Sustainability the Increasing Role of Accountability in the Omega-3 Industry

A SPECIAL ALL-DIGITAL ISSUE

VOLUME 2 ISSUE 4 October 2013

Sustainability The Increasing Role of Accountability in the Omega-3 Industry

• Sustainable Resources • Certifiers Round-Up • Peruvian Anchovy Fishery CONTENTS A SPECIAL ALL-DIGITAL ISSUE VOLUME 2 ISSUE 4 October 2013

Features

4 Viewpoint

5 Sustainable Resources for a Thriving Segment by Celeste Sepessy 5 When working with any food or dietary supplement ingredient—let alone the unique considerations of marine resources—safety, quality and efficacy must be top of mind. Many omega-3 professionals are well-acquainted with these intricacies, and the importance of sound supply-chain management, sourcing and certification.

12 Certifiers Round-Up 12 As consumers increasingly gravitate toward sustainability as a guiding force in their purchases, a certification scheme can be of great benefit to an omega-3 provider. Explore the efforts of five organizations in this overview: Friend of the Sea, Global Aquaculture Alliance, GLOBALG.A.P., Marine Stewardship Council (MSC) and Naturland e.V.

19 The Peruvian Anchovy Fishery 19 by Adam Ismail Nearly 80 percent of the omega-3 oils used in supplements, pharmaceuticals and fortified food comes from a single fishery. And although the Peruvian anchovy fishery is recovering from widely-publicized sustainability concerns, many industry members are hopeful it will overcome local politics to focus on obtaining science-based third-party certification.

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SupplySide Omega-3 Insights • October 2013 2 omega3insights.com When choosing an omega-3, green means go.

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n boardrooms across the country, companies are debating the topic of sustainability. Where are ingredients

Viewpoint Isourced and from whom? How are the ingredients processed and what is the impact on the environment, the workers and the company’s operations? While coffee and cocoa seem to gain a fair amount of the sustainability spotlight, perhaps no market has been as scrutinized as the marine supply chain. Chefs and retailers avoid particular types of fish, and mainstream reporters discuss concerns about aquaculture and ocean fishing practices. The omega-3 market has certainly seen its share of pointed discussion, with the case of major retailers opting not to carry krill products as the highest profile situation—even as their concerns seem based more on hype than reality. Sustainability is a topic that we’ve explored previously through SupplySide Omega-3 Insights, but with so many aspects to address, it’s something that will remain on our radar as well. This Digital Issue includes not only an overview of the state of sustainability in the market, but some great insights on what certifying organizations are doing to help suppliers and manufacturers implement more sustainable operating practices. We’re also preparing for SupplySide West, set for Nov. 12 to 16 in Las Vegas (supplysideshow.com). The Expo Hall will feature a number of suppliers of unique omega-3 ingredients, many with a great sustainability story to tell. And if you’re looking for more myths and realities around omega-3s, don’t miss Ian Newton, CERES Consulting, at the post-conference workshop on Nov. 16, “Exploring Future Opportunities in the Omega-3 Market,” developed in conjunction with GOED. He’ll be joined by GOED’s Harry Rice with a regulatory update and Bill Harris, tackling the latest cutting-edge research in the category. We’ll hope to see you there.

Best regards,

Heather Granato Vice President, Content VIRGO Health & Nutrition Network (480) 990-1101 ext. 1305 [email protected]

@heathergranato

SupplySide Omega-3 Insights • October 2013 4 omega3insights.com Sustainable Resources for a Thriving Segment In the omega-3 industry, the future depends on today by Celeste Sepessy

he Food and Agriculture Organization (FAO), a U.N. agency, reports more than half (53 percent) of the world’s fisheries are fully exploited, Twhile an additional 32 percent are overexploited, depleted or recovering from depletion. Though omega-3 applications only account for 4 percent of marine-harvested fish, ingredient suppliers are dedicated to implementing sustainable sourcing practices—and to communicating these efforts with customers. “The most important omega-3 ingredients on the market today rely on marine sources, so sustainability should be a prerequisite for any company operating a business in this space,” said Becky Wright, communications and marketing manager, Aker BioMarine Antarctic US. “At the same time, many consumers are demanding more and World Fisheries better standards in the development of the Fully exploited 53% products they buy, with Overexploited, Depleted or sustainability being one Recovering from Depletion 32% of the top factors in purchasing decisions.”

Fluid Supply Chain Management To ensure sustainable ingredients, omega-3 producers are starting from the bottom up. Vertical integration gives firms complete control, while providing consumers with complete confidence in the end-product’s quality. “The main sustainability-related challenge for companies getting into the omega-3 business is knowing exactly the origin of the raw material that they would use in their processing facility,” explained Claurio Aracena, commercial director, Golden Omega. “The main way to overcome it is to be integrated into in tHiS iSSUe the raw material.” Viewpoint p. 4 Several companies are taking this sea-to-shelf Certifiers Round-Up p. 12 approach. With a processing plant in Svolvaer, Norway, Table of Contents p. 2

SupplySide Omega-3 Insights • October 2013 5 omega3insights.com Nordic Naturals utilizes a vertically integrated supply chain that affords the company total reliability of the finished product. And, according to Keri Marshall, Nordic Naturals’ chief medical officer, vertical integration should be a requirement for manufacturers seeking marine ingredients. “If they cannot be hands-on in managing their own supply chain, they need to be sure their supplier is,” she said. Omega Protein’s fish oils also boast the benefits of a 100-percent inclusive supply chain. Ben Landry, director of public affairs, explained: “Vertical integration allows us to control every step of the production process—from company-owned fishing vessels to our state-of-the-art oil refinery—ensuring product integrity, consistent quality and complete traceability.” In the omega-3 category, sustainability and traceability go hand in hand. Consumers care about where their products come from, and marine ingredient producers are responding to the demand by providing traceability assurance. “Aker BioMarine can provide its customers with the exact GPS location where the krill they In the omega-3 purchased was harvested in Antarctica,” Wright said. category, sustainability “Our customers connect with their customers, by being completely transparent about where their krill comes and traceability go from.” This traceability helps consumers engage with the hand in hand. brand in a transparent way.

Sustainably Sound Sourcing Many omega-3 suppliers also work closely with regulators to ensure a vibrant and healthy fish stock. “Our fishing efforts are monitored in the Atlantic and Gulf coast by regional, state and federal management agencies that closely oversee and regulate our fishing efforts, as well as overall sustainability of the menhaden population,” Landry said. “These government agencies have the ability to establish quotas, close environmentally sensitive fishing areas and limit the fishing season.” From Antarctica to Chile, companies abroad follow the appropriate laws created with sustainable marine life in mind. “The fishing of the resources—mainly anchovy—used in our oil complies in tHiS iSSUe with the most stringent regulations and controls defined by Viewpoint p. 4 the Chilean fishing law,” Aracena stated. Sustainability doesn’t end with being mindful of the Certifiers Round-Up p. 12 catch’s origin—it also involves the catch itself. Many Table of Contents p. 2

SupplySide Omega-3 Insights • October 2013 6 omega3insights.com Vetting an Omega-3 Supplier Dietary supplement firms must examine crucial considerations when entering the omega-3 market. Becky Wright, communications manager for Aker BioMarine, recommends manufacturers ask potential suppliers the following questions to compete in the sustainability space.

• What sustainability practices/standards do you have in place? • Are you third-party certified? • Which environmental experts do you work with? • How are you innovating to keep pace or go above and beyond sustainability standards? • How are you limiting bycatch and making sure the biomass you get your omega-3s from is healthy? • Is your source of omega-3s 100-percent traceable? In other words, can you tell me with absolute certainty what happens to your marine ingredients from sea to shelf?

omega-3 suppliers are continually working to develop new technologies for safer yields. One such innovation, Aker’s Eco-Harvesting, nearly eliminates bycatch during the krill harvesting process. The fishing system keeps the net under water, filtering the krill through a flexible hose flowing with water. As a result, the vessel can process fresh, live krill—rather than raw material degrading in a holding tank. “Also, because it is a gentle process, the krill are further protected from degradation, resulting in a better nutritional profile,” Wright said. Nordic Naturals also emphasizes responsible fishing practices, being careful to protect against unintended bycatch. The company uses purse seine nets, sorting grids and large meshes in line and net fishing methods to protect ocean habitats. Marshall said, “This prevents seafloor and ecosystem damage that is caused by methods such as bottom trawling and dredging.”

Three Steps to Viability As with any dietary supplement ingredient, manufacturers must do their homework when entering the omega-3 market, rather than ride the wave of segment success. Wael Massrieh, VP of scientific affairs, Neptune Technologies & Bioressources, suggested companies study the big three concerns—safety, in tHiS iSSUe quality and efficacy—with specific marine ingredient Viewpoint p. 4 considerations in mind. Certifiers Round-Up p. 12 Manufacturers have two primary concerns in Table of Contents p. 2 ingredient safety: organic contaminants and heavy

SupplySide Omega-3 Insights • October 2013 7 omega3insights.com metal toxins. These industrial toxins enter the ecosystem but do not break down easily; consequently, the fat-soluble compounds can accumulate in the fatty tissues of fish and other aquatic species. “Manufacturers of EFA [essential fatty acid] supplements also have to deal with the inconsistent quality of raw material,” Landry said. The answer: companies should scrutinize stability and degradation indicators, Massrieh recommended, noting suppliers should have stringent specifications on oxidation parameters. “One criterion that seems to be overlooked is that of efficacy, not to say that it is not important or demanded,” he added. “However, it seems that a lot of distributors seem to be lenient in projecting results from other products onto each other.”

Making the Sustainability Claim Walk through any natural foods store, and thousands of label claims stare out from shelves, from processed pastries to multivitamins. Amidst “Promotes heart health” and “Non-GMO,” claims of “Sustainably sourced” are becoming a natural products mainstay.

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Qualitas’ flagship product is Almega PL™, a vegetarian, EPA-rich, polar lipid-structured omega-3 oil. Sourced from a researched strain of microalgae selected for its high level of EPA omega-3 and unique polar-lipid structure, Almega PL contains omega-3 fatty acids conjugated with phospholipids and glycolipids that provide superior absorption and digestibility. Almega PL’s special molecular structure has been clinically shown on a gram-per-gram basis to offer better omega-3 bioavailability than krill oil.

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SupplySide Omega-3 Insights • October 2013 8 omega3insights.com Certifications from third-party organizations such as the Marine Stewardship Council (MSC) or Friend of the Sea (FOS) are necessary to stay competitive in the omega-3 market. For an overview of available certifications, see the “Certifiers Round-Up” on page 12. “The eco-label provides an effective way to communicate environmental performance to their customers,” Massrieh said, adding that Neptune’s flagship product NKO® is FOS-certified. But companies can’t just slap an eco-friendly certification on their products and hope for skyrocketing sales. So how can companies actively convey the message to customers and consumers beyond a simple sustainability label claim? Companies must weave sustainability efforts throughout their entire marketing strategy—from social media to events— ensuring both customers and consumers receive easy-to-digest information on rules and efforts. Marine ingredient suppliers are tasked with communicating the complex steps they take to manage a sustainable business. Aker recently launched a new sustainability website that takes a back-to-the-basics marketing approach: using simpler forms of communication such as infographics to deliver key facts. In some cases, marketing’s goal is simply to remove the stigma often associated with marine-sourced omega-3s, Wright explained. “The reality is the krill fishery’s approach to sustainability has always been pre-emptive,” she said, “so the cause for concern has more to do with perception than anything else.” But whether a manufacturer is trying to spread the word about a new certification or dispel myths, it should actively reach out with messaging to all customer levels. Nordic Naturals partners with educators and advisors that present seminars and webinars. Marshall said, “In fact, at Natural Products Expo West this year, we’re hosting Dr. Ski Chilton, Adam Ismail and Anthony Bimbo—three top experts in omega-3s and fishery management—for an interactive panel discussion on sustainability as it relates to our industry.” It’s up to companies to educate consumers, retailers and professional partners about the importance of sustainability—after all, there’s a limited amount of fish in the sea. in tHiS iSSUe “If we are to continue to enjoy the considerable Viewpoint p. 4 health benefits of this essential nutrient, we must act responsibly and be unwavering in our commitment to Certifiers Round-Up p. 12 sustainable practices,” Marshall said. q Table of Contents p. 2

SupplySide Omega-3 Insights • October 2013 9 omega3insights.com Omega-3s: A Snapshot of Aquatic Sustainability

Five fisheries make up the bulk of the current omega-3 supply, but the future will look very different as market dynamics shift and the supply situation evolves accordingly. Learn more about the segment leaders and emerging supply sources in the free Omega-3 Insights Report, “Omega-3s: A Snapshot of Aquatic Sustainability,” by Ellen Schutt, communications director for the Global Organization for EPA and DHA Omega-3s (GOED).

Anchovy As seen in the chart, anchovy oil is by far the largest raw material source for omega-3s, supplying almost 80 percent of the oil used. The bulk of the anchovy business is sourced from a fishery in Peru, although there are smaller fisheries in Chile and Morocco as well. The Peruvian anchovy fishery is unique in that the largest fishing region is completely within Peruvian borders, so the government is the sole body responsible for monitoring and regulation. For a deeper dive on sustainability efforts in this region, see “The Peruvian Anchovy Fishery” on page 19. Percent of Omega-3 Market Cod The Arctic cod fishery is an excellent example of a recovery in progress. In Cod prior years, a variety of economic and technological factors, coupled with oversight 6.8% challenges, caused an overfishing situation. 5.6% Tuna As recovery efforts continue, reports indicate 3.8% the area’s biomass is increasing. It is Anchovy Salmon important to note that the Artic cod fishery is 3.4% 79.1% Algae part of the Atlantic cod fishery, which still has Krill 1.1% sustainability issues. Other 0.2% Tuna Tuna is one of the most challenging species to analyze because the tuna used for tuna oils comes from several different species harvested in a variety of regions. GOED estimates more than 50 percent comes from skipjack tuna, followed by 30 percent from yellow fin, with albacore and big eye contributing 5 percent to 10 percent each. Regions involved include American Samoa, Thailand, Seychelles, Mauritius, Japan and Vietnam. For omega-3s, the good news is for the most part, tuna canneries, from which tuna oil is sourced, are big corporations that have incentives for their brands to be sustainable.

SupplySide Omega-3 Insights • October 2013 10 omega3insights.com Salmon The primary harvest area for salmon oil is in Alaskan waters, which is a very well-regulated and monitored fishery. Because the fishery falls under the jurisdiction of the Alaska Department of Fish and Game, the infrastructure and recordkeeping is extremely detailed and goes back to 1959 when Alaska gained its statehood. For omega-3s, the primary source of raw material is pink salmon, which GOED estimates supplies about 80 percent of the salmon oil used today. Chum salmon supplies another 10 percent and sockeye supplies 10 percent.

Krill One of the fastest-growing sources of omega-3 is krill, which is harvested exclusively in one region off the coast of Antarctica. The fishery is strictly regulated by the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR), which tracks the biomass of the region and sets fishing quotas. The krill sustainable harvest quota is 9.3 percent of the total determined biomass, but CCAMLR actually mandates a lower precautionary quota that is only 1 percent of the biomass number. In 2011, the actual catch was about one-third of this 1 percent, so it’s easy to see that the fishery is well- managed and the catch is far below any trigger levels for overfishing.

SupplySide Omega-3 Insights • October 2013 11 omega3insights.com Certifiers Round-Up Organizations Providing Fish and Aquaculture Sustainability Information Schemes

As consumers increasingly gravitate toward sustainability as a guiding force in their purchases, a certification process can be of great benefit to an omega-3 provider. These schemes assess various sustainability aspects of aquaculture operations and/or fisheries, and may result in an ecolabel that can be used in marketing. Typically, participants pay a third-party certifier for these independent reviews, which use a standard set of criteria for measurement.

Friend of the Sea friendofthesea.org Friend of the Sea (FOS) offers international third-party certification of products from sustainable fisheries and aquaculture. It covers 53 countries globally on all continents: Argentina, Australia, Austria, Belgium, Brazil, Cabo Verde, Canada, Chile, China, Colombia, Costa Rica, Cyprus, Denmark, Ecuador, Estonia, Finland, France, Germany, Ghana, Greece, Guatemala, Iceland, India, Indonesia, Italy, La Reunion, Madagascar, Malaysia, Maldives, Mauritius, Mexico, Morocco, Netherlands, New Zealand, Nigeria, Norway, Oman, Papua New Guinea, Peru, Philippines, Portugal, Senegal, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey, United Kingdom, United States and Vietnam. As far as omega-3-related producers, 16 countries from all continents are represented: Australia, Chile, China, Colombia, Denmark, Finland, France, Germany, Morocco, Norway, Peru, Philippines, Sweden, Switzerland, United Kingdom and United States. As far as omega-3 production is concerned, FOS certifies fisheries (Austral Group, China Fisheries Group, Copeinca, Omega Proteins), manufacturers (EPAX, Naturmega, Sovapec Maromega) and distributors of consumer products. The organization also audits private in tHiS iSSUe labels of retail chains for products other than omega-3s. Viewpoint p. 4 In terms of differentiating factors, FOS is: • a nonprofit association with the sole scope of marine The Peruvian Anchovy Fishery p. 19 habitat conservation Table of Contents p. 2

SupplySide Omega-3 Insights • October 2013 12 omega3insights.com • completely independent from the seafood, fishery and aquaculture industries • potentially able to certify products from both fisheries and aquaculture • the only seafood certification program recognized by the European Union (UE) national accreditation bodies FOS has audited and certified products from some of the major omega-3 supplement producers, from CFG and BASF to Healthspan and Polaris. More than 350 companies have relied on FOS for sustainability certification.

Global Aquaculture Alliance gaalliance.org Through the development of its third-party certification program, the Global Aquaculture Alliance (GAA) is carrying out its mission of responsible aquaculture every day. Encompassing environmental and social responsibility, food safety, animal welfare and traceability, the Best Aquaculture Practices (BAP) program is a comprehensive certification system for aquaculture facilities. The BAP standards are

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SupplySide Omega-3 Insights • October 2013 13 omega3insights.com drafted by species-specific technical committees, reviewed by an independent standards oversight committee (whose members equally represent industry, academia and the environmental community) and published for public The combined comment before implementation. Currently, more than 600 annual output farms, processing plants, hatcheries and feed mills are from BAP-certified BAP certified. Additionally, the combined annual output processing plants from BAP-certified processing plants exceeds 1 million exceeds metric tons. The BAP-certified facilities are located 1 million metric tons throughout the world, with many found in the world’s key aquaculture production regions, particularly Asia and Latin America. The facilities are audited annually by independent ISO-accredited certification bodies, and the BAP management team regularly conducts auditor training courses in countries such as India, Vietnam and Canada to ensure auditors are up to speed with the latest additions to the BAP standards, which are updated and improved consistently. Also, the BAP seafood processing plant standards are benchmarked against the latest Global Food Safety Initiative (GFSI) food-safety requirements. GFSI provides an internationally recognized benchmark against which any food-assurance standards can be measured. In addition to managing and ensuring the integrity of its third-party certification program, GAA has a market development team that works with retailers, foodservice operators and suppliers to promote the BAP program and responsible aquaculture in the marketplace. The team is scattered throughout the world, with representation in Europe, North America and Australasia.

GLOBALG.A.P. globalgap.org T he GLOBALG.A.P. Aquaculture Standard covers the entire production chain, from broodstock, seedlings and feed suppliers to farming, harvesting, processing and post-harvest handling operations. It serves as a practical manual for any aquaculture producer, ensuring food safety, minimal environmental impact and compliance with

animal welfare and worker health and safety requirements. in tHiS iSSUe Version 4, released in March 2011, covers a much greater Viewpoint p. 4 diversity of fish, crustaceans and mollusks and extends The Peruvian Anchovy Fishery p. 19 to all hatchery-based farmed species, as well as the passive collection of seedlings in the planktonic phase. Table of Contents p. 2

SupplySide Omega-3 Insights • October 2013 14 omega3insights.com Its technical committee on aquaculture incorporates members from both trade and production. Feedback was obtained from 500 stakeholders worldwide, representing 116 organizations with direct industry involvement such as suppliers, farmers, producer organizations, retailers, scheme owners and the foodservice sector. These schemes assess Contributors with administrative and technical interests included certification bodies, research centers, various sustainability universities, NGOs, national technical working aspects of aquaculture groups, consultants, the animal health industry and metrology institutes. Throughout all drafts up to the operations and/or final version, the committee used the FAO Technical fisheries, and may result Guidelines on Aquaculture Certification as a reference. The resulting version provides a more compact, in an ecolabel that can be comprehensible standard for users, with new criteria used in marketing. resulting in a stricter level of compliance. In addition, all GLOBALG.A.P. certified products automatically undergo an Environmental Impact Assessment (EIA) as an integral part of the process. This, as well as meeting the demands of their specific standard, ensures that aquaculture farms show special consideration for animal welfare and the effects of farming practices on their immediate surroundings. GLOBALG.A.P. operates in more than 100 countries, working with certification bodies accredited according to ISO 65. Globally, producers can choose from a wide range of experts to carry out their annual independent farm audits. More than 20 countries have implemented the GLOBALG.A.P. Aquaculture Standard, with certifications in: Belgium, Chile, China, Colombia, Denmark, Ecuador, Faroe Islands, France, Germany, Indonesia, Ireland, Italy, Malaysia, Netherlands, Norway, Poland, Spain, Suriname, Thailand, Turkey, United Kingdom and Vietnam.

Marine Stewardship Council (MSC) msc.org Marine Stewardship Council (MSC) is an ecolabel and certification program for wild-caught seafood. The evaluation process is conducted by an independent certifier with full stakeholder engagement. When buyers and consumers see the blue MSC ecolabel, they in tHiS iSSUe can be sure that product is traceable back to a Viewpoint p. 4 fishery certified to MSC’s rigorous environmental standard. It ensures the fish stocks are healthy, The Peruvian Anchovy Fishery p. 19 the impact of fishing on the marine ecosystem is Table of Contents p. 2 minimal, and the fishery is well-managed.

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To learn more about Romega™, visit with Scoular at SupplySide West, Nov 14-15, Booth 27040 www.scoular.com/food | 612-851-3737 | [email protected] The MSC program is open to fisheries and supply chain companies worldwide. MSC has offices in Beijing, Berlin, Cape Town, Copenhagen, Glasgow, The Hague, Halifax, London, Madrid, Moscow, Paris, Reykjavik, Santiago, São Paulo, Seattle, Singapore, Stockholm, Sydney and Tokyo to engage and assist fisheries and commercial partners around the world. The MSC program certifies the entire seafood supply chain. MSC’s fishery certification verifies a fishery’s sustainability and MSC’s Chain of Custody certification is for all other companies in the supply chain from processors to consumer product companies to retailers and restaurants. MSC Chain of Custody certification ensures seafood with the MSC ecolabel is traceable back to an MSC certified fishery. MSC is the only seafood certification program for wild-capture fisheries consistent with the United Nations Food and Agriculture Organization’s

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The Scoular Company supplies natural, sustainable, nutrient-dense ingredients for leading health supplement formulators and manufacturers. We bring the highest quality non-GMO, organic, traceable, and cGMP certified Omega-3s, proteins, and botanicals to the nutritional community. Our current portfolio includes: Marine Oils: crude and specialty oils including OU Kosher, Salmon, High DHA, and High TG Concentrates Natural-source vitamin E: non-GMO IP sterols and tocopherols Proteins: non-GMO IP and organic including Pea, Rice, Soy, and Wheat Botanicals: extracts, powders, and colors from fruits, vegetables, and algae including Cranberry, Acerola, Macqui, and Bilberry Romega™: a DHA-phospholipid-rich oil derived from the golden roe of Norwegian herring Naticol®: a natural, pure, and concentrated source of Type I collagen peptides, high in glycine, proline, hydroxyproline, and arginine Appl’in™: a polyphenol-rich extract from apples which naturally reduces glycemic response post meals and snacks Cocovanol™: a non-GM, whole cell cocoa powder rich in polyphenols and flavanols, delivering a high ORAC value (>1.5 M/100g) without caffeine The Scoular Company has a long history as a significant player in the omega-3 sector. Ranked 65th on the Forbes 2012 list of largest privately-held US corporations, with annual sales exceeding $6 Billion, Scoular works transparently with our many manufacturing partners around the globe. We minimize whole supply-chain risk for our customers in the growing segments of functional foods and dietary supplement markets. We ensure highest quality, consistent supply, and novel origins. We drive innovation in nutrition through ingredients. scoular.com/food 612-851-3737

SupplySide Omega-3 Insights • October 2013 17 omega3insights.com Guidelines for the Ecolabeling of Fish and Fishery Products from Marine Capture Fisheries and the ISEAL Code of Good Practice for Setting Social and Environmental Standards. MSC is a true third-party program that provides complete independence between the developer of the standard and the assessment of a fishery against that standard. MSC is a standard with a comprehensive system of scoring a fishery, not a checklist that verifies management structure and policy are in place without evaluating in detail how well the structure and policy are performing against standardized norms. The MSC program is completely open and transparent.

Naturland e.V. naturland.de Naturland’s third-party certification scheme is for manufacturers of fish meal and fish oil—only for products used in feeds, not for use as omega-3 in dietary supplements for human nutrition. The manufacturers are inspected annually by independent inspection bodies, and Naturland evaluates the inspection reports. Fish meal and fish oil have to fulfill the following general requirements: All feed originating from wild marine fauna has to be harvested in compliance with internationally established sustainability standards (e. g. FAO Code of Conduct, ICES). Wherever possible, this should be confirmed by producing proof of independent certification. Principally, fish meal/fish oil shall originate from the same geographical region as the aquaculture operation in which it is located. Permissible sources of fish meal/fish oil include: • fisheries certified independently as sustainable, taking into account impact on target species as well as bycatch species and the ecosystem • trimmings of fish processed for human consumption (not from conventional aquaculture)

• bycatches of captures for human consumption in tHiS iSSUe Naturland has certified six manufacturing facilities Viewpoint p. 4 of fish meal and fish oil in Germany, Ireland, The Peruvian Anchovy Fishery p. 19 Denmark, Norway and Ecuador. q Table of Contents p. 2 Editor’s Note: Information was provided by the certifying organizations.

SupplySide Omega-3 Insights • October 2013 18 omega3insights.com The Peruvian Anchovy Fishery A Q&A with the Marine Stewardship Council by Adam Ismail

early 80 percent of the omega-3 oils used in foods and supplements come from a single fishery, the Peruvian anchovy Nfishery. The sustainability status of any fishery generates controversy, which is why science-based approaches to managing fisheries are important. Many certification programs are designed to help bring science into the process while simultaneously building consumer trust in fishery products. The Marine Stewardship Council’s (MSC) program is probably the most widely-utilized scheme in the world. The Peruvian anchovy fishery has been contemplating pursuing MSC certification for a number of years, even going through a pre-assessment analysis a few years ago to identify the issues that could be barriers to obtaining certification. However, since the pre-assessment was completed, progress toward MSC certification has been slow due to conflicts between the populist government, the industrial fishery and artisan fishermen. Adam Ismail from the Global Organization for EPA and DHA (GOED) sat down with Rodrigo Polanco from MSC’s staff and Kees Lankester from the MSC board of directors to learn the latest. Ismail: Is the current biomass level of anchoveta healthy in Peru, and if so, why is there a need to pursue certification? MSC: The status of the anchoveta stock is subject to strong fluctuations, with some years of low abundance in tHiS iSSUe linked to the El Niño phenomenon. This is well Sustainable Resources p. 5 acknowledged by the scientific and management authorities in Peru and taken into account when setting Certifiers Round-Up p. 12 catch limits. Table of Contents p. 2

SupplySide Omega-3 Insights • October 2013 19 omega3insights.com Rather than determining how to manage a fishery, MSC provides an opportunity to get a confirmation by a third-party auditor of the sustainability level of a fishery. This provides credibility to the performance of the fishery and the management authorities, which in turn, can add stability and confidence in the market. In addition to the status of the stock, MSC certification also provides credibility that the fishery has limited effects on the ecosystem, e.g., on bycatch of endangered species or seafloor disturbance. With MSC certification, the fishery must demonstrate Rather than determining to a third party that the fishery and its management are how to manage a having effects in the water. Therefore, the industry doesn’t pat itself on the back, but credibility is achieved fishery, MSC provides with confirmation from a third party. an opportunity to get a Ismail: What benefits of certification would omega-3 supplement companies receive from confirmation by a third-party Peruvian certification? auditor of the sustainability MSC: Certification has been shown to provide level of a fishery. several benefits. While one or more of these could also apply to omega-3 supplement companies with certified Peruvian anchoveta, eventually it is a business judgement to be made by the company itself, to which extent the potential benefits could apply. Potential benefits could inter alia be: a. Low risk of the fishing industry not managing the availability of the resource well, giving more long-term assurance; b. Low probability of illegal practices in the fishery; c. Potential market preference [for sustainably-certified product]; d. Possible price premium; e. Access to markets that demand or require MSC-certification (these markets are currently growing); f. More assurance of future supplies to aquaculture companies that are certified to the Aquaculture Stewardship Council, which requires that within five years, certified aquaculture seafood must have MSC-certified fishfeed; g. Contribution to the responsible business image of a company; companies can advertise and campaign about their accomplishments.

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#SSWExpo /SupplySideShow Ismail: Sustainability certification is a process of ongoing improvement, so what are the most important areas where you see a need for improvement in the Peruvian fishery? MSC: To date, almost every MSC certification has been accompanied by post-certification conditions. The implied path of progress usually happens in two phases: Before the certification and after the certification. Every fishery will prepare as much as it can to pass the test in the full assessment. History shows that in general, a fishery will do what is needed. The sustainability of the Once the certificate is earned, the post-certification conditions demand continued progress in the five anchoveta fishery is in the years to come; while at the same time, the fishery has common interest of all involved the market advantages of the label. The most recent pre-evaluation of the anchoveta parties and the Peruvian society was performed in June 2013. That report shows in at large, whether industrial what areas the fishery is likely to need small steps or great strides. Eventually it is up to the fishing or artisanal fishery, whether industry to judge both the necessity and the supplier or buyer, whether feasibility of those steps. government, fisherman or NGO. Ismail: What are the major obstacles to moving forward with certification, and what can omega-3 companies do about it? MSC: Sustainability is a quality of the products, therefore common for both suppliers and buyers. When the buyer has market demand for certified product, it can convince the supplier of its need to meet that demand. It is therefore important that involved parties join forces to enable the certification. The remaining obstacles in the anchoveta fishery are best presented by the fishing industry themselves. Ismail: There are many conflicting interests in Peru, particularly among the established industrial fishery, the desires of the artisanal fishery to expand, and the government’s desire to promote human consumption of anchoveta. Can MSC certification help align these interests? MSC: The first and foremost observation is that the sustainability of the anchoveta fishery is in the common interest of all involved parties and the Peruvian society at large, whether in tHiS iSSUe industrial or artisanal fishery, whether supplier or buyer, whether Sustainable Resources p. 5 government, fisherman or NGO. To reach MSC certification, Certifiers Round-Up p. 12 parties will need to set aside their respective interests and first Table of Contents p. 2 resolve the common sustainability conditions.

SupplySide Omega-3 Insights • October 2013 22 omega3insights.com Different markets can have specific demands for product sustainability. This can vary per destination and per product, and whether the product is for indirect or for direct human consumption. The MSC does not claim to resolve any existing differences in market interest, but it does offer an instrument for reaching a level playing field. Each part of a certified fishery has to meet the relevant authorities’ rules and globally accepted minimum guidelines such as the FAO established. There will be no allowance for illegal or unreported activities, so demonstrated outcomes from inspection and audits are an integral part of a credible certification. It is up to each company itself to assess its economic advantages of MSC certification, be they direct or indirect. Ismail: The Peruvian industry has been attacked over social issues and not accounting for other species when quotas are determined. Does MSC certification address these issues? MSC: The MSC has deliberately limited itself to addressing the sustainability of the resource and its ecosystem. By doing that, it addresses the most fundamental social issue—namely, assuring there will be enough fish to catch next year for everyone. The MSC is not involved in deciding which portion of the catch is for whom. MSC certification does not intend to regulate the product destination. Direct or indirect human consumption is entirely left to market decisions. MSC most certainly accounts for other species. Bycatch, discard levels and seafloor disturbance are well restricted, since these contribute to a healthy ecosystem. As long as the wild resource is in a healthy state to allow catches, it is regarded a separate issue by whom and for which destination the anchoveta is caught. Ismail: Are there other examples of how certification has helped omega-3 supplement companies grow their businesses that could serve as a case study for the Peruvian anchoveta fishery? MSC: The best example would be Antarctic krill. There are also many businesses that produce omega-3 products from MSC-certified trimmings. q

Adam Ismail is the executive director at the Global Organization for EPA and DHA (GOED).

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