In July , 2014, it was reported that the Shanghai Husi food plant in China, a subsidiary of Illinois-based OSI Group and a supplier of meat to major MNEs, including McDonalds, Starbucks and Papa John's, failed to maintain basic food safety standards.
This latest incident highlights that multinational enterprises (MNEs) are key participants in the food and beverages industry. OSI is an MNE with operations in China and its customers are major food service MNEs. Through their actions, all of them failed several aspects of food security, as defined by the World Food Summit of 1996, such as safety, nutrition standards and quality, thereby compromising consumers’ health and confidence. MNEs, therefore, must safeguard their production processes in a highly concentrated global market in which the top 100 food and beverage MNEs account for one-third of production and more than one-half of the technological activities.
The multifaceted nature of food security is comprised of complicated global value chains (GVCs) that are mostly led by MNEs, creating a close link between trade and foreign direct investment (FDI). GVCs in the food industry revolve around two dimensions: the global dimension represented by MNEs participating in the agro-business sector, manufacturing, franchising, and retailing and the local dimension represented by local farmers, producers, local franchises, and retailers.
The interaction of these global and local food value chains creates two major challenges for the global community. The first relates to the restoration of competition and empowerment of the stakeholders in the local value chain. For example the New Alliance for Food Security and Nutrition is committed: “to increase responsible domestic and foreign private investments in African agriculture, take innovations that can enhance agricultural productivity to scale, and reduce the risk borne by vulnerable economies and communities.” Its 2013 Progress Report emphasizes the integration of small holders into GVCs. Similarly, a major issue raised by non-governmental organizations (NGOs) was that the New Alliance will actually serve the interests of large MNEs that profit “through land grabbing.”
The second challenge concerns the safeguarding of quality standards in GVCs by leading firms. For example, in April 2014 PepsiCo accepted the Voluntary Guidelines on the Responsible Governance of Tenure, while Kellogg’s, Nestle and others pledged to stop targeting children in advertisements of unhealthy food. The 2014 World Economic Forum, through its “Rethinking Global Food Security” theme, stressed the pivotal role MNEs are called to play in providing real solutions to the problem.
Effective response to these major challenges requires the implementation of policy measures and initiatives at both the regional and global levels. One area that needs continuous improvement is that of governance. International organizations, governments and NGOs should enact appropriate policy frameworks and effective evaluation processes leading toward sustainability, which will mostly rely on the participation of local stakeholders. Equally important, food and beverage MNEs should proactively improve their production models by incorporating more dynamically green processes and integrating local entrepreneurs and farmers. They should also review the standards set for suppliers to monitor their performance and to assist them in meeting these standards. Finally, they should show responsibility toward consumers, secure their access to good quality food at affordable prices and protect them from problems like obesity and diabetes. Monitoring rules, accountability and effective sanctions can ensure sustainable GVCs and the successful tackling of food security. However, the current debates suggest that there is much ground still to be covered and this will require further mobilization of all significant stakeholders.
1. U.S. Department of State, G8 action on food security, available at http://www.state.gov/s/globalfoodsecurity/190282.htm
2. See SOS Children’s Villages, “Will the G8 food security alliance benefit Africa’s small farmers?”, July 1, 2013, available at http://www.soschildrensvillages.org.uk/news/charity-blog/will-the-g8-food-security-alliance-benefit-africa2019s-small-farmers
3. See Smart Company, “Nestle, Coke and other big brands say they’ll stop advertising junk food to kids – by 2018”, June 23, 2014, available at http://www.smartcompany.com.au/marketing/42505-nestle-coke-and-other-big-brands-say-they-ll-stop-advertising-junk-food-to-kids-by-2018.html#