The food and drink industry is being urged to better protect itself from fraud in order to safeguard their businesses and consumers.
The warning comes from the Chartered Institute of Environmental Health (CIEH) on the same day the membership body launches a new report which helps food businesses adopt established counter fraud good practice.
The good practice guidance is being launched on 2 November and was developed by CIEH Food in collaboration with the University of Portsmouth’s Centre for Counter Fraud Studies, the Food Standards Agency’s National Food Crime Unit, Food Standards Scotland’s Food Crime and Incidents Unit, and the Intellectual Property Office.
Co-author of the report, CIEH’s Eoghan Daly, said that despite extensive work being undertaken by food and drink businesses, there is no reliable information about the nature and extent of fraud affecting the sector.
“This is a serious problem as fraud not only has the potential to impact on an individual business’ profits and reputation but it also reflects on the food industry as a whole and more importantly risks consumers’ trust and health,” said Eoghan Daly.
“Food businesses need to quickly change their approach and adopt good practice in counter fraud as a key element of day to day business, before profits are hit and they lose customers.”
The guide explains that fraud is an issue for every business in every sector as it leads to financial costs, undermines consumer confidence and potentially impacts on consumers’ health and well-being.
In the food and drink industry, fraud can take many forms, such as the inclusion of contaminated substances in products, misleading claims being made in terms of quality or quantity or fictitious companies created to receive goods on credit, who then disappear without paying bills.
The guide says that despite extensive work undertaken by food and drink businesses to address fraud, there is no evidence that they are measuring the financial costs of fraud to their organisations. Without this information the report warns the industry will find it difficult to determine whether fraud is increasing or decreasing and whether or not their actions are effective.
To better protect themselves, CIEH is urging the industry to adopt proactive and comprehensive counter fraud strategies based on reliable evidence of the nature and scale of all fraud risks facing the organisation.
This approach would mean the industry would have to think wider than just focusing on known fraud issues related to products or ingredients.
These strategies should be incorporated as essential processes, alongside payroll and HR, and could include:
Calculating the financial cost of fraud based on reliable estimates, including detected and undetected instancesEnsuring counter fraud tactics are centrally managed, with sufficient authority to secure necessary changesConduct proactive and regular counter fraud exercises early rather than waiting for problems to be reportedDevelop an anti-fraud culture, which ensures robust, deterrent, action is taken when issues are identifiedMaking use of the skills and experience of accredited counter fraud professionals and engaging with Government organisations, such as the Food Standard Agency’s National Food Crime Unit, to ensure the overall fight against fraud is strengthened
Fellow co-author Jim Gee, Visiting Professor and Chair of the Centre for Counter Fraud Studies at the University of Portsmouth said: “Fraud undermines the financial health and reputation of food and drink businesses. It is the last, great unreduced business cost with the latest research data, across 17 years, showing that this cost averages over 5% of expenditure.
“The better news is that there are examples where businesses have cut this cost by up to 40% within 12 months, significantly improving profitability. This guide shows how that can be achieved.”
Ron McNaughton, Head of the Scottish Food Crime and Incidents Unit, said: “The Scottish Food Crime & Incidents Unit are committed to working with industry and partners to ensure that any efforts to tackle food fraud are collaborative and consistent across the UK. Those who perpetrate fraud do not recognise borders, it is therefore crucial that we work together.
“Ultimately it is the public that pay the price. I would urge the industry to promote this guide and encourage those working in the food industry to play their part in combatting food fraud. We believe that this guide will help businesses understand the many risks involved in food fraud and the measures that can be brought into place to mitigate the risks.”
Eoghan Daly added: “Fraudsters work hard to hide their activities, making the worst, and most costly, scams subtle and difficult to detect.
“This means that the number of potential frauds is practically unlimited and once one type of fraud is successful other vulnerabilities may be exploited. Fraud is damaging to everyone and needs to be stamped on in order to prevent the scammers from doing any more harm.”