Over three quarters of respondents in a recent China corporate social responsibility survey ranked product quality above environmental protection, management integrity, or public welfare in terms of a company’s CSR performance. The survey, conducted by Tsinghua University and Ruder Finn Public Relations, reflects domestic consumers’ growing awareness of, and reaction to, product safety.
The finding comes amid a nationwide probe into milk products contaminated with melamine, the industrial toxin which was also the root cause of the 2008 tainted milk scandal. Foreign companies have been blighted by safety concerns as well as domestic operators: Melamine-tainted plastic tableware, including bowls and plates, was discovered in Carrefour and Auchan supermarkets in Beijing, according to the International Food Packaging Association.
Both producers and retailers should be wary of repeating past mistakes when it comes to product safety and the costs incurred by recalls and potential litigation. Investors are similarly concerned of what might come next. Inner Mongolia Yili Industrial Group (600887.SH), China’s biggest producer of dairy goods, dropped 3.78% against a 2.36% rise in the benchmark Shanghai Composite Index. Bright Dairy & Food Co shed (600597.SH) fell by 0.63%. Greater near term risks lie ahead for the sector unless dairy firms are shown to be more proactive in preventing harmful materials sickening consumers.