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Report of WPC80 Independent Inquiry for Fonterra Board

Preface by inquiry team

This report was commissioned by the board of Fonterra on 8 August 2013, five days after Fonterra announced a precautionary recall of three batches (totalling 38 tonnes) of whey protein concentrate. An external test of the product had indicated it had potentially been contaminated with a strain of Clostridium botulinum.

At the time of announcing an independent inquiry, Fonterra’s Chairman, John Wilson, said he expected it to “challenge every aspect of the business. We want to know how this happened, and why. We want...to take steps to build systems and procedures in Fonterra, and the global dairy supply chain, that will reduce the chance of this ever happening again.”

It is now a matter of history that the precautionary recall was proven to be a false alarm. On 28 August, it was announced that additional independent testing had established that there was no presence of C. botulinum in the whey protein concentrate.

While the “all clear” announcement was a huge relief to all concerned, it nonetheless raised further questions about how Fonterra had found itself in this position.

The Inquiry team has sought to fulfil the expectations of the Chairman, the Board and the wide range of Fonterra’s stakeholders by working over the past two months or so to establish what went wrong and why, and (more importantly) to point to what it sees as the lessons for the future.

In doing so, members of the Inquiry team have visited 8 plants, conducted interviews with over 70 people within Fonterra, from the Board down, and also had discussions with over 30 of Fonterra’s key stakeholders in a number of markets customers, farmer/owners, politicians and regulators, members of the diplomatic corps, industry stakeholders, members of the media, financial analysts and institutional investors and employees.

The interviews have all been conducted on an unattributable and confidential basis. The review team wishes to thank all who participated for their constructive involvement, their candour and their valuable insights. 

The Inquiry team has also benefited greatly from its collaboration with the special oversight committee, whose membership is outlined in their Foreword to this report.

Few if any organisations have voluntarily opened themselves to the intensive scrutiny involved in the Fonterra Board (i) commissioning this Inquiry’s independent review of the context, contributors and responses to a particular incident, (ii) providing full access to people and documents, and (iii) publishing the resulting report. The Inquiry team has appreciated the corresponding responsibility and trust inherent in its wide brief. To avoid any doubt, the Inquiry team records that it has not been constrained or impeded in its work by the Board or management of Fonterra.

Any inquiry of this nature will tend to focus on a few things that, with advantages of hindsight, could or should have been done better. This Inquiry is no exception. But it needs to be kept in mind that that tendency will obscure the reality that most things continue to be done extremely well.

Thus, although it might go without saying, it is probably a useful reminder for the Inquiry to record that Fonterra is a high quality organisation with talented and dedicated people. It has great efficiency, well developed systems and processes, and ongoing commitments to food safety and quality and to continuous improvement. The WPC80 events have already generated significant improvements, illustrated by the prompt Operational Review, and the progress on its implementation. This Inquiry’s report should be read with those reminders kept in mind.

The Inquiry team has been left with a strong impression that Fonterra will use the WPC80 events as a catalyst for positive operational, cultural and governance change and will continue to build on important changes for the good already underway. That would be a very fine legacy from a very difficult period in Fonterra’s history. 

 

JACK HODDER QC

GABRIELLE TRAINOR 

JACOB HEIDA 

 

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