The Precautionary Principle is a sensible way of minimising risk in the face of uncertainty. But preventive action can turn into reactionary panic. What can we learn from this to apply in business?
Hindsight is wonderful, but history surfaces a plethora of scares based on dubious science – where the reaction was gross sensationalism and overreaction from officials and government ministers.
From salmonella in eggs to listeria in cheese, dioxins in poultry, to the millennium bugs infecting computers, nitrates in water, and the mad cow epidemic (BSE) -the pattern has been constantly repeated. The EU currently uses the Precautionary Principle to effectively ban any genetically modified foods entering the market and it is being advocated for environmental protection reasons to prevent fracking for shale gas in the UK.
In 1996, the fears of 500,000 deaths projected from BSE led to action which destroyed the UK’s meat export industry. Since 1996, there have been about 176 deaths from vCJD and deaths are currently running at 1 or 2 per year (1).The Precautionary Principle can be said to have cost the country £3.45bn, closing down a successful industry and losing many their jobs and businesses – including my own. There were most certainly alternative, less drastic, courses of action available.
By 1996, I had developed a thriving business supplying the animal feeds industry with unconventional non meat byproducts from processing orange peel, cellulose byproducts from paper making and by-products from citric acid.
In response to the BSE epidemic, the Minister of Agriculture, John Gummer, cited the Precautionery Principle and introduced a drastic solution – blanket slaughter of all cattle that could have been infected by BSE. British supermarkets responded by demanding meat from “naturally” fed cattle. Overseas countries responded to the blanket slaughter policy by banning British beef. Both the export and domestic markets for my company died.
Three issues with the Precautionary Principle
No adaptation The Principle is designed to minimise risk when insufficient scientific evidence is available. In practice, when the evidence becomes transparent, it is often slow to be reviewed. In 2014, a panel of experts set up in the UK proposed existing EU regulatory system on GM foods should be replaced with a more logical system such as that used for new medicines. Even Mark Lynas, one of the activists behind Greenpeace objections to genetic engineering, who unsuccessfully tried to steal Dolly, the first genetically modified sheep, converted to the view in 2015. The EU maintains the ban on GM foods.
Inconsistency Banning of home-produced gas from UK shale gas sources is advocated, while ignoring that, in practice, the alternative is imported liquified fracked gas with its far greater carbon footprint. And why is it judged acceptable in Europe to insert GM genes into your body for medicinal reasons but to invoke the Precautionary Principle regarding eating GM food?
Inhibits innovation Witness the explosion in biotechnological innovation in medicine compared to the lack of any advancement in biotechnology in agriculture in the EU. Famers in Uganda and Kenya cannot use GM seeds which improve their maize crops dramatically because the EU will not allow importation of GM maize.
How to approach
The Precautionary Principle definitely has a role. However, each time it is invoked, its consequences should be laid out – its costs and opportunities, including the constraint on innovation, quantified and publicly reported. It should be consistently applied to imports as well as home production, and time limited with any extension required to be justified by intensive research findings.
What does this mean for your business?
The Precautionary Principle can generate your ‘Black Swan’ (totally unexpected event). It did for my first business. Recognising the implications early and reacting rapidly will allow you to move on – and survive!
Balancing risks inherent in innovation with the value of competitive advantage is essential. If you accept risk, you need to have a clear head and an appetite for rigour. It is uniformed risk-taking and responding to the emotional and sensational as opposed to the empirical that is the problem.
Building risk intolerance and anti-fragility against uncertainty into the business model is an essential part of any long-term viable business.
Risk assessment, safety training, testing facilities, incident prevention and mitigation products are growth markets.
Sources 1. European Centre for Disease Prevention and Control, an agency of the European Union 2018