‘Licence to Operate’ in the Halal Market: a matter of alignment

The Middle East and Southeast Asia are one of the leading consumer markets today for food, cosmetics and pharmaceuticals. All mayor brand owners want to serve these Muslim markets. However, Muslim markets have stringent requirements regarding halal, demanding not only halal compliance of ingredients and production, but increasingly the end-to-end supply chain and value chain. For doing business in Muslim markets, the corporate halal reputation is the most important strategic asset.

A corporate halal reputation is a collective representation of the firm’s past actions and halal performance, and the firm’s future ability to meet halal requirements. Halal reputation is undoubtedly valuable for corporations, but at the same time an intangible asset. Although intangible, the corporate halal reputation is important to measure and track its performance. Muslim society’s diminishing risk tolerance is related to declining trust in that Muslims are less prepared to tolerate risks (whether real or perceived). It can be argued that Muslims want a near zero-risk halal environment.

Companies serving Muslim markets need to earn their licence to operate. The key drivers for a licence to operate is the ability to anticipate halal market requirements, addressing them through a solid halal authenticity, trustworthy halal certification body (HCB), right messages by the company & supply chain partners, and positive messages by external stakeholders.

Halal authenticity is the halal character or DNA of a company. Halal authenticity is the most valuable asset for halal reputation, which is the prime focus with regards to halal reputation. The likelihood of companies targeted by whistle-blowers has increased significantly. The only way companies can truly protect themselves from halal reputation risks of being found guilty of non-compliance is by having a solid halal authenticity through an evident contribution to Islamic resources, Muslim obligations and Muslim lifestyle. Based on the ingredients used, the manufacturing process and organisation, a HCB certifies a plant and its product halal. There is a grand spectrum of HCBs, in total an estimated 500+, ranging from absolutely untrustworthy to highly trustworthy. Choosing the right HCB for a particular Muslim market served is therefore of utmost importance. Messages by the company and its supply chain partners are a third factor in the corporate halal reputation. Internal alignment within the organisation and supply chain is hereby essential for a good halal reputation. Messages by external stakeholders, the fourth factor, are a result of the level of connectivity with Muslim communities, current media coverage, and the company track record with halal issues. The halal market requirements are a critical denominator in the formula of the licence to operate in Muslim markets. There should be effective alignment between the halal market requirements and these four factors.

Internal and external alignment

Internal alignment within the own organisation and supply chain requires intelligence, information sharing, training, and monitoring. Intelligence is required regarding existing halal practices and halal awareness with its own organisation and with supply chain partners. Gaps are being mapped and analysed. Inform staff and supply chain partners about the corporate halal strategy, its intent (nyat), and implication for their operations. Training enables the company’s staff and supply chain partner’s staff in developing the right skills and ensuring consistent halal practices within the (end-to-end) supply chain. Monitoring is necessary to track the progress of alignment and adjust where needed. Halal audits are hereby not only important within the organisation but throughout the supply chain.

External alignment with the external stakeholders requires market intelligence, and a mix of strategies and tactics to achieve total stakeholder support. Emerging halal market requirements and in particular changes to the public opinion on addressing Islamic values by a brand owner and expected changes in halal standards are critical to be monitored. This intelligence can be complemented by the benchmarking of corporate halal reputation with competitors. Hence, systematic scanning of the halal market requirements are important for brand owners in order to identify gaps between the (emerging) market requirements and brand practices, and pro-actively addressing them in order to ensure sustainable high reputation of brands operating in Muslim markets. External alignment strategies and tactics amongst others involve informing the (Muslim) consumer, lobbying with halal certification bodies, advocacy activities with the media, take part in halal forums & conferences, participate in halal industry research & societies, and horizontal collaboration (with competitors) in the industry.

Conclusion

High profile halal crises in recent years with top brands show that the world is getting smaller, and that people are far more aware of how the world economy is interlinked. Companies need to deal with international expectations in a local context and local halal requirements in an international context. Muslim society’s diminishing risk tolerance is related to declining trust in that Muslims are less prepared to tolerate risks (whether real or perceived). The licence to operate in Muslim markets needs to be earned and is a function of halal authenticity, trustworthiness of HCB , messages by company & supply chain partners, messages by external stakeholders and halal market requirements. Halal authenticity, choice of HCB, halal management of company & supply chain, and management of external stakeholders need to be aligned with the halal market requirements. An imbalance with the halal market requirements affects the licence to operate in Muslim markets. A good halal reputation comes from living authentic Islamic values; making good decisions; meeting and exceeding halal standards; and demonstrating halal behaviour across the supply chain and value chain. Building a strong halal reputation and trust by the Muslim consumer of a brand is the result of an on-going, steady stream of consistent small efforts, not a series of one-off, gigantic pushes. Halal certified companies manufacturing and exporting to Muslim markets should be educated by HCBs on the importance of their corporate halal reputation and need for internal and external alignment.

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