Elsevier

Food Policy

Volume 35, Issue 5, October 2010, Pages 412-418
Food Policy

The implementation mechanisms of voluntary food safety systems

https://doi.org/10.1016/j.foodpol.2010.05.008Get rights and content

Abstract

The recent food scares have been the motivation for voluntary programmes on food safety being promoted by public authorities and voluntarily implemented by food operators. In this article, we take into account the nature of the contamination risk to investigate the complementarities between private and public mechanisms for those voluntary systems to be implemented by a firm. We show two main results. First, when the firm directly markets its products to consumers a strong mandatory threat is a sufficient condition to implement voluntary systems whatever the risk of contamination. In contrast, when the mandatory threat is weak voluntary systems should be more implemented in industries where the risk of food contamination is low (pesticide residue) than in industries where the risk of contamination is high (pathogenic contamination). Second, when the risk of food contamination is low and the firm is embedded in a supply chain where the retailer can impose its own safety system, a well-designed penalty contract will induce a voluntary implementation whatever the mandatory threat.

Introduction

The recent food scares have been the motivation for voluntary programmes on food safety being promoted by public authorities and voluntarily implemented by food operators. We have empirical evidence that food operators are voluntarily adopting individual or collective quality management systems to guarantee food quality and/or safety and promote public health. For example, the British Egg Industry Council 10 years ago introduced the Lion Quality Scheme which sets high standards of food safety and animal welfare and currently accounts for 85% of egg production in the United Kingdom.1 This cooperation between public authorities and firms has been tackled in the economics of food safety under the concept of co-regulation (Garcìa-Martinez et al., 2007, Codron et al., 2007, Rouvière and Caswell, 2010).

In this article we investigate the complementarities between private and public mechanisms that might induce voluntary implementation by food operators of quality management systems. We develop a formal analysis considering the behavior of one producing firm that might be under the influence of public authorities and/or a retailer, who would impose their own quality management systems (respectively, mandatory or quasi–voluntary system). To better catch the specificities of the food safety issue, we rely on two points. First, we follow the definition of risk2 provided by the Australia New Zealand Food Standards Council (ANZFA, 2002) distinguishing among two kinds of risks on the human health after a contamination episode: (i) a high risk when there is a pathogenic contamination, (ii) a low risk when there is a pesticide residue contamination. Second, we consider that food safety failures are “systemic in nature” (Hennessy et al., 2003) in the high risk situation. That is, all producers could suffer from a pathogenic contamination episode even if they are not responsible of the contamination. In 1998, the Federal Department of Agriculture of the Unites States of America published and promoted a voluntary guideline to “minimize microbial food safety hazards in the fresh fruit and vegetables industry” (Calvin, 2007). Calvin reports that most of spinach growers have voluntary used this framework to develop their own and voluntary food safety plans and that their compliance and practices have been certified by third-party audits. However, following the fall 2006 spinach outbreak, the Economic Research Service of the United States Department of Agriculture reported that all US spinach growers suffered a drop in demand for their product.3 Following a food scare, consumers lose confidence in the safety of products whatever preventive measures producers have implemented. After an outbreak all firms will suffer from a drop in demand because consumers indirectly lose their trust in the whole supply chain. Because of this systemic nature, we mainly show that in the high risk situation the voluntary measures will be implemented only when the threat to be imposed a mandatory system is strong. Otherwise, voluntary measures will be more easily implemented when the safety risk is low (pesticide residue contamination). We also show that when the safety risk is low and the retailer can impose its own safety system, a well-designed penalty contract will induce a voluntary systems implementation whatever the mandatory threat.

As far as we know, our approach differs from the theoretical literature on the implementation of voluntary food safety system. From our point of view, this literature has not adequately tackled all the specificities of the food safety issue when they have transposed the analytical framework developed in environmental economics. Indeed, it assumes that food operators always benefit from a voluntary adoption even after the occurrence of a contamination episode. Segerson (1999) shows that, because voluntary systems allows firms to save on costs and to benefit from reputation compared to a mandatory system, a firm will implement voluntary protective measures on food safety if there is a strong threat to be imposed a mandatory system. Building on her result, Venturini (2003) argues that a strong mandatory threat is a necessary but not a sufficient condition when relaxing the assumption on costs differential between voluntary and mandatory systems. Under this condition, he argues that governments must help food operators to signal safer foods allowing for instance firms’ products to be stamped with an official label.

Our article departs from this literature by considering the more general setting where voluntary systems do not save on costs and where reputation benefit may vanish after the occurrence of a contamination episode. Then, we show that a strong mandatory threat is a sufficient condition to implement a voluntary system whatever the food safety risk considered. In contrast, when the mandatory threat is weak, we show that voluntary systems should be more implemented in industries with low food risk. Noelke and Caswell (2000) study the efficiency of food safety systems in the context of a supply chain. The authors have analysed the conditions under which a mandatory, quasi–voluntary or voluntary system implemented in a supply chain are more prevalent, that is leads to a higher level of food safety. They show that a voluntary system and a negligence liability rule always provide the highest level of food safety. However, their article does not deal with the implementation issue of those systems. Our article focuses on this issue and shows that private incentives provided by a retailer may implement voluntary systems whatever the mandatory threat.

Moreover, this article enlarges the current debate on the mix-up between public regulation and private standards on food safety. The “task sharing” that is developed in co-regulation programmes has been now at great place in the food safety industries in the US, the UK, Australia and in France (Garcìa-Martinez et al., 2007, Codron et al., 2007). The development of private standards or private regulation from supermarkets (Havinga, 2006) led scholars to develop research on different issues. Some of them bring out the impact of private standards on the food operators from developing countries (Minten et al., 2009) whereas others question the development of the certification market for food and the reliability of the certification process (Jahn et al., 2005). We follow up those researches establishing that in a co-regulation framework, to induce a voluntary implementation, retailers must recognize that voluntary systems performs as well as mandatory system or private standards in providing food safety.

The article proceeds as follows. In food safety risk with direct marketing, we consider the decision of a producing firm who directly sells its products to consumers distinguishing between high food risk and low food risk. In low food risk in the supply chain, we deepen our analysis of the implementation of voluntary programmes within the supply chain considering that a task sharing between public authorities and retailers exists in monitoring food safety standard. In this context of co-regulation, we model the firm’s decision when the firm is a supplier and might face to the requirements of a retailer. Concluding remarks concludes.

Section snippets

Food safety risk with direct marketing

In this section, we study a situation where the food operator directly markets its products to consumers (direct marketing). Following the previous literatures (Segerson, 1999, Venturini, 2003) we will consider two mechanisms that can induce voluntary implementation of food safety measures by the food operator: (i) the regulator’s ability to impose a mandatory improving food safety system; (ii) economic and legal sanctions that injured consumers might impose to the food operator.

Low food risk in the supply chain

In the previous section, we have shown that voluntary systems can be more easily implemented in a low food risk situation than in a high food risk situation. However, the “stick and carrot” mechanism that sustains this implementation may not be efficient. Indeed, the market “carrot” (i.e., the increased benefit (BD + BR) when choosing voluntary systems) as well as the judicial “stick” ((p  q)LL) can be very low. Indeed, since consumers cannot sue a firm which failed to provide safe goods because

Concluding remarks

The recent evolution of European food safety regulations is characterised by the increased involvement and responsibility of private actors in food safety controls. The 2001 European Regulation (EC) No. 178/2002 that came into in force in 2005 had this objective. This article focuses on complementarities between private and public mechanisms for those systems to be voluntary implemented by food operators taking the specificities of the food safety. We argue that these mechanisms can be ranked

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