An opportunity to better manage risk and fight fraudThe new EU Whistleblowing Directive (Directive) will require certain organisations in a number of key sectors - including in food & beverage, food chain and food supply - to comply with legislation on how to deal with fraud, corruption or wrongdoing in the workplace.
While this sounds like an additional burden for the F&B sector, it is an opportunity to better manage business risk and supply chain efficiencies by becoming aware of potential issues at an earlier stage, and limiting financial loss or legal exposure.
How does the Directive affect the F&B business?
1. If you only have UK based operationsUK employers are not required to implement the Directive for its operations in the UK. Instead, UK operations will have to be compliant with the Public Interest Disclosure Act (PIDA), which also provides a certain level of protection for whistleblowers reporting wrongdoing in their workplace.
The Food Standards Agency (FSA) is a prescribed person under PIDA, which means that employees, contractors, trainees or agency staff who are aware of wrongdoing within the F&B industry and choose to report it to the FSA are protected by the PIDA. This includes any suspected wrongdoing, danger to health and safety of individuals, damage to the environment or deliberate concealment of information tending to show a legal breach.
We also note that the FSA is in talks with Ministers to secure additional investigatory powers for its National Food Crime Unit (NFCU), address gaps in enforcement powers and ramp up enforcement where needed.
2. If you have EU-wide or global operationsThe Directive provides that by 17 December 2021, Member States must require employers to, for example;
(i) introduce internal channels and procedures, including ensuring that the whistleblower's identity is kept confidential;
(ii) prohibit all forms of retaliation against whistleblowers;
(iii) identify competent authorities to receive, provide feedback and progress reports; and
(iv) implement effective and proportionate penalties for anyone who retaliates against whistleblowers, obstructs the reporting of a disclosure or otherwise breaches the duties outlined in the Directive.
Therefore, any operations in the EU Member States will have to comply with the Directive (especially if your business will have 250 or more EU-based employees in 2022, and 50 or more from 2023 onwards).
What action should you be taking?These potential variations will make it difficult for multinational F&B companies to implement a global, 'one-size fits all' approach to whistleblowing.
If you are a global employer, you will need to carefully monitor the aspect of local country implementation to ensure you have an approach that both works for your business and achieves risk compliance.
Have you considered whether any changes will be required (or are simply desirable) based on the scope of the Directive and any expanded Member State protections applicable to the F&B and related supply chain industry?
Did you perform a risk assessment to ensure you have implemented appropriate fraud detection and escalation procedures throughout your business and supply chains?
Studies have demonstrated that 43% of frauds are detected by a tip-off. 50% of all tip-offs are provided by employees and 35% come from people outside the organisation – customers, vendors and competitors.
On average, organisations with a whistleblowing hotline as one of their internal controls see a 49% reduction in the total number of frauds and a 33% reduction in the duration of a fraud.
The message? Whistle-blower systems reduce corruption, fraud and human rights abuses, and improve business performance.
While the Directive will require many EU and multinational companies to make changes, by ensuring that effective whistleblowing arrangements are in place, your business will have an opportunity to become aware of multiple concerns at the earliest stages, helping to avoid or limit financial, brand and reputational risks.
Is your business ready to comply with the Directive? Are you appropriately managing and reducing food fraud and corruption risk within your business and protecting the value of your brands?
If you would like to discuss the changes implemented by the Directive, explore efficient options to comply with it or manage the risk of potential fraud or wrongdoing within your F&B business, please get in touch.
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