Financial Institution Guidance: Sustainable Seafood Production
Financial institution guidance:Sustainable seafood production
Comments andqueriesPlease address any comments and queries to:Tom Bregman, t.bregman@globalcanopy.org (Global Canopy)Sarah Rogerson, s.rogerson@globalcanopy.org (Global Canopy)Lucy Holmes, lholmes@wwf.org.uk (WWF)About SCRIPTSCRIPT (Soft Commodity Risk Platform, available at www.script.finance) is a new freely-available system to help financial institutionsunderstand and mitigate the business risks associated with financingcompanies in soft commodity supply chains. The platform providestools and guidance for financial institutions to establish a robustsustainable financing policy and screen their portfolios to determinethe companies and issue areas that pose the greatest risk to theirinstitution.About Global CanopyGlobal Canopy is an innovative environmental organisation thattargets the market forces destroying tropical forests. Since 2001, wehave been testing new approaches to tackling deforestation, andguiding companies, investors and governments worldwide to thinkdifferently about our planet’s forests.About WWFFor nearly 60 years, WWF has been protecting the future of nature.The world’s leading conservation organization, WWF works in 100countries and is supported by more than one million members in theUnited States and close to five million globally. WWF’s unique way ofworking combines global reach with a foundation in science, involvesaction at every level from local to global, and ensures the delivery ofinnovative solutions that meet the needs of both people and nature.FundingThis work is part of the Conservation and Financial Markets Initiative, acollaboration among Ceres, the World Business Council for SustainableDevelopment, World Wildlife Fund and the Gordon and Betty MooreFoundation that seeks to leverage the power of mainstream financialmarkets in order to help drive the food sector away from practicesthat degrade natural ecosystems, particularly the production ofcommodities such as beef, soy, and farmed and wild-caught seafoodthat contributes to the loss of forests, grasslands, oceans, mangroves,and other habitats. The initiative is developing mechanisms andincentives that help companies and financial markets make betterinformed business and capital allocation decisions. For moreinformation see www.moore.org.
Contents1Introduction2Relevance2Guidance for company engagement41. Transparency and disclosure42. Board oversight and management of risk andopportunity53. Company policies and strength of mitigationstrategy64. Strategy implementation8
IntroductionThis document lays out the scientific and business cases for whyand how companies should act to minimise the environmentaland social impacts associated with the production of seafood1.These expectations are intended to assist financial institutionsto engage companies around the potentially negative impactsof fishing and aquaculture. The expectations are aimed at theboards of companies producing or procuring seafood, and area starting point for discussion between financial institutions andcompanies on these issues. The expectations are relevant for allcompanies involved in seafood supply chains, acknowledgingthat some expectations are more relevant for certain parts of thesupply chain.RelevanceThe continued production of seafood through fishing andfarming is key to meeting the growing global demand for food,supporting millions of jobs and livelihoods and meeting theSustainable Development Goals. However, as with the productionof many global commodities, unsustainable production ofseafood can lead to negative environmental and social impacts.These include the loss or degradation of natural habitats such asmangroves or reef systems, pollution, over-exploitation of naturalresources, capture of endangered species, slave labour, and theloss or decline of coastal livelihoods.As consumer and government awareness of impacts takes hold,companies face an increasingly risky business landscape. Forexample, companies are already facing restricted access tomarkets that require seafood to be sustainably produced andcertified2. Furthermore, continued overfishing and unsustainableaquaculture practices can lead to lower or more volatile yields.For example, overfishing has contributed to a decline in averagecatch rates along the Thailand coast from 300 kg in 1961 to 20kgin 20103. In turn this can lead to lower returns on investment forfinancial institutions providing capital to companies in seafoodsupply chains.For the purposes of this document: ‘Fishing/Fisheries’ refers to wild-caught fish and other aquatic animals, ‘Aquaculture’ refers to the farming ofaquatic animals, ‘Seafood’ encompasses both wild-caught and farmed.2FAO (2018) Seafood certification and developing countries: focus on Asia, available from: rms12
RISKS TO FINANCIAL INSTITUTIONSSeafood supply chain risks can have an impact on standard financial metrics such as revenue,asset valuation or costs. In turn, these can affect the credit worthiness of clients or the marketvalue of investee companies.Non-performing loansAsset valuesRevenue/profitabilityClients may be unable tocontinue to service debtobligations in full and on time.Assets may become strandedif market conditions change,requiring de-coupling ofproduction from impacts,or preventing production incertain areas.Market value may deteriorateas revenue and profits areimpacted.SEAFOOD SUPPLY CHAIN RISKSSustainability issues in seafood supply chains can lead to a variety of material risks forbusinesses, which in turn can affect investors and alOverfishing ordisease canreduce theproductivityof fisheries oraquacultureoperations andthreaten securityof supply.Environmental orsocial breaches,as well as lackof preparednessfor compliancewith regulatorychange canlead to productsbeing bannedfrom certainmarkets, or finesbeing leviedagainst individualcompanies.Companies thatfail to manageenvironmentaland social risksin their activitiesmay be exposedto legal liabilities,such as fromillegal fishing orlabour abuses inthe supply chain.Structural changein societalpreferences awayfrom productsthat negativelyimpact coastalor marineecosystems andpeople, canrestrict marketaccess forunsustainablyproducedseafood.Companies maybe targeted byNGO or mediacampaigns if theyfail to mitigateenvironmentaland socialimpactsassociated withtheir productionor procurement ofseafood.Figure 1: Risks facing companies and financial institutions associated with theunsustainable production of seafood.3
In 2017, 10 of the largest seafood companies came together toissue a statement of intent to remove a number of environmentaland social impacts from their supply chains4. By making thiscommitment, these companies acknowledged the potentialimpact that sustainability issues, if left unresolved, could haveon their businesses. Yet, despite such commitments, a significantmarket shift is still required to ensure that sustainable seafoodpolicies are put in place and upheld. For example, a recentassessment of US seafood retailers suggested that manycompanies are struggling to uphold labour and human rights,and their business practices continue to be associated withsignificant environmental impacts5.Given the ubiquity of operational, reputational, and regulatoryrisks across the supply chain, it is imperative that companiesaddress their exposure to risks associated with seafood bydeveloping and implementing robust sustainability strategies.Financial institutions can protect their investments or financing byengaging with companies to understand their existing businessstrategy and encourage them to produce and procure seafoodthat is free from environmental and social impacts.Guidancefor companyengagementTo ensure robust and resilient business strategies, and toencourage a smooth transition to a more sustainable seafoodsector, we have set out expectations and guiding questions forfinancial institutions to raise in their discussions with the boardand management teams of companies in seafood supply chains.These expectations are intended as parameters under which to‘stress test’ company strategies to manage seafood supply chainrisks. The majority of these expectations apply to all companiesregardless of whether they are sourcing wild caught or farmedseafood. Where the expectations are specific to a productiontype, this is noted.1. Transparencyand disclosureCompanies should be transparent about the questions raisedin this document so that financial institutions can use thisinformation to identify how environmental and social impactsmay affect companies’ economic performance and prospects.Financial institutions and third parties can use this informationto hold companies accountable for the impacts of their businesspractices and ensure that they have an appropriate strategy totransition to a more sustainable business model.Stockholm Resilience Centre (2018) Global leaders in seafood step up their actions for ocean stewardship, available from: eenpeace USA (2018) Carting away the oceans, Washington, United States of America.44
Expectation of companies:Companies should have a reporting framework in place thatrobustly measures progress towards achieving their statedcommitments and policies (see section 3) and enables publicreporting on an annual, or more frequent, basis. This reporting canbe through a company’s annual report and website or through anyother available public platforms.Questions for financial institutions to ask the board: Reporting progress - Is there a clear framework in place thatallows progress towards achieving policies? If so, how often is thepolicy reported against and are reports publicly available? Strategy adaptation - Does the company adapt their approachto managing risks and opportunities based on up-to-date data andcompany best practices? Does the company publicly communicatethese changes? Subsidiary disclosure - Does the company disclose all thesubsidiaries that it owns or partially owns that produce or procureseafood, including farms and fishing vessels? Does this includevessel name, flag, IMO number, and information on fishing rightsand sourcing of fish (e.g. area of operation, licenses, and quotas andcatch data)? Complaints - Does the company report active social conflicts orcomplaints registered against them, including fishing rights, labourand human rights disputes?2. Boardoversight andmanagementof risk andopportunityCompanies should be able to demonstrate that their internalprocesses are adequate to identify and respond to seafood relatedrisks and opportunities. Financial institutions can use his informationto determine whether there is sufficient board level oversight of thecore issues that have the potential to impact company costs andrevenues.Expectation of companies:Companies should ensure that the board and management haveoversight of the risks and opportunities associated with seafoodsupply chains. Clear processes should be in place that ensure thatrisks and opportunities are identified and that their managementhas been integrated into the business strategy. The business strategyshould not only account for current business risks, but also tochanging operational, regulatory, and reputational risks associatedwith the transition to a sustainable seafood sector.Questions for financial institutions to ask the board: Understand dependencies - What processes does the boardemploy to ensure it fully comprehends the environmental and socialimpacts of its production or procurement of seafood? Does theboard assess whether these impacts undermine the future5
production of seafood? Identifying risks - What processes does the board havein place to identify business risks associated with sourcingunsustainable seafood? How does the company prioritise therisks identified? Board oversight - Does the company’s board have a committeethat is formally focused on sustainability issues, and if so, doesthe committee charter reference environmental and socialimpacts or risks associated with seafood? Does the company linkexecutive compensation to sustainability metrics? Adjusting company strategy to changing externalities - Whatprocesses does the board have in place to ensure the company’sstrategy adapts to changes in business risks and opportunitiesassociated with seafood? Sustainable seafood strategy - Does the company have anoverarching strategy for addressing environmental and socialimpacts associated with its production or procurement ofseafood?3. Companypolicies andstrength ofmitigationstrategyOnce a company has fully understood the implications ofthe risks and opportunities affecting their business, they areable to put in place effective policy measures to promotefuture resilience. The questions below aim to build a betterunderstanding of the policy measures that companies haveput in place to mitigate their business risks, including how farthe company has embedded seafood sustainability into theirbusiness strategy and planning. Questions that apply to bothaquaculture and fisheries appear in the ‘all seafood’ section.Those questions that are more appropriate for one or other ofaquaculture and fisheries only appear in the relevant sections.Expectation of companies:Companies should develop time-bound and publicly-availablepolicies or commitments that account for the company’s exposureto aquaculture and fishery related business practices andsupply chains. These policies should account for the numerousenvironmental and social impacts associated with seafoodproduction, and should promote the long-term sustainability ofseafood production systems and the associated ecosystems.All seafood6Questions for financial institutions to ask the board: Publicly available - Are company policies publicly available,and easily accessible, to enable independent verification? Cover all seafood - Does the company policy cover all sourcingof seafood, including all species, and those sourced from wildand farmed sources?
Time-bound - Does the company have a time-bound targetfor removing unsustainable seafood from its production andprocurement? Are there interim milestones that enable progressto be monitored and reported against? Whole business - Does the company’s policy apply to all of itsbusiness, including all subsidiaries, farms, vessels, and companieswithin the group? Animal welfare - Does the company have a commitment toprotect the welfare of all wild caught and farmed seafood, andany other wildlife impacted? Important ecological areas - Does the company have acommitment to not produce or procure seafood from operationsthat are located in or impact important ecological areas. Protects the rights and livelihoods of local communities - Doesthe company have policies in place that ensure that the rightsand livelihoods of local communities are protected, includingcomprehensive stakeholder engagement to achieve Free PriorInformed Consent and detailed policies on workers’ rights (e.g.child labour, forced labour, freedom of association and otherprinciples in ILO core conventions, the ILO 188 fishing convention,and the Universal Declaration of Human Rights)? Gender equality - Does the company commit to addressinggender related workers’ rights? Does the company encourage theinclusion of women in fisheries and aquaculture? Small businesses and farmers - Does the company havepolicies for ensuring that small farms, fishing companies, andprocessors are not excluded from their supply chains?Aquaculture specific7 Responsible water management - Does the company have acommitment to minimise water usage and wastewater associatedwith their own farms or processing facilities, as well as onlysourcing from companies that manage their water responsibly? Farm management - Does the company have a commitmentto only produce or procure from farms with appropriatemanagement and reporting systems in place? Do thesemanagement systems have specific considerations for escapes oflivestock, disease, and parasites? Chemical pollution - Does the company have a policy to onlyuse legal and nationally-approved chemicals, antibiotics, andpesticides? Does the company minimise the use of these productsunless absolutely necessary? Sustainable feed - Does the company only source feed fromavailable sustainable sources that minimise or are free fromenvironmental and social impacts? Predator control - Does the company commit to minimise lethalmethods to control predators, and prohibit the use of lethalmethods for any IUCN threatened species?
Fishery specific Illegal, unreported, and unregulated (IUU) fishing - Does thecompany have a policy in place relating to illegal, unreportedand unregulated fishing? Does it have a system in place to trackand trace vessels or products to ensure they are not operatingillegally or sourcing IUU products? Overfishing - Does the company have a commitment to fish insustainable fisheries or procure seafood from stocks that are notoverfished? Bycatch - Does the company have a commitment to minimisebycatch associated with seafood that they produce or procure? Protected species - Does the company have a commitment tonot fish or procure protected species? Fishing methods - Does the company have a commitment tonot use methods or equipment that irreversibly damage coastalor marine ecosystems, or source from those that do?4. StrategyimplementationCompany policies demonstrate awareness and intent to mitigateenvironmental and social impacts. However, if these policies arenot supported by robust implementation processes, the companywill remain exposed to growing business risks. The questionsbelow aim to build a better understanding of how the companyis implementing their sustainable production or sourcing strategy.Companies will need to use a variety of techniques to ensuretheir business is free from environmental and social impactsdepending on their business structure and role in seafood supplychains.Expectation of companies:Establish a clear process for identifying and engaging directand indirect suppliers to ensure compliance with the company’spolicy. Supplier assurance should be achieved through regularmonitoring that is tailored to the products being sourced, andtheir region of origin. When producing in, or sourcing from,high risk regions, third party due diligence should be requiredto ensure that suppliers continue to be in compliance with thepolicy.Questions for financial institutions to ask the board: Supplier selection - Are sustainability credentials accounted forduring the supplier selection process? Does the company enforceprocurement standards that impact commodity sourcing? Certification - Does the company use third party certificationas a way to make their business practices more sustainable?Does the company support suppliers to undertake FisheryImprovement Projects (FIPs) or Aquaculture Improvement Projects(AIPs) to meet certification standards if they are not yet8
compliant? Traceability - Does the company have a strategy for increasingtraceability back to the processing facility, and ultimately the sourceof production? Production-site information - Can the company provideinformation about all farms or fisheries in the supply chain? Doesthis include GPS coordinates, the production volume, and thespecies harvested? Monitoring compliance - What processes are in place to monitorcompliance with the company policy and with local, national andinternational laws and regulations? How frequently is compliancechecked? Verifying compliance - Does the company use third partyverification and/or undertake internal audits to ensure policycompliance? What is the process
For nearly 60 years, WWF has been protecting the future of nature. The world’s leading conservation organization, WWF works in 100 . companies face an increasingly risky business landscape. For example, companies are already facing restricted access to markets that require seafood to be sustainably produced and
appetite for all manner of seafood has led to unprecedented pressure on the world's ma-rine resources. Being the second-largest per capita seafood consumer in Asia and importing nearly 90 per cent of this seafood from over 150 countries and territories, Hong Kong is an important player in the sustainable seafood challenge.
sustainable seafood market, WWF-Hong Kong has determined that sustainable seafood has gradually gained traction and support from the business sector over the last few years. Sales volumes have increased substantially and more suppliers are providing an increasing number of sustainable seafood options throughout Hong Kong.
sustainable fishing practices, influencing the choices people make when buying seafood and working with our partners to transform the seafood market to a sustainable basis. This report shows how we have been working together with partners throughout the seafood sector so future generations can enjoy seafood and oceans full of life, forever.
a more sustainable and responsible seafood industry, and thereby supporting the achievement of the Sustainable Development Goals (SDGs). By assessing the 30 most influential seafood companies in the world, the Seafood Stewardship Index (SSI) aims to identify how the private sector is contributing to this transition, where com-
(ssci) to develop a seafood-specific social compliance benchmark. gssi is a global, public-private partnership, working towards more sustainable seafood for everyone 59.6 million workers directly employed in capture fisheries and aquaculture 239 million workers directly and indirectly employed in the seafood sector 20kg source: fao sofia 2018 .
farms that supply the seafood products we buy and sell. Preferentially sourcing and selling environmentally-responsible seafood that addresses local, regional, and global concerns regarding environmental performance. If the source of the seafood product is found to be from an unsustainable source, Acme Smoked Fish will uti-
The Sustainable Seafood Coalition is a pre-competitive collaboration platform comprised of more than forty seafood businesses and organisations. It was founded in 2011 in order to establish standards for responsible sourcing by buyers of seafood, and a harmonised approach to environmental claims made when selling that seafood. .
The Hawaii longline fishery for tuna and swordfish produces sustainable seafood. This fishery is sustainable because it meets the national and international requirements for 1) science-based, precautionary fishery management, 2) performance in managing fish populations for sustainability, and 3) controlling fishery impacts on the ecosystem.
