Navigating emerging food and beverage challenges in 2022 and beyond
Each new year ushers in excitement and optimism about the possibilities for the future. For global businesses, however, the new year also brings new challenges and emerging complications resulting from recent crises such as the COVID-19 pandemic, bouts of civil unrest and the increasing frequency of cyber attacks as well as the changing business environment across the globe. In this edition of the newsletter, we explore three emerging challenges that food and beverage companies are facing in 2022 and beyond, including:
- The new era of smarter food safety
- Preparing for the new food traceability rule FSMA Section 204
- Business continuity beyond manufacturing sites
New Era of Smarter Food Safety
The foods we eat are continuously evolving. This is particularly true today, as we find ourselves in the midst of a food revolution that has been sparked by rapid changes within the dynamics of the food industry. With a global market and the availability of foods and ingredients from around the world, consumer demand for different flavours and tastes has driven the food industry to be increasingly innovative. Foods are being reformulated with new ingredients and flavours, new foods are entering the market, upgraded and modernised production processes are being implemented and alternate and technology driven delivery methods are being employed resulting in increasing demand for the digitalisation of the farm-to-fork supply chain.
The US Food and Drug Administration (FDA) has reacted to food safety issues with new or changing regulations to keep pace with this evolution. Over the next decade, the FDA will launch the New Era of Smarter Food Safety which aims to leverage technology and other tools to create a safer and more digitally traceable food system.. This initiative will involve new regulations and processes which builds on the work that the FDA has done on the Food Safety Modernization Act (FSMA). The FDA has collaborated with food safety experts, consumers, the food industry, technology firms, federal and state regulatory partners, regulatory counterparts in other nations, and academia, resulting in the FDA’s blueprint for the New Era of Smarter Food Safety, which is centered around four core elements:
- Technology-enabled traceability
- Smarter tools and approaches for prevention and outbreak response
- New business models and retail modernisation
- Food safety culture
While technology will play a key role in implementation, the harmonisation of all core elements will be necessary for success. Ultimately, the objective is to have end-to-end traceability throughout the food safety system. Companies will need to adopt new technologies and methods to bring about a system that will support interoperability across a variety of tech solutions.
As new data streams are generated and tools to rapidly analyse big data become available, government and industry will be able to enhance and strengthen root cause analyses and predictive analytics to modify food safety practices to avoid identified risks. These tools and approaches will also inform the FDA and other regulatory partners on how to approach inspections, outbreak responses and recall modernisation.
Traditional business models are being explored to determine the best ways to modernise and help ensure the safety of foods. New and emerging business models will need to address the evolution of and changes in how
food gets from farm to fork. This will include e-commerce and new delivery models, changes and innovations in how food is produced, new business models and advances in food production systems, and online shopping for meals and groceries. Also included will be risk-based inspectional approaches and advance research to strengthen retail food safety.
Dramatic improvements in reducing the burden of foodborne illnesses and disease will not be possible without companies instilling food safety cultures that influence people’s beliefs, attitudes and behaviours and the organisation’s actions. A strong food safety culture is a prerequisite for effective food safety management.
In putting forth the concepts in the blueprint for the New Era of Smarter Food Safety, companies will need to work differently to create a more digital, traceable and safer food system that advances food safety, improves the quality of life for consumers in this country and all over the world, and better prepares us for unexpected events that could impact the global food supply.
Preparing for the new food traceability rule FSMA Section 204
Traceability has always been an important factor in the food supply chain, but its criticality going forward cannot be understated. Over the past year, the FDA proposed new food traceability recordkeeping requirements for businesses of all sizes that manufacture, process, pack or hold foods that are labelled as “high-risk” in the Food Traceability List (FTL). The proposed requirements are recorded under Section 204 of the FDA Food Safety Modernization Act (FSMA). The FSMA Section 204 rule stipulates that businesses that produce and process foods on the FTL must adhere to enhanced traceability requirements that include establishing and maintaining detailed records of the farm-to-fork Critical Tracking Events (CTEs): growing, shipping, receiving, creating and transforming foods. The information required in the records includes but is not limited to: time, location, lot code, quantities or other units, and business identification. In other words, FSMA Section 204 requires a higher level of detail than was previously available, which will allow for selective filtering when tracking and tracing food contamination incidents.
The aim of FSMA Section 204 is to improve farm-to-fork food traceability while protecting public health and minimising losses from recalled products. With detailed and accurate recordkeeping of foods, identification of source contamination will be narrower, quicker and more efficient overall. Food contamination incidents in the past have led to blanket recalls of product as a safety measure because of an inability to narrow the scope of a contamination. The FDA attributed blame to existing requirements, which have now been deemed insufficient.
The FSMA Section 204 rule, although specifically targeting foods in the FTL because of the higher risk they represent, is recommended by the FDA for all businesses in the food and beverage industry. The full requirements of the proposed rule are still being drafted but, once the updated proposal is published and approved, the FSMA Section 204 rule would become effective after 60 days. The government recognises that the implementation process for businesses may be extensive; therefore, a two-year compliance window is provided. One new key requirement that may necessitate substantial efforts from businesses is the submission of electronic food records upon request by the FDA within a 24-hour window. Although the rule does not mandate electronic recordkeeping, for a business to easily provide these records within this short timeframe, the records would have to have been stored digitally. Implementation will require, at a minimum, that all parties involved in the farm-to-fork supply chain identify and capture products and location activity across the many points in the supply chain using globally accepted standard identifiers. This will require the ability to maintain and share data with all involved parties in the supply chain to ensure visibility at all levels. It will be imperative that data is standardised using a common set of attributes and formats in order for diverse technologies to be able to communicate with one another. This may require that businesses take appropriate steps to convert current digital records to a new format and transfer all manual recordkeeping processes to digital ones, which can be both time consuming and costly.
Businesses are encouraged to take proactive steps to familiarise themselves with the specifics of the FMSA Section 204 as soon as it is published in the Federal Register and regularly monitor changes, as the FDA retains the right to update the FTL when appropriate. As a result, a business that was once simply advised to adhere to the new requirements could find itself under a mandate to do so. Some exceptions and specific considerations are in place; therefore, businesses are urged to leverage expert advice to understand the full scope of the FSMA Section 204.
Business continuity beyond manufacturing sites
While many of the emerging challenges that companies will need to navigate center around tighter regulatory scrutiny and additional controls, there are also operational challenges that have emerged over the past 18 months that cannot be ignored. Control Risks works with numerous manufacturing clients, including food and beverage production companies, to improve their business resiliency. A general trend that we have observed is that, for many such companies, business continuity efforts are often highly siloed, particularly for extensively matrixed global organisations. Business continuity procedures are neither designed nor enforced in a consistent manner across the organisation and tend to be focused only on manufacturing sites and their ability to continue production in the midst of a disruption. There is often little in the way of a centralised programmatic approach driven by a corporate function in order to ensure consistency of approach and minimum standards across the organisation, as well as to ensure that critical supporting functions (e.g., human resources, finance, legal, supply chain) can continue to operate at an acceptable level during and following a disruption. As a result, companies lack an enterprise-wide picture of their critical processes and dependencies and the associated recovery procedure requirements should they be faced with a disruptive event or crisis.
Taking such a siloed approach to business continuity is unlikely to be sustainable for many food and beverage manufacturers going forward. Since COVID-19 first emerged, Control Risks has observed a sharp increase in the amount of requests from customers for greater visibility into their suppliers and partners’ business continuity procedures, not just over their manufacturing sites but across the entire organisation, including key programme components such as policies, plans and exercising documentation. In addition, this is increasingly becoming a requirement of boards, shareholders and insurers alike as they seek increased confidence in an organisation’s ability to respond to any disruption it may face, often sparked by the increase in customer requests for transparency, knowledge that their competitors are investing in this space and fear of a media eager to make examples of companies that respond poorly during crises.
Control Risks finds that companies that take the lead in this area employ a programmatic approach to business continuity. They have a dedicated corporate resiliency function and programme framework that defines the minimum standards for business continuity to drive consistency in approach across the organisation. In addition, these companies utilise an established business impact analysis (BIA) process that identifies an organisation’s critical functions and dependencies and drives the prioritisation of business continuity planning, regardless of whether those critical functions exist inside or outside of manufacturing sites. An enterprise approach to BIAs ensures that companies have a holistic picture of their most critical assets in order to better prepare for disruptions to them. Taking an organisation-wide approach also ensures that the BIA captures not only manufacturing processes and dependencies, but also those of key corporate functions such as finance, information technology and supply chain that often get overlooked but can also face severe disruptions. Leading programmes will also have an ongoing maintenance process that includes the development and regular updating of business continuity plans for all their critical processes, testing and training. These will also hold the programme accountable and measure its ongoing progress and effectiveness under the watch of a dedicated executive steering committee. Beginning with a BIA, building capabilities around its results and then employing a sustainable, comprehensive business continuity programme that is properly maintained will not only go a long way to satisfy requests from customers and internal stakeholders but also provide companies with a competitive advantage when a disruption occurs.
In conclusion, it is critical that food and beverage companies take these three emerging challenges seriously as they plan for and execute their business strategies for 2022 and beyond. Without doing so, companies open themselves up to unnecessary and impactful risk exposure to which they may be unprepared to respond. For more information on any of these topics, please contact Control Risks.