kilogram and the limit for liquid milk at 2. 5 milligrams per kilogram.
On Oct 09, 2008, in order to stimulate the dairy products industry of China, the Chinese government announced an emergency rescue arrange for the affected dairy farmers. The government planned to provide 300 million Yuan in subsidy. Furthermore, the interest rate for loans awarded to dairy providers to buy fresh dairy was also reduced by 3 percent for the time between Oct and December in 2008. Some local government authorities in China had also promised to provide a subsidy to the dairy products farmers. For example, the Hebei province got allocated 316 million Yuan (US$46. 4 million) as subsidies to dairy farmers.
The dairy products companies in China were required to recall thousands of tons of melamine contaminated dairy food. Sanlu was bought to recall its products immediately after the Hebei provincial federal found melamine contamination in its baby solution. After GAQSIQ acquired found melamine contaminants in the products of 22 Chinese language dairy companies, they were also asked to remember their products. On Oct 15, 2008, GAQSIQ ordered recall of all dairy products made before Sept 14, 2008. According to a notice issued by the organization, "All supermarkets, retailers, and all city, town, and village-level vendors will urgently remove and seal up all dairy powder and water milk made before September, pending further assessment. "
On December 27, 2008, it was declared by the China's Dairy Industry Relationship that the affected children and their own families would get compensation from the 22 companies found guilty of producing and reselling contaminated milk natural powder. According to the statement released by the Connection, "The enterprises wanted to shoulder the settlement liability. In so doing, they desire to earn understanding and forgiveness of the families of the sickened children. The amount of money for compensation is set up now and can soon be handed to the people who have guardianship of the sickened children through various programs. If the babies suffer from relative after-effects, all medical fees will be covered by the fund. " In a very letter delivered to the subjects and their own families by these 22 companies, the payment amount was specifically brought up for tired children, for many who were experiencing kidney failure, and then for family members whose kids possessed died due to tainted milk natural powder. It was also pointed out in the notice that dairy providers would setup a fund to pay the medical costs of the kids who were ill, until they reached age 18.
On January 22, 2009, two different people were sentenced to fatality for their involvement in the Chinese milk scandal. Wenhua was presented with a life imprisonment and three other executives were given imprisonment from five to fifteen years
In my own opinion, the government didn't supervise product quality sensible. The potency of the regulatory environment in China is poor in disclosure the threat as well as makes quick action to stop it. According for some research in the internet, there were many authorities departments to keep an eye on food safety in China. As there is no single agency to look after all product safety polices and enforcement in the country and there was no clear hierarchy of firms, the tasks of different departments often overlapped.
Recommendations to Sanlu to recuperate its goodwill as well as Chinese language milk industry toward global
Investors who acquired already committed to the Chinese dairy industry were worried about regaining consumer's confidence. In this respect it means consumers are now thinking double before purchasing such products, so the key challenge now could be to get back the consumers trust. "
As you can recall the case from Hong Kong, Vitasoy milk and Lemon tea also have problems with big risk of the pollution in production collection and made the milk changes sour in around ten years old. We believed as a favorite organization with market authority role, they can restore their goodwill step-by-step like Vita Corporation in order to achieve the customer self-confidence again as below.
However, the situation in Hong Kong is much much easier to turnover because the federal government and the legislation control is much rigid and clear to check out. If Sanlu would like to regain the image, both Sanlu and Federal government needed to take a step to guarantee the quality of the products is healthy and safe to customer utilization.
We assume that honest business environment is the key issue to recuperate the confidence from public on the Chinese milk production
On Government
Regulations
To avoid similar incident happen again, employing of new issues and regulations are necessary. For instance, AQSIQ should have regular and immediate inspection on the quality of products. The food industry inspection should be in random and firmly follow the international standard norm.
Laws and ethics
Nonetheless, only will depend on laws, it is not sufficient to ensure the situation would not exist in future. It is more difficult to depend on enterprise to check out the law in PRC such the corruption and education level is not high. There are several functions that are legal but unethical. And there's also many people use money to improve illegal to legal by cover the challenge or override the checking from federal. As with the dairy scandal, the utilization of little bit of melamine was legal because it is not harmful to adult; there is no regulation on it. It is clear that regulations cannot fully control human habit; as law is merely norm to regulate people react. However, for business ethics, the standard is much higher than that of regulations. It is because as a highly honest company, their goals are not only earnings but also caution of the public as well as their customer. Ethics is not concerned only with people's tendencies. It is a standard for our key values. As an individual or a corporation, in addition to being legal, being honest is the key which shows that their worth are of higher standard somewhat than get together the minimum necessity only. As being a ethical organization, Sanlu should use the idea that customer's babies are their babies, they will not give some damaging materials or potential hazardous ingredient towards their own infants. They should worry the health of all newborns although add melamine and dilute dairy can be appropriate to increase creation.
Education on general public
People's behavior is actually influenced by norm, attitude and worth from the culture & most likely are from other own family. Changes in norm, frame of mind and values are very important for improving business ethics. We thought that it is the worthiness of Chinese venture was too famous on earnings, nor know plainly what honest standard they needed. Hence, together with implementation of options and legislation, education on both top management and employees would be the most important way to do so. For example, government can improve more foreign expert and special to teach ethic and made speech in university to raise the concern of general public and know they can do it profitability like coca cola, nestle as well as P&G etc.
On Sanlu itself
Ethic knowledge training
Unethical issues cannot be done by only 1 level. In case the ethical criteria are enough in the business, they will perform a shared inspection on other actions toward ethic venture. For example, before employees go with their working positions, the business should provide ethics training, covering moral issues and responding to the rules, compliance requirement and the organization values to their employees. Let employees realize the importance of business ethics for the business as well as their own.
During training, conversations on circumstances of ethical problem and analysis with employees are valuable in producing employees' awareness of business ethics and ethical competency.
Furthermore, the business should speak information about the reporting mechanisms with all employees. When there may be any unethical tendencies, employees can report to the company immediately. This would be the most efficient way to find any problems and take prompt actions to solve them.
Quality control process and crisis management
Since Sanlu's image was totally destroyed in this incident, we recommend that Sanlu can import the modern of art trials machine for rigid quality control and the development chain should be more transparent toward public. They can create a additional inspection team which consists of outsiders from other dairy industry's expert and also international country representative to research the production channel, sourcing as well as the healthy and safety level on its our products. Therefore, the general public may slowly get back its self-confidence on Sanlu's milk products. Also, the management team should have a knowledge posting about the investor's New Zealand industry how they manufacture the dairy and ensure the mandatory process and honest norm can be executed in Sanlu to regain the image from global market. After the incident occurred again, Sanlu ought to know how to lessen the negative impact toward customer like stop creation immediately, message general public timely and remember all damaged products from merchant and dealers in order to show their complex experience in problems management. Like Vita group, we believe that the market encourage their products again.
In realization, we assume that the critical factor on this incident and regain image of Sanlu in the event is focused on ethics. We thought that the technology and expertise in China are enough to create healthy and basic safety products. However, their action has been afflicted by the norm to earn the maximum amount of money as you possibly can in short period of time by legal but no ethical actions. In order to decrease the negative image toward Chinese language product such as foods, drinks, electronic and toy. Chinese authorities should pay more work on increase the moral standard by education and control of the government officials. If indeed they cannot to do so, the short-term goal of Chinese enterprise toward profits without matter on general public would have an impact on the development of the overall economy of whole Chinese language market.
