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Uni-President Enterprises

Food safety management

Home / EOS Case Studies / Uni-President Enterprises

Uni-President Enterprises (Uni-President), together with its subsidiaries in Mainland China and Southeast Asia, manufactures, processes and markets instant noodles, dairy products, frozen foods, soft drinks, soy sauces, meat products, animal feeds, aquatic feeds, edible oils, bread, cakes and desserts. The company also operates vending machines and food distribution centres.

Background
Our engagement with the company was triggered by the 2011 food contamination scandal involving plasticiser, which led to a large-scale recall of affected products and significant damage to Uni-President’s reputation. Our engagement focus was to ensure that the company adopts the necessary structures, systems and processes to minimise the risk of further incidents.

What we did
Following dialogue with the company and a site visit to its headquarters in June 2014, we saw significant improvements in its food safety management. After our visit, the company set up a new structure to connect all the sustainability initiatives in its various departments, incorporating the recommendations we had made regarding the disclosure of its efforts. Unfortunately, a further major incident involving tainted oil in the company’s supply chain was discovered in November 2014. Despite our disappointment about this, we were supportive of the cultural change that management wanted to implement across the company. We recommended more granular reporting on its food safety management, including the use of infographics to better demonstrate the processes in place.

With regard to governance, we were concerned about the lack of transparency regarding the director nominations process and the insufficient number of independent directors on the company’s board. We therefore strongly pushed for a strengthening of the board through the nomination of independent directors and better disclosure thereof.

In February 2017, we paid a visit to the company’s new food safety centre. In accordance with international best practices of hygiene and safety, the testing facilities were kept separate from each other. The number of specialist and segregated laboratories focus on food sample testing for veterinary drugs, pesticides, pollutants, adulterants, additives, lipids, heavy metals and antimicrobial substances. We also discussed the company’s efforts in food waste and water management.

Results
The company reacted to the concerns we raised at its AGM in June 2013. Subsequently, it put forward three independent directors for election by shareholders and set up an independent audit committee. While the extent and timeliness of disclosure on director elections could be enhanced to bring it further in line with international best practice, the company has adopted the market standard nomination system, enabling us to conclude our engagement on board issues.

Since then, the company has notably improved the quality of its reporting on food safety management, the effectiveness of its risk management and the oversight of its suppliers. An incentive scheme with four levels of risk alerts was introduced to encourage internal reporting of any identified food safety issues. Rewards are given to employees who raise food safety concerns. These attempts at changing culture have also been supported by management.

In addition, the company is studying ways to improve its water management capabilities and has started reviewing the industry’s best practices.

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Christine Chow Dr Christine Chow is responsible for the financial services, technology and extractive sectors in Asia ex-Japan. She has 19 years of experience in portfolio management, research and investment consulting. Christine's PhD thesis on shareholder engagement for responsible investment was short-listed for a UN award in Sweden for industry relevance and academic excellence. She is an adjunct associate professor in the Department of Finance at the Hong Kong University of Science and Technology. She is a governor of the London School of Economics and a member of the university’s investment committee. She was also a member of the greater China committee of the Hong Kong Retirement Funds Association between 2014-2016. Christine has worked at a number of multinational corporations such as Merrill Lynch, Schroders and Hewitt. In the 1990s, she was responsible for establishing strategic partnerships in fund management for the Schroders Group, especially in Mainland China. Christine is a graduate of the London School of Economics and the University of Melbourne. She also completed an executive education course on financial engineering at Stanford University.
Read all article by Christine Chow
Previous article:
Panasonic

Engagement objectives:

Environmental: Food waste management

Environmental: Water management disclosure

Social & ethical: Food safety management

Governance: Board independence

Governance: Board member nomination and election process

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