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Ocean Spray Environmental Risk Management Crasins
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The growers Co-op has developed a careful and effective system of environmental ... a human health scare during that season the entire year is negatively impacted ... – PowerPoint PPT presentation
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Title: Ocean Spray Environmental Risk Management Crasins
1
Ocean Spray Environmental Risk
ManagementCrasins
- Professor Doug Cerf
- Donald Bren Graduate School of Environmental
Science and Management - Environmental Risk Management (ESM 286)
- Winter 2008
2
Risks
- Human health risk (the deal breaker)
- Risk of bringing the whole industry down (1
Billion crop) - Continuously changing environmental regulation
- Federal restrictions on pesticide licenses
- Water quality restrictions related to
reauthorization of the Clean Water Act - Availability of wetlands for cranberry
cultivation - Current stock of wetlands expected to be used in
few years - Uncertainty of additional wetlands becoming
available - Relationship with growers
- Relationship with cranberry grower industry
associations
3
Framework for risk evaluation
- These risks are analyzed from the perspective
that Ocean Spray has an effective system of
environmental governance and management - System exceeds regulation
- One small problem can lead to industry wide
problems - Relationships with environmental organizations
were surprisingly challenging given their
proactive position - e.g. disagreement on wetland banking
- Setting aside acreage in return for developing
acreage - Consequently, Ocean Spray did not court
environmental organizations - Do you agree?
4
Case Analysis Overview
- The growers Co-op has developed a careful and
effective system of environmental governance and
management. - Is this the proper strategy?
- It does not mitigate risk to Ocean Spray of non
co-op growers - Is this enough given the wetland capacity issue?
- Ocean Spray has limited impact over operations
(growers)
5
Environmental agreement with grower/owners
- Diverse set of growers
- Diverse on their education, size and concern for
the environment - The agreement called for
- Following practices, rules and regulations which
protect the environment - Significant consequences for lack of compliance
- Ocean Spray was trying to develop systems and
practices beyond the law - Necessary for growers to cooperate voluntarily
- Industry solution rather than a firm by firm
solution - In Freeport and DuPont we were looking at firm
level solutions - Ocean Spray coop has significant power
- 85 of cranberry growers are in coop
- Does industry self regulation substitute for
governmental regulation?
6
Initiatives that exceed regulation
- Pesticide usage
- Water management
- Environmental auditing
7
Free Rider Dilemma
- The trick is to get compliance despite the
obvious benefits to the free riders - All growers even those not complying should
benefit
8
Pesticide risk assessment matrix
- For the range of chemicals used by the growers
develop - Pesticide risk ranking
- Risk benefit ratios
- Risk criteria weighted according to risk to Ocean
Spray - Fresh fruit residue
- Processed fruit residue
- Government and science
- Environmental impacts
- Public perception
- Calculate a risk factor for each chemical
- Calculate a risk benefit ratio for each chemical
- See Exhibit 10
9
Case Questions
- How does concern about the environment affect the
economics of Ocean Sprays business?
10
Case Questions
- Evaluate the environmental management practices
of Ocean Spray. In particular, do you think that
Ocean Sprays managers should (a) try to assert
more control over the practices of the growers,
or (b) get more directly involved in the public
debate over reauthorizing the Clean Water Act?
11
Case Questions
- Are there opportunities or institutional
arrangements that will allow for the expansion of
cranberry bogs in wetlands? Should there be?
12
Case Questions
- Can Ocean Sprays environmental program be a
competitive advantage for the organization?
13
Case comparison of environmental risk management
strategy
- Where is Ocean Spray on the continuum from
avoidant to proactive regarding environmental
issues? - Compare to the Freeport and DuPonts
environmental risk management strategy - Consider the following dimensions
- Stakeholder concentration or dispersion
- Characteristics of the products
- Political marketplace
- Economic marketplace
- Environmental strategy
14
Lesson learned
- It is advantageous to stay ahead of
- the line of regulation
- reasonable environmental group concerns
- Strategy
- Stay ahead of the curve so concerns fly under the
radar
15
Lessons Learned
- A problem with one of the suppliers (growers) can
be perceived to be a problem with the entire crop - Perception is the key here because we are dealing
in a consumer market with human health risk - Can the environmental risk of the grower be
separated from that of Ocean Spray? - It does not matter if the grower is in the
cooperative - How does this supplier situation differ from
typical supplier situations?
16
Lessons Learned
- Economic and environmental risk is mitigated
through product diversification - Cranberries are a very seasonal product
- Product diversification spread sales throughout
the year - If product is highly seasonal and there is a
human health scare during that season the entire
year is negatively impacted
17
Epilogue
- http//www.entrepreneur.com/tradejournals/article/
168858116.html - The Cranberry Industry and Ocean Spray
Cooperative Lessons in Cooperative Governance - http//www.aae.wisc.edu/fsrg/publications/Monograp
hs/19cranberryjan06.pdf
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