Off The Record

The crisis in the US started when pets began dying of kidney failure in the past few months.  An investigation by the US Food and Drug Administration concluded that the pet-foods involved in the crisis had been using wheat gluten imported from China.  Further investigation found that the wheat gluten contained high levels of melamine and were traced back to two companies, Xuzhou Anying Biologic Technology Development Co. in Jiangsu Province, and an associated firm in Shandong, Binzhou Futian Bio-technology Co.  The FDA has banned imports from the two companies.

The companies’ immediate reaction to the crisis confronting them was to deny knowledge of the melamine and claim that they did not use it in their products.  However, their denial was demolished when an online advertisement placed in March by Xuzhou Anying seeking to purchase melamine was discovered by investigators.

The first mistake of crisis management is to try to escape by lying – it usually fails, especially in today’s highly advanced technological world which has made it almost impossible to erase all tracks.  Bad move Xuzhou Anying.
 

Since then it has transpired that many Chinese animal feed companies add melamine to their products as it boosts nitrogen levels in the products.  Nitrogen is usually a yard-stick measure of the amount of protein in animal feed.  Melamine in animal feed has no nutritional value.  In other words melamine is used to mislead purchasers that the animal feed contains a higher level of protein than is actually the case.  Put another way, the Chinese animal feed industry is based on lies and half-truths.

For the time being, the feed suppliers are saying their customers prefer their product with the melamine in it. It will be interesting to see how the domestic industry reacts to the news that their feed suppliers have been misleading them all these years.

The lesson for companies in China is that corporate social responsibility is not just about donating money to worthy causes.  It is first and foremost about a company’s practices being consistent with its stated principles and policies.  Lying to your customers is obviously very bad CSR practice indeed.

In the US, where concerns are already riding high about the risks of poor health and safety standards of imported animal feed from China, the crisis could spillover into imports of foodstuffs for human consumption.

So far the Chinese government has reacted appropriately, promising to ban the use of melamine in animal feed.  But questions remain – including why weren’t stricter laws introduced sooner; and what guarantees can be provided on enforcing the soon to be introduced ban.  After all, China has some of the most stringent IP protection laws in the world, but some of the worst enforcement of its own laws.

Chinese companies need to learn that if they wish to be global players they are going to have to comply with international standards, especially on issues of health and safety.  They will need to align their CSR policies with world best practice standards.  Watch this space.