Moral imperatives aside, compliance with regulatory requirements is a critical part of business. Suppliers, distributors, and manufacturers rely on each other to ensure policy compliance at every step of the value chain. Across verticals, specialty ingredients regulations are designed to protect the public and maintain the exceptional quality standards the industry needs to put the best possible product in the hands of our consumers.
What Is Regulatory Compliance?
Regulatory compliance is the ongoing process of complying with all applicable laws, regulations, standards, and policies established by governments and regulatory bodies. Organizations monitoring and enforcing these rules vary according to industry, complexity, and consequences. For example, the US government bodies tasked with food safety are the FDA and USDA, while the European Union has a mix of EU and national bodies navigating several layers of regulatory compliance risk.
Regulatory compliance covers many aspects of normal business operations. Regulations often pertain to:
- Quality and safety
- Financial reporting and accounting
- Data privacy and security
- Environmental impact
- Labor and employment laws
- Material sourcing laws
Risk Regulation and Compliance in the Food Industry
Food manufacturing and distribution are highly regulated, requiring clear upstream visibility to prevent potential non-compliance issues. Manufacturers operating global supply chains and decentralized production facilities face additional challenges, including conflicting and changing regulations and import bans.
Food manufacturing compliance is an ongoing investment in business success and, critically, public health. In addition to prioritizing internal food industry compliance management, many organizations enlist outside experts for added insight and direction.
Three Pillars of Governance, Risk, and Compliance
Whether food industry businesses are handling compliance independently or combining internal and outsourced regulatory compliance, these teams operate on a three-tiered, or three-stage, compliance framework.
1. Policy and Procedure
Effective governance, risk, and compliance (GRC) starts with proactive research to understand existing and new regulations. Compliance often requires a degree of clarification and interpretation, resulting in ongoing discussions between industry players and regulators.
In many cases, one company’s ability to manage regulatory compliance risk depends in no small part on the diligence of its vendors. An important part of the policy and procedure pillar includes educating staff, suppliers, and vendors about new regulations.
2. Execution and Monitoring
Organizations should aggressively monitor compliance by building policies for daily operations and continually confirming adherence to those. This may not always be convenient. Internal team members may sometimes be tempted to cut corners and sacrifice compliance – and safety – to increase profit margins or achieve faster production times. One of the advantages of outsourcing regulatory compliance is removing the temptation to take chances, which is what makes an outside perspective so valuable.
3. Data Access and Incident Management
Information is invaluable before, during, and after a safety incident occurs. In the food industry, having comprehensive and immediate access to information about ingredient sourcing, storage, cross-contamination risk, and retail shipping makes food recalls and warnings more effective.
Today, international manufacturers following strict GRC best practices can quickly recall millions of affected products worldwide, narrowing the risk to specific batches and deliveries. These efforts prevent serious health risks and save lives, making the cost of compliance a small price to pay.
The High Cost of Non-Compliance
For food and beverage manufacturers, the consequences of non-compliance with regulations include lasting, potentially irreparable damage to the brand, severed contracts and partnerships, and trade restrictions. There are also more immediate costs associated with non-compliance, such as fines and revenue loss.
Researchers have devised a useful formula to calculate the true total cost of non-compliance in this industry: with the estimated share (%) of the whole cost of non-compliance.
- Business disruption – 33% of costs
- Revenue loss – 26%
- Productivity loss – 24%
- Reputational damage – 10-15%
- Miscellaneous – 2-7%
While the exact costs vary widely by sector, instance, and brand, it’s clear that strict compliance makes business sense. Even accounting for recalls, legal fees, and other consequences, non-compliance costs 2.6 times more than building and maintaining compliance measures. A recent study found that the average financial impact ranges from $14 million to $40 million.
Of course, the most serious consequences of non-compliance with food safety laws are human, not monetary. Disease outbreaks, allergen contamination, and human error claim hundreds of lives each year globally.
The importance of food laws and regulations cannot be overstated. Every link in the supply chain owes its partners and end consumers exceptional diligence and quality control. That’s why suppliers and manufacturers partner with Tilley Distribution.
Safety and Compliance Always Come First
Every business has an operational and financial incentive to ensure compliance with policies and procedures. Tilley Distribution offers the expertise to make this possible. With deep industry expertise and global resources, we’re the ideal regulatory compliance partner for organizations in the specialty ingredients field. Contact us today to learn more about our capabilities.
