Chang Guann was listed in third place in the fifth edition of risk assessor RepRisk’s Most Controversial Companies of 2014 report following a scandal over contaminated food oil.
The report’s data, which ranks the 10 most controversial companies of 2014, is based on information screened, analysed and quantified by RepRisk from a wide range of publicly-available, third-party sources.
Asian majority, though only one food business
Six out of the 10 most controversial companies of 2014 are located in Asia, though Chang Guann was the only food industry representative on the list.
Fifa, football’s Switzerland-based governing body which ranked No 1 on the 2013 report, ceded its position to Chonghaejin Marine, the South Korean transport company whose ferry sank at sea leading to the deaths of hundreds of students last year.
Japanese automotive components Takata Corporation took second place, having been found to have manufactured defective airbags, while multinationals Uber and General Motors both took spots in the top 10. This year, Fifa improved to sixth place.
“The incidents faced by the ten companies listed in the report fall primarily into social and governance categories with accusations focusing on corruption, fraud, occupational health and safety, poor working conditions, and supply chain issues,” RepRisk said in a statement.
It is also interesting to note the speed with which these ESG incidents affected the companies’ reputation.
Chang Guann’s gutter oil scandal
In September 2014, Taiwan’s Food and Drug Administration identified more than 900 restaurants and food plants that were using “gutter” oil supplied by Chang Guann.
The company was accused of supplying firms with cheap recycled oil from kitchen-waste, and by-products from leather plants and slaughterhouses, and mixing it with lard before reselling it from an unlicensed factory.
The Taipei health department imposed a maximum fine each against two food supply companies, For Chorn and Kong Yen, for initially refusing to disclose the downstream purchasers of their cooking oil, which had allegedly been produced by Chang Guann.
Later, Kong Yen finally disclosed that the contaminated oil had been supplied to nearly 400 restaurants, including bigger food-service chains in Hong Kong such as 7-Eleven, Starbucks, and Café Express. These outlets had reportedly been using pineapple buns supplied by Maxim’s Group, which confirmed that its oil supplies had originated from Chang Guann.
In September, retailers in Macau, Taiwan and Hong Kong removed hundred of tons of products from their shelves over fears that they were con-with the oil.
Subsequent investigations showed that a total of 235 manufacturers had purchased the sub-standard oil, and 213 food products contained the contaminated lard. Over 1,000 retail businesses were asked to recall the tainted products, and Taiwan’s premier created a special task force to deal with the problem.
The directors of Chang Guann were indicted on charges of violating food safety regulations and fraudulently selling substandard products, and the company was fined TWD52.9m (US$1.7m).
Following the scandal, Chang Guann was fined further by the Bureau of Kaohsiung City Labour Affairs for allegedly dismissing 103 employees without giving them the legally required 60 days’ advance notice. The Bureau’s investigations also found that employees had been illegally asked to work overtime.
In September, the CEO of Chang Guann was arrested in relation to the scandal and the assets of company’s owner were frozen.