Sustainable Seafood and Responsible Investment Seafood Production Presents a Major Challenge to Our Ability to Manage the Earth’S Resources Sustainably

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© Vladislav Gajic/Shutterstock.com Sustainable seafood and responsible investment Seafood production presents a major challenge to our ability to manage the earth’s resources sustainably. Fishing effort has often exceeded the ability of fish stocks to maintain themselves and the impact on non-target species (including potentially vulnerable species such as sharks, turtles, and marine mammals) can be severe. The results have often been stark; many fish stocks have declined just when our need for increased food production is greatest and the marine ecosystem has been significantly degraded. ©terekhov igor/Shutterstock.com ©terekhov

Fish farming – aquaculture – has grounds are now capable of producing “ Using renewable experienced massive growth in the only a fraction of previous catches, while resources wisely is the past two decades and now provides fsh farming is constantly threatened by key to maintaining a half the seafood consumed worldwide. disease epidemics because of insuffcient sustainable economy. This represents a very positive trend regulation and enforcement. The current environmental, for food production but will not take social, and governance pressure off wild stocks, because the Sustainability is central to the business practices within the growth in demand consistently exceeds seafood industry create the growth of supply. Aquaculture success of companies that produce, signiﬁcant challenges for can also have signifcant sustainability process, or retail seafood because of the commercial ﬁsh stocks. issues through the use of wild fsh to signifcant risks inherent in the supply Current rates of extraction make feed, the environmental impacts chain. Companies engaged in the seafood threaten both the future of farms, and the vulnerability of the sector have to manage risk factors, such as: stability of a multi-billion- industry to rampant disease outbreaks. dollar industry itself and, Risk of supply chain disruption – more importantly, the Governments play a vital role in regulating Wild fsheries can be overexploited, long-term food security fshing and fsh farming but the results causing a dramatic fall in annual of millions of people.” are highly variable. Some countries have harvests, while fsh farms can

STEVE WAYGOOD an excellent record in managing fshing; be ravaged by disease. Seafood Chief Responsible Investment Ofﬁcer at Aviva Investors for instance, New Zealand introduced a companies that process and sell Quota Management System (QMS) during marine products face signifcant the 1980s that allows scientists to set the risks in securing a reliable source total catch while allocating portions of that of raw material – in terms of both total to quota holders. The ownership of availability and price. quota has led to a more innovative and responsible approach by industry and New Risk to reputation – Companies Zealand is now considered a world leader with public-facing brands face a risk in sustainable marine management. to their reputations if they do not act to source from responsibly managed Unfortunately, few countries manage fsheries. Many high-profle campaign their fshing as well as New Zealand and groups specifcally work on issues many, particularly in the developing world, of corporate responsibility around lack the resources to effectively control seafood and will publicly identify fshing and fsh farming. Many fshing companies that fail to act responsibly.

1 Risks associated with production in developing countries (for instance, “ ASDA is committed to factors – Fish farming may involve Thailand) but can also happen in the long-term future the use of materials or techniques Europe. A failure to address such of seafood. How and that can lead to wider systemic abuses can lead to signifcant where we source are key problems. For instance, fsh farming reputational damage and even pieces of information for can involve the use of antibiotics to prosecution in some jurisdictions. all those interested in this important area. We control disease, but this may have continue to support the wider impacts through encouraging These risks are signifcant; however, open reporting of seafood resistance in pathogens. the companies that catch, farm, process, sourcing and welcome and retail seafood have substantial power the publication of the Risks associated with using illegal to change things for the better. There are Ocean Disclosure Project product – Illegal fshing, sometimes already many examples of enlightened this year.” called pirate fshing or “IUU” (illegal, corporations that have taken steps to CHRIS BROWN unreported, unregulated) fshing, is improve fshing and fsh farming. Sustainability Director at ASDA a major problem in seafood supply chains and is closely associated with Engagement by responsible investors can environmental damage and labor have an important effect in encouraging abuse. Companies that are found to companies to adopt progressive be using illegal product can face legal policies that reduce environmental and action and damage to reputation. human rights abuses and enhance the sustainability of fshing and fsh farming. Risk associated with human rights This briefng is intended to guide investors abuses – The seafood industry seeking to improve the sustainability contains supply chains where human performance of companies through rights abuses are well documented. asking the right questions and promoting These risks are particularly severe measures that will deliver real benefts.

What should seafood companies be doing?

The seafood supply chain has signifcant infuence over the behavior of producers and the agencies that regulate them. It is entirely possible for companies to avoid fsh that are illegally caught, support well-managed fsheries and fsh farms that are certifed to credible standards, support the responsible management of aquaculture resources across regions, and encourage fsheries that are trying to improve.

The most important frst step that a company can take towards responsible behavior is to formulate and adopt a responsible seafood policy. Such a policy does not entail avoiding poorly managed fsheries and confning procurement to “sustainable fsheries,” but involves a commitment to continuous improvement and transparency with ambitious targets in the future.

2 Wild ﬁsheries Farmed ﬁsh

The essential elements of an effective, For farmed ﬁsh, a responsible seafood responsible seafood policy for wild ﬁsh policy would consist of commitments to: are commitments to:

1. Assess all source fsheries for 1. Reward fsh farms that are performing environmental and social risk and well (for instance, certifed to a credible report on this process. standard like the Aquaculture Stewardship Council or Global 2. Achieve suffcient traceability within Aquaculture Alliance Best Aquaculture the supply chain that illegally caught Practices or GlobalGAP) through fsh cannot be sold and the adoption purchasing decisions and reporting of sanctions against suppliers convicted on the proportion of certifed seafood of dealing in illegal fsh. used in the business.

3. Reward fsheries that are performing 2. Reward fsh farms that are actively well (for instance, certifed to a credible improving through purchasing standard like the Marine Stewardship decisions and support for aquaculture Council) through purchasing decisions improvement projects (AIPs) that work and reporting on the proportion of to ensure responsible management certifed seafood used in the business. of fsh farms across a region. This commitment should also include 4. Reward fsheries that are actively reporting on the proportion of seafood improving through purchasing decisions that comes from fsh farms that are and support for fshery improvement engaged in improvement projects. projects (FIPs) and reporting on the proportion of seafood that comes 3. Assess the environmental and social from fsheries that are engaged in risks associated with fsheries that improvement projects. produce the fshmeal and fsh oil used in aquaculture feed and to 5. Transparency and the reporting of report on that process. source fsheries used in the business (for example, through supporting the 4. Transparency for fsh farms that supply

5. Encourage the holistic management of fsh farms across regions, and so reduce the risk of disease and wider environmental damage.

6. See antibiotic use effectively minimized in fsh farms that supply the business (in line with global best practice).

Investors can play a direct role in encouraging responsible corporate behavior by asking companies about each of the specifc elements of the sustainable seafood policy for either wild fsh or farmed fsh, or both. Shrimp farm in Thailand

3 Questions that investors can ask companies

The ability of investors to ask penetrating questions of companies represents a major source of leverage in pressing for more sustainable behaviors. Asking for substantial answers to simple questions will have a major impact on companies that deal in seafood and Sustainable Fisheries Partnership (SFP) is available to advise and support investors in conducting these conversations.

Organisations such as the UN-supported Principles for Responsible Investment also provide guidance to investors on addressing human rights risks in food supply chains – for example, the statement on Investor Expectations on Labour Practices can be used to incorporate additional questions in dialogues with relevant companies.

We have itemized below some simple questions that can be asked of companies within the seafood supply chain.

Questions for wild caught ﬁsh

1. Question: Does the company have system be in place and that details of its a policy regarding the sustainable implementation be made available along management of the seafood resources with information about sanctions against it uses in its business? suppliers that were detected supplying illegal products. Context: Most large companies do have such a policy and responsible 4. Question: What is the company policy investors should ask that such a policy towards producing/purchasing wild is formulated and published. SFP can seafood that is certifed sustainable? point to High Liner Foods, Wegmans, and Young’s Seafood as examples of Context: A responsible company should companies with strong policies. have a clear policy to buy seafood from a certifed sustainable source where such 2. Question: Has the company assessed an option is available. SFP recommends the current management status of all that only the Marine Stewardship Council the stocks of wild fsh that are part of be considered a credible sustainability their business? standard for wild fsh at this time.

“ Incorporating responsible Context: This should be a basic 5. Question: What is the company policy investment considerations requirement for any business. It would towards producing/purchasing seafood provides us with be diffcult for a company to claim to from fsheries engaged in fshery a global research and be competent if it failed to understand improvement projects? analysis framework. the security-of-supply issues affecting This strengthens our its raw materials. There are numerous Context: A responsible company should investment management public resources available to complete actively support fsheries that engage in capabilities, as does this task (for instance, FishSource), and fshery improvement projects through engagement with companies can use NGO partners or preferential purchasing or other means companies with exposure to seafood supply chains. consultants to help them, if necessary. of support. Aviva Investors is supporting SFP in helping 3. Question: Does the company have 6. Question: What is the company policy to increase transparency traceability systems in place that ensure regarding the disclosure of source in corporate performance the avoidance of illegally caught fsh? fsheries that produce raw material around the sustainable What sanctions have been adopted when for the business? sourcing of seafood and illegal raw material has been detected? to provide guidance to Context: Any responsible company responsible investors.” Context: Avoiding illegally caught should be willing to disclose the identity ABIGAIL HERRON product entering a company should of source fsheries as a minimum Head of Responsible Investment Engagement be a minimum requirement for element of corporate reporting. Several at Aviva Investors responsible business. Responsible companies already report this data via investors should ask that a traceability the Ocean Disclosure Project.

4 Questions for farmed ﬁsh

1. Question: What is the company policy 3. Question: Does the company have “ There is a strong link towards producing/purchasing farmed a policy to assess the environmental between the performance seafood that is certifed as responsible? and social risks of the fsheries used of a company and the to produce fshmeal and fsh oil for sustainable management Context: SFP recommends that the aquaculture feed? of the resource that Aquaculture Stewardship Council, underpins that business. Global Aquaculture Alliance Best Context: The management of fsheries Working to achieve sustainable sourcing is Aquaculture Practices, and GlobalGAP used to provide fshmeal and fsh oil an essential activity for standards be accepted as credible for feed is a major ethical issue for the any company that uses indicators of responsible practice. seafood supply chain. A responsible marine resources and There are no credible aquaculture company should always have a clear an important indicator certifcations currently available that view of the fsheries that supply feed of responsible behavior. claim to certify “sustainable” farmed components and a good understanding Sustainable Fisheries fsh, because the focus is primarily on of the risks associated with those Partnership is actively individual farms and not the cumulative fsheries. supporting transparency impacts of many farms in a region. in the seafood industry 4. Question: What is the company policy through development 2. Question: What is the company policy towards transparency and reporting of initiatives like the Ocean Disclosure Project towards producing/purchasing seafood around aquaculture operations? and through helping from fsh farms engaged in aquaculture companies communicate improvement projects? Context: A responsible aquaculture their sourcing policies.” company should report regularly JIM CANNON Context: A responsible company should on signifcant issues around farm CEO, Sustainable Fisheries actively support fsh farms that engage management (such as disease and Partnership in aquaculture improvement projects parasites, chemical and antibiotic use, through preferential purchasing or other negative interactions with local wildlife, means of support. polluting emissions to the environment, etc.). A processor and retailer of farmed seafood should have traceability across the supply chain and be willing to report on the origins of farmed seafood.

Conclusion

Positive engagement by responsible investors can steer companies towards more sustainable strategies that both improve business performance and deliver environmental and social beneﬁts. However, investors need to be able to ask the right questions of companies and press them for substantial answers. This can seem a daunting task without some technical support. SFP is available to provide guidance to investors about the right questions to ask and the common indicators for responsible behavior.

For further information, contact: Blake Lee-Harwood at [email protected]

DISCLAIMER: SFP would like to thank Aviva Investors for supporting the preparation and production of this briefng. The content of the report is the responsibility of SFP and may not refect the opinions of the PRI or other organizations referenced in the report.

5 Case Studies Why investors in seafood businesses need to consider sustainability issues

PACIFIC ANDES RESOURCES CHILEAN SALMON INDUSTRY DEVELOPMENT (PARD) Rapid, unchecked expansion and a lack of disease Declines in Peruvian anchovy stocks led to a control measures proved disastrous for the signifcant reduction in the supply of raw material Chilean farmed salmon industry. The fsh disease for Pacifc Andes’ fshmeal operations. Pacifc Infectious Salmon Anemia (ISA) spread quickly Andes suffered substantial losses, with one report across the Chilean industry, in part due to large from the company indicating a loss of profts concentrations of salmon pens facilitating the totaling nearly 90 percent in Q3 2015 alone. In transfer of disease. First gaining public attention in its disclosure, the company indicated that the June 2007, the ISA crisis has cost farmers billions reduced availability of anchovy was a major factor of US dollars in lost revenue due to infected in the losses – the company simply did not have stocks. New farming practices and legislation the fsh needed for processing. The decline in have been introduced, but there are still disease anchovy stocks was partly due to environmental concerns within the industry. The Chilean salmon changes, but Pacifc Andes would have been better industry would be signifcantly more proftable prepared if it had pressed for more transparent today if it had adopted a comprehensive “zone management of the fshery. management” approach at the start and minimized disease risk through effective planning and coordinated farm management.

THAI SEAFOOD INDUSTRY CHINA TUNA INDUSTRY GROUP

The Thai seafood industry has been rocked in China Tuna Industry Group shelved its plans for recent years by the exposure of extreme violations a $100-million initial public offering (IPO) after of basic human rights on board Thai fshing Greenpeace’s Hong Kong branch delivered a letter vessels. The reputation of the Thai industry has of complaint to the Hong Kong Stock Exchange been severely damaged and consumer-facing accusing the company of underestimating its brands in the US and Europe that buy Thai seafood exposure to environmental and sustainability risks have had to work hard to retain the confdence of in its draft prospective to investors. There were customers that their products are not associated concerns that tuna quotas had been breached. with slavery. It is not possible to assess the overall fnancial damage to the supply chain at this stage, but it is clear that both businesses and consumers will continue to be wary of seafood products from Thailand for some time to come. The Thai seafood industry, and its business customers, would have avoided a great deal of human suffering and signifcantly increased the value of the industry if it had adopted labor practices in line with international norms.

6 FURTHER INFORMATION www.sustainablefsh.org

For additional information please contact: Blake Lee-Harwood [email protected]