Considering Fraud Vulnerability Associated with Credence-Based Products Such as Organic Food

Abstract

Organic foods carry a premium price. They are credence-based foods, i.e., it is difficult for consumers to evaluate the premium aspects of organic food under normal use. In global supply chains, organic food is purchased on institutional trust (certification, logos, standards) rather than on relational trust. Relying on institutional trust makes consumers vulnerable to criminals who intentionally label conventional product as organic or develop sophisticated organized crime networks to defraud businesses and consumers. The aim of this research is to explore cases of organic fraud that are emergent from academic and gray literature searches to identify ways to strengthen future capabilities to counter illicit activities in a globalized food environment. Each case is considered in terms of perpetrator motivations (differentiated as economic, cultural, and behaviorally orientated drivers), the mode of operation (simple or organized), the guardians involved/absent, and the business and supply chain level vulnerabilities the cases highlight. The study finds that institutional trust is particularly vulnerable to fraud. Supply chain guardians need to recognize this vulnerability and implement effective controls to reduce the likelihood of occurrence. However, in some cases considered in the study, the guardians themselves were complicit in the illicit behavior, further increasing consumer vulnerability. Future research needs to consider how additional controls can be implemented, without increasing supply chain friction that will impact on food trade and supply, that can ensure consumers are purchasing what they believe they are paying for.

Halo Effect and Source Credibility in the Evaluation of Food Products Identified by Third-Party Certified Eco-Labels: Can Information Prevent Biased Inferences?

“…Certainly, inferences about the higher quality and price of organic products are prone to effective heuristic thinking in making responsible purchasing decisions when consumers are able to truthfully identify them [8,16,19,21,38]. In this way, eco-labels would fulfill their function of acting as heuristic cues in the identification of better and more expensive products [3][4][5][6]16,[18][19][20][21][22]. However, consumers do not seem to know the exact meaning of third-party certified eco-labels [18,30,31,34,35,38].…”

“…Going forward with this reasoning, several contributions in the literature show that the influence of eco-labels on purchasing decisions has to do not only with understanding their meaning, but also with the credibility attributed to them [3,6,21,22,34,35,56]. In this sense, many authors conclude that environmental information certified by public authorities and other independent sources is more reliable than that provided by producers or retailers [18,21,[68][69][70].…”

“…Precisely, as argued above, one of the main functions of third-party certified ecolabels is to perform as credible symbols that facilitate the identification of environmentally responsible products [3][4][5]16,18]. In fact, because most consumers do not have the technical expertise and knowledge about the requirements that distinguish organic food, experts consider consumer confidence to be a key prerequisite for the emergence of a market for green products [6,18,21,22].…”

“…Getting consumers to demand and purchase products from organic farming is a key objective of current far-reaching sustainability policies, appearing as an inseparable complement to the greater involvement of companies and organizations in production processes with less environmental impact [1,2]. Such purpose recognizes the need to establish transparent and reliable systems that aim to verify the use of organic production practices so that markets can operate efficiently, as consumers lack the expertise and time required to obtain accurate information to evaluate them by themselves, either before or after purchase [3][4][5][6]. In this regard, it is known that most of the thinking that takes place in grocery shopping situations occurs heuristically, that is, without enough rational analysis, because consumers often must make several quick decisions in a row and need simple cues to evaluate the attributes of the products with minimal effort [7][8][9].…”

“…Thus, one of their concrete functions is to act as credibility cues, simplifying consumer decision-making by facilitating the identification of environmentally superior products [3][4][5]16,18]. Furthermore, organic labeling has gained importance as being a tool for building trust in consumers about the quality of the food they consume, as well as to justify its higher price [6,[19][20][21][22], which allows reaching market niches less sensitive to environmental sustainability issues compared to other product attributes [16].…”