It is one of the most feared scenarios for a food products company: a food safety scandal. In both 2000 and 2002, Snow Brand Milk, Japan’s top dairy company, found itself living the nightmare.

University of St. Thomas Center for Ethics Director Dr. Daryl Koehn has closely studied the ethics of the company’s response to the two back-to-back food safety scandals. She spoke on how the situations were handled during a presentation on Oct. 30 at the Tokyo headquarters of Snow Brand Milk.

In 2000, more than 15,000 people came down with food poisoning after consuming Snow Brand Milk. The problem was traced to bacteria on the production line of one of the company’s factories. Later investigations found Snow Brand had also been recycling its milk and combining new milk with outdated milk. As a result, some SBM products were off the store shelves for more than a year.

Then, in 2002, the company’s meat subsidiary was caught relabeling imported Australian beef as Japanese beef in order to get domestic subsidies under a buyback policy that Japan’s farm ministry implemented after mad cow disease was discovered.

“Snow Brand Milk took a series of steps to preserve its brand,” said Koehn, UST ethics professor. “They thoroughly re-examined all their processes and did a lot of consumer focus groups. The immediately fired top level managers involved in the scandals and brought in other people from within the company who were in no way tainted by the scandal. The current CEO Kohnose-san has done a wonderful job of tackling problems head-on. He is not afraid to admit that the firm made serious errors of judgment in the past, and he has supported efforts by managers in the compliance and corporate social responsibility departments to learn more about sound ethics practices in Japan and around the world.”

Other steps include instituting a day of remembrance observed each year by SBM employees. The remembrance ceremony serves as a reminder of the importance of eternal vigilance if future scandals are to be avoided. One of Japan’s top consumer advocates, Nobuko Hiwasa-san, was asked to join the SBM board of directors.

Koehn says future challenges are ahead for Snow Brand Milk, including Japan’s new financial integrity law known as Japanese SOX.

“That law requires that firms implement better controls and can be expensive,” said Koehn. “The margins in the dairy industry are very thin, because it is such a competitive industry and there hasn’t been much growth with the aging Japanese population. If the firm’s costs increase, it will be a challenge to maintain growth and to resist the temptation to take shortcuts to preserve margins.”

The Center for Business Ethics at UST works with the corporate community to help business people and students make good choices that benefit themselves, their businesses and their communities.

For more information, Koehn can be reached at 713-942-5917 or email at koehnd@stthom.edu.