European Journal of Economic and Financial Research ISSN: 2501-9430 ISSN-L: 2501-9430 Available on-line at: http://www.oapub.org/soc doi: 10.5281/zenodo.1009179 Volume 2 │ Issue 4 │ 2017 ELICITING MILLENNIAL PERSPECTIVES ON ETHICS IN SAFETY PRODUCT RECALLS TO ENSURE CONSUMER PROTECTION AND INDUSTRY SUSTAINABILITY Jet Mbogai The University of Bolton, Bolton Business School: Fulfillment of PhD, Deane Road, Bolton, BL3 5AB, UK Abstract: The pressure to gain market share in competitive markets plays a role in expedited production, less time in research and development, and minimal product testing; these actions leave the flaws to be pinpointed by consumers instead of the respective companies. Product recalls are an economic threat to suppliers and manufacturers and a main concern to the public’s health; the complexity of a globalized supply chain with areas of unregulated safety standards contribute to increase in recalls. The adoption of technology and ease in usage of smart devices equipped with access to social media has provided consumers with the power to report malfunctions to larger audience and government agencies thus directly influencing consumer behavior. The cost incurred by companies after a recall are estimated at $55.5 billion a year including mortality, productivity losses, and medical expenses; specifically, the direct cost to the food company can go up to $10 million on lost sales and brand image reputation. The ethics within industries; what motivates industries from not being forthcoming and delaying the recall of products that cause harm to others and need to be recalled? Research focused on eliciting millennial perspectives on safety recalls on significant consumable products, baby products, and technology related recalls with emphasis on the CPSC recall of 1.9 million Galaxy Note 7 and 2.8 million top-load washers for a total of 4.7 million recalled products in 7 weeks a period from September 15 to November 04, 2016. JEL: D18, L60, M11, A14, F23, M14 Copyright © The Author(s). All Rights Reserved. © 2015 – 2017 Open Access Publishing Group 140 Jet Mboga ELICITING MILLENNIAL PERSPECTIVES ON ETHICS IN SAFETY PRODUCT RECALLS TO ENSURE CONSUMER PROTECTION AND INDUSTRY SUSTAINABILITY Keywords: ethics, safety product recalls, consumer protection, industry sustainability 1. Introduction Product recall is a procedure where the retrieval of defective goods from the consumer market occurs; the products are recalled because they are hazardous in one or more of the following: scientific findings confirms danger of content once thought as safe; unintentional contamination; flaw in design; defect in the production; tampering of products; misuse that is unforeseen; inability to comply with safety regulations (Berman, 1999; Gibson, 1995; Kumar & Budin, 2006). Product recall is a threat to profitability and a nuisance for consumers and manufacturers; the recalls can affect safety and health, impact consumer ability to regain confidence in the companies and the products that they manufacture (Chow, 2010; Kowitt, 2016). The major elements contributing to the recalls include weak Hazard Analysis and Critical Control Points (HACCP); non-adherence to Standard Operating Procedures; deficiency in production monitoring (Wallace, 2010). Severe cases of product recalls can lead to law suits and criminal charges against the companies; for example, Infantino baby sling recalled over 1 million slings after 3 infants died from suffocation (Chow, 2010; New York Post, 2010, March 24). Similarly, the safety recall of toys with lead were regulated to the weight of 6000 parts per million of lead by weight or coatings in the 1978 federal ban and in the lead limits were lowered to 90 parts per million in Consumer Product Safety Improvement Act of 2008 (Yerak, 2009). Other recent recalls stemmed down to Galaxy Note 7 that abruptly caught fire and resulted to the American civil aviation regulators banning the device from all United States airlines. The United States (US) dedicated agencies to address defective, hazardous, and unsafe products within the U.S. government recalls include U.S. Centers for Disease Control and Prevention (CDC) and Consumer Product Safety Commission (CPSC) (CPSC.gov, 2017). CDC and CPSC enforce federal laws and serve a purpose of protecting consumers against arbitrary risks and deaths; yet up-to-date there exits multiple products that cause harm and end up on the path of safety recall (CPSC.gov, 2017). Food recalls cause public health concerns and contribute to a substantial economic loss; the rigorous food production guidelines enforced within the U.S. took decades to be enacted by lawmakers but came after catastrophes that included death thus prompting agencies such as United States Department of Agriculture (USDA) and Food Safety and Inspection Services (FSIS), and Food and Drug Administration (FDA) to be established (Berman, 2016; Food & Drug Administration, 2016). European Journal of Economic and Financial Research - Volume 2 │ Issue 4 │ 2017 141 Jet Mboga ELICITING MILLENNIAL PERSPECTIVES ON ETHICS IN SAFETY PRODUCT RECALLS TO ENSURE CONSUMER PROTECTION AND INDUSTRY SUSTAINABILITY Product recalls in the U. S. upward trend are linked to the aggressive regulations set forth by the government agencies (see Appendix A) seeking out the recalls; the use of technology has made it simple for customers to be vocal about their distastefulness in the products and the supply chain has become complex for ease in control by manufacturers Jones, ; O’Malley, . Specifically, food recalls have seen doubling figures since 2002 (See Appendix B); these data are confirmed by Food Safety in a Globalised World which also outlines the cost of health for consuming contaminated food as $15.6 billion per year (Canadian Underwriter, 2015; Clapp, 2016; Machado, 2002). The reasons of food recall include 47% from microbiological contamination and others as show in Appendix C and operational mistakes; for example, the impact of food recalls accounts for 48 million illness annually with global numbers of 25-30 food contaminations such as E. coli, salmonella, and other viruses weekly (Forsythe, 2011; Kowitt, 2016). Specifically, in 2013 there were 9 million sick Americans from food contamination of whom 50,000 were hospitalized and 2,377 were cases of fatalities (Canada Underwriter, 2015, July 15). The threat of recalls is also evidenced in the global supply chain that has become enormous; take the example of tainted milk that was exported from China with melamine; at the time of detection the milk had already been transported to 47 countries (Kowitt, 2016). As the supply chain continuously moves into the global platform, the strict quality standards in the U.S. have contributed to more cases of recall because of the regulatory scrutiny that raises the possibility of recalls thus creating an economic impact on companies (Larkin, 2002; Lewis, 2015). The cost for recalls could be higher for larger brands because of the ease of access to recall information on social media platforms with nine-in-ten Americans being online and 77% owning smartphones as confirmed by Pew Research Center with data with survey conducted from 2000 to 2016 (See Appendix D) (Smith, 2017). For example, the direct cost to the food company at $10 million on lost sales and brand image reputation as reported by Food Marketing Institute and the Grocery Manufacturers Association (Heneghan, 2016; Kowitt, 2016; Marler & Clark, . Another research by Ohio State University’s Robert Scharff confirmed an estimate of $55.5 billion a year including mortality, productivity losses, and medical expenses (Kowitt, 2016). The direct cost incurred by companies undergoing recall include notification costs to consumer, supply chain, regulatory bodies, retrieving products, labor costs, storage, destruction, and unsalable products among others (Berman, 1999; Davidson & Worrell, 1992; Pimentel. D. & Pimentel, M. H., 2007). Additionally, Grocery Manufacturers Association confirmed that lost sales from by international companies in 2011 that were correlated to recall could range from $30 million and $99 million as reported by 18% and 5% shared that the financial impact to European Journal of Economic and Financial Research - Volume 2 │ Issue 4 │ 2017 142 Jet Mboga ELICITING MILLENNIAL PERSPECTIVES ON ETHICS IN SAFETY PRODUCT RECALLS TO ENSURE CONSUMER PROTECTION AND INDUSTRY SUSTAINABILITY the company could be over $100 with steeper price tags on the long-term reputation of the company (Kowitt, 2016). The increasing cost of product recalls are estimated at $55.5 billion a year for mortality, productivity losses, and medical expenses; for example, $10 million on lost sales and brand image can be the direct cost for a food company (Heneghan, 2016; Kowitt, 2016; Marler & Clark, 2017). The ethics within industries; what motivates industries from not being forthcoming and delaying the recall of products that cause harm to others and need to be recalled? Research focused on interviewing and surveying millennial age group of 18 – 34 to elicit their perspectives and understanding the ethics behind product safety recalls with an emphasis on the CPSC recall of 1.9 million Galaxy Note 7 and 2.8 million top-load washers for a total of 4.7 million recalled products in 7 weeks a period from September 15 to November 04, 2016. Gauging and understanding the millennial perspectives on ethics and product safety recalls is essential because the millennials are projected by Fortune to do dominate the workforce by 2020 (Hyder, 2016). For viewing / downloading the full article, please access the following link: https://oapub.org/soc/index.php/EJEFR/article/view/224 European Journal of Economic and Financial Research - Volume 2 │ Issue 4 │ 2017 143