When we evaluate value chains, we look for lead firms: small, medium, or large enterprises that are linked to many other players in the value chain and can influence the practices of these commercial partners. Ideally, these firms are thought leaders in their fields and open to innovation. Building on our value chain and market research, we work with these firms to lead by example. We collaboratively design and implement pilot projects that help overcome barriers to triple bottom line business growth.
Through these projects, we test our research findings, learn more about what will work on the ground, and iterate on real-world solutions. These pilot projects not only improve business practices within the lead firm, but throughout the fishery value chain. When successful, they generate financial returns that demonstrate the viability of new approaches in the industry and inspire other businesses to follow suit, thus improving industry competitiveness. They create new norms in the market that are sustained because of their business value rather than relying on ongoing philanthropic support or government subsidies to succeed.
Crab fishermen in Indonesia receiving their “Kartu Nelayan”, guaranteeing their access to benefits such as life insurance
Role of Lead Firms
Sustainable and profitable fisheries are built on secure
tenure, sustainable harvests, and monitoring and enforcement, according to
research behind the report, “Towards Investment in Sustainable Fisheries”.
Rather than waiting indefinitely for these enabling environment conditions to
transpire, using a lead firm approach allows project developers to leverage the
assets and abilities of industry to progress towards better managed fisheries.
In return for their contributions, lead firms in fisheries promote decreased
supply volatility; increased long-term availability of the resource; improved
supply chain efficiency, and more.
Lead Firm Project Goals and Benefits
Wilderness Markets’ goal with lead firm projects is to attract private, return-seeking impact investment and complement ongoing work by fishery managers and NGOs to improve fisheries. This approach enables local fishermen to adopt sustainable practices faster than waiting for the government to independently create and enforce management changes, and without the economic hardship for fishermen that often accompanies changes in fishery regulations. It will also bolsters business advocacy for more effective fisheries management policies and enforcement through a local cooperative structure.
Lead Firm Experience
From 2016 to 2017
we engaged with a lead firm, Blue Star Foods, in the blue swimming crab fishery
in Indonesia. Our primary goals were to engage a lead firm to secure change on
the water and development an investment model. We gained some valuable
learnings, including the importance of fisher organizations; the need for
ongoing, structured and unstructured facilitation between stakeholders; and the
importance of pre-agreements for data collection analysis, and management.
Sumatran Fisherman with Blue Swimming Crabs
By working with a lead firm, the financial viability of data collection and management was validated, and many of the improvements in the value chain have continued to date, despite the project ending in 2017. [
For the fishermen,
participation in the project included signing up for the Indonesian fisher ID
card – Kartu Nelayan – which conferred immediate benefits to the fishers, such
as life insurance. The government also benefitted from getting better counts of
fishermen in the area. Through their participation, harvesters were provided clear and reliable financial benefits for small-scale
fishermen to make gear changes; follow harvest control measures; and take on
other sustainable fishing practices.
Successful Lead Firm Characteristics
Industry leaders: innovation, technology,
experience
Highly connected in the value chain: linked to
large numbers of producers
High capacity: can provide technical assistance,
credit and inputs
Financially stable: can make long-term
investments towards sustainability
Excellent market access and understanding:
connected with multiple markets (to decrease risk) and routinely attend
industry events and conduct analysis to stay attuned to market dynamics
Respected influencer: others in the industry
look to them for thought leadership and hold them high esteem
Willingness: firm indicates a willingness to
work with project developers, including signed agreements
Adapted from: “Integrating
Very Poor Producers into Value Chains: Field Guide” by USAID, fhi360 and World
Vision, October 2012.
Impact investors are ready to invest increasing amounts of impact capital in sustainable fisheries; what’s missing are profitable businesses and organizations with the capacity to accept investment. These profitable “investible entities” aren’t emerging apace because the entrepreneurial ecosystem to develop their business capacity is lagging.
A study done by the Marine Heatwaves International Working Group showed that there has been a 54% increase globally in the number of “marine heat wave days” per year since 1925.[1] Published in the Nature Communications journal and cited in News Deeply recently[2], the study cited the warm zone off the Western Australian coast in 2011 and the Gulf of Maine episode in 2012 as incidences of this trend. Average ocean temperatures have been increasing but these marine heat waves are also increasing in frequency and duration. The combination of the two are linked to factors that damage ecosystems and economies.
Figure 1 Graphic explanation of Marine Heat Waves, from http://www.marineheatwaves.org/all-about-mhws.html
Marine heat waves (MHWs) are “…prolonged periods of anomalously high sea surface temperatures… [that] have had severe impacts on marine ecosystems in recent years.” (Oliver et al., 2018). In Australia alone, Shark Bay in Western Australia lost 36% of its seagrass meadows and carbon storage, and the Great Barrier Reef suffered four mass coral bleaching events because of these extended periods of elevated sea surface temperatures.[3]
There are significant ecological and economic effects arising from these marine heat waves. They include:
“… sustained loss of kelp forests, coral bleaching, reduced surface chlorophyll levels due to increased surface layer stratification, mass mortality of marine invertebrates due to heat stress, rapid long-distance species’ range shifts and associated reshaping of community structure, fishery closures or quota changes and even intensified economic tensions between nations.” (Oliver et al., 2018)[4]
According to Eric Oliver, the study’s lead author, “…in the early 20th century, there was an average of two marine heat waves per year globally, but now there are three or four. While they used to last 10 days on average, they now last for an average of 13 or 14 days.”[5]
The study suggests that marine heat waves will continue to increase with the ongoing global warming.
Why does Wilderness Markets care about anemones and anemonefish? Because our work requires us to look not only at enterprises and fishery management, but at the entire ecosystem to properly account for business risks. Learn more about us.
[1] Oliver, E. C. J et al. (2018). Longer and more frequent marine heatwaves over the past century. Nature Communications, 9. doi: 10.1038/s41467-018-03732-9
[2] News Deeply. (2018). Executive Summary for April 13th. Oceans Deeply (Marine Heatwaves Are Longer, More Frequent). Retrieved from https://www.newsdeeply.com/oceans/executive-summaries/2018/04/13.
[3] McSweeney, R. (2018). Marine heatwaves have become ‘34% more likely’ over past century. Carbon Brief. Marine heatwaves have become ‘34% more likely’ over past century. Retrieved from https://www.carbonbrief.org/marine-heatwaves-have-become-34-more-likely-over-past-century.
[5] Willick, F. (2018). Ocean heat waves becoming more common, longer, new study finds. CBC. Retrieved from http://www.cbc.ca/news/canada/nova-scotia/marine-heat-wave-ocean-hot-spot-study-1.4611794
Rising ocean temperatures are causing significant changes with devastating impact on the ecosystem. Worldwide, the warmer and more acidic ocean conditions in the tropics have caused mass bleaching of anemones and corals[1]. A new study published in the Proceedings of the Royal Society B supports findings from another recent study in the journal, Nature, that the bleaching of anemones has a severe impact on anemonefish, like clownfish and dire consequences for marine life in general.[2]
Clownfish in anemone. Used under Creative Commons from : https://pxhere.com/en/photo/559857
Findings
The latest study looked at the metabolic rates between fish from bleached and unbleached anemones. Even though there was no discernible difference in activity between the two groups of fish, the study found that the “[s]tandard metabolic rate of anemonefish from bleached anemones was significantly higher by 8.2% compared with that of fish residing in unbleached anemones, possibly due to increased stress levels.”[3] Reduced spawning frequency and lower fecundity are two of the negative impacts that were previously observed.
The study published in Nature in 2017 focused on the hormonal stress response and reproduction of anemonefish in bleached anemones. The 14-month monitoring study found a strong correlation between the anemone bleaching and the anemonefish’s stress response and reproductive hormones. Anemonefish in bleached anemones had a 73% decrease in fecundity compared to anemonefish in unbleached anemones. They spawned half as frequently, laid 64% fewer eggs, and experienced a significantly higher egg mortality in incubation. The authors were unable to determine why the bleaching of anemones would trigger a stress response in anemonefish. They offer the possibility that bleached anemones may provide less cover and have reduced neurotoxicity of venom which leads anemonefish to perceive a greater risk of predation. [4]
According to Beldade, Agathe, O’Donnell, & Mills (2017), there are “…[a]t least 50 species of fishes and facultative symbionts of sea anemones worldwide…as many as 12% (56/464) of coastal fish species depend directly, either for food or shelter, on organisms capable of bleaching. While the strength of such dependency varies greatly, if these species suffer even a fraction of the impact found for anemonefish, then a short-lived bleaching event could decrease the reproductive output of at least 12% of species, especially those highly dependent on corals or anemones.”
Takeaway
The two studies contribute to a growing library of research on the effects of global warming on marine life and highlights the importance of understanding how individual differences in stress responses influence a species’ chances of survival.
Why does Wilderness Markets care about anemones and anemonefish? Because our work requires us to look not only at enterprises and fishery management, but at the entire ecosystem to properly account for business risks. Learn more about us.
Photo Credit: “q phia”; anemone fish on bleached anemone, fukui, siladen, 2017
[1] Norin, T, Mills, S. C., Crespel, A., Cortese, D., Killen, S. S., & Beldade, R. (2018). Anemone bleaching increases the metabolic demands of symbiont anemonefish [Abstract]. Proceedings of The Royal Society B. doi: 10.1098/rspb.2018.0282
[2] News Deeply. (2018). Executive Summary for April 13th. Oceans Deeply (Bleaching of Anemones Makes Life Harder for Clown Fish). Retrieved from https://www.newsdeeply.com/oceans/executive-summaries/2018/04/13.
[4] Beldade, R., Blandin, A., O’Donnell, R., & Mills, S. C. (2017). Cascading effects of thermally-induced anemone bleaching on associated anemonefish hormonal stress response and reproduction. Nature Communications, 8. doi: 10.1038/s41467-017-00565-w
Case Study: Developing and Implementing SIMP Compatible Seafood Data Reporting and Traceability System in the Crab Supply Chain
Problem Statement and Opportunity
The U.S. implementation of the Seafood Import and Monitoring Program (SIMP)[1] on 1 January 2018 establishes reporting and recordkeeping requirements to prevent illegal, unreported and unregulated (IUU) seafood from entering the U.S. The onus of proof is placed on the importer of record to provide and report key data from harvest to U.S. entry. In geographically diffuse supply chains, like blue swimming crab from Southeast Asia, with thousands of “points of entry”, i.e., fishers, tracking landings to the vessel is far less straightforward than short and narrow supply chains, such as skipjack tuna or sardines. This reporting requirement, while worthwhile, will require U.S. seafood importers to incorporate cost-effective traceability initiatives in their often-complex supply chains.
There is a growing appreciation that the needs of fishers and their communities must be addressed in order to improve the underlying causes of fishery exploitation in the developing world, particularly for small-scale fisheries. -California Environmental Associates
The requirement also presents an opportunity to promote resource sustainability through supply chain transparency and catch monitoring. Despite pledges to abide by size limits, U.S. importers of blue swimming crab (BSC) have difficulty ensuring their supply chain partners are buying only crabs larger than the agreed minimum size of 10cm and excluding berried females. The application along with a web-based reporting tool we developed can meet the requirements of the SIMP, as well as the European Catch Documentation (CD) requirements, and elucidate the in-country supply chain. By tracking landings by vessel and by harvester, this tool further provides the opportunity to address key social and environmental outcomes associated with the Sustainable Development Goals[2] (SDGs), which gives seafood importers a mulit-purpose toolkit to both decrease their reporting costs and increase the sustainability of the crab stocks.
The opportunity to spur social and economic impact should not be underestimated. Educating, engaging and rewarding fishers and communities directly for complying with ecological goals like minimum size, berried females, no-take areas, and more offers an opportunity to engage communities directly in resource management and provide key links to SDGs. Aside from nascent work by Fair Trade[3] and SmartFish[4], there are few fishery sustainability efforts that actually benefit the fishers that form the foundation of many supply seafood chains. Indeed, most efforts impose costs on fishing communities—time, foregone income, capital for new equipment—without providing benefits. Our tool allows identification of compliant fishers, so they can be awarded price premiums and other incentives.
Supply chain transparency is beneficial to the U.S. importer not only in terms of identifying good actors and meeting reporting requirements, but also gives them an edge in the marketplace full of otherwise opaque supply chains.
Provision of ice is a key concern
Assessment
When initially considering how to provide BSC supply chain transparency from the ocean to the end buyer, we researched existing options, hoping to find one that could be customized to the supply chain. We conducted a desk review, scouring the internet and our personal network to identify all available options. In total, we reviewed nearly forty systems that provided varying levels of traceability; of these, we interviewed approximately six potential providers that met or came close to our key considerations:
Ease of use – the user interface needed to be easy for data collectors in Indonesia and importers in the U.S. to use
Utility for marketing purposes – a consumer-facing component was a must
Facilitate regulatory compliance – must collect and provide data required by the SIMP and EU CD in a straightforward format
Mapping – needs to provide maps of fishing locations to determine which areas are best for avoiding undersized and berried crabs
Business model – a cost effective and durable business model that did not result in excessive fees or costs to each level of the value chain
Data access, storage and ownership – data must be accessible by multiple parties within the value chain, stored in Indonesia, and owned by the funding company
Reasonable set-up costs – ideally, a system would be compatible with existing software and hardware and would require little in the way of training. A team should be able to begin data collection with a few hours or less of upfront training on the system interface and they should be able to readily convey to the fishers the benefits of the system.
Geographic and cultural relevance – the system needed to function in rural, relatively isolated areas with little to no telecommunications access
Engage Harvesters and Vessel owners in order to build their understanding and the relative importance of adhering to harvest control regulation
Ease of integration – overall, the platform needed to be easy to readily integrate into the supply chain.
Findings from Assessment
None of the reviewed systems met the requirements of the lead firm with the exception of the Pelagic Data Systems units for vessel management, i.e., vessel tracking. Due to the cost of acquisition and the relatively high ongoing costs of use, these were installed on a trial basis. This test was not successful, and cheaper, more effective units were identified.
Development
Not finding a suitable existing program, Blue Star Foods decided to develop their own application to gather data tied to their marketing goals and objectives around supply chain integrity. The SIMP and EU CD data requirements were integrated into the data collection system. Wilderness Markets worked closely with an app-development team to develop an Android and iOS application and support the field trials. After the initial field trials, the system was deployed to in-house teams from Blue Star Foods Indonesian partners, consisting of procurement and quality control specialists.
Implementation and Deployment
Data was collected at selected mini-plants and landing sites during a six-month period. Both harvesters and data collectors were simply encouraged to log landings during the pilot phase without any indication or reference to IUU or other considerations. They were not penalized or otherwise reprimanded for reporting undersized or berried crabs during this time period. Vessel tracking data was collected for a select number of boats during this period, which could be matched to landings data.
Sumatran Fisherman with Blue Swimming Crabs
Initial learning points
Data collection required additional training of procurement and quality control teams. This in turn required an additional budget to be implemented effectively.
The pilot only covered a small portion of overall U.S. imports from Indonesia (less than 1%) – the current opacity of the supply chain means we did not know how much each mini-plant contributes to the supply chain before the pilot
The system efficiency is high enough that recording all landings at a mini-plant or at a landing site is possible, though unless a quality control individual is onsite continually, it cannot guarantee there will be no side selling unless all buyers agree to use the system.
The data feedback loop to management has been significantly shortened and is possible in nearly real-time allowing:
Faster identification of low productivity landing sites
Faster identification of high productivity landing sites
Faster identification of undersized and/or berried crab seasons and locations
Data integrity and accuracy continues to be an issue and needs to be worked on – Due to their small size, most vessels are unregistered so vessel identification is challenging. Usual data integrity and accuracy issues for data collection operations exist, such as ensuring consistent data entry, checking entries for errors, etc.
Initial Data Findings
Initial indications, based on sampling approximately 10% of the harvest per vessel, are that up to 25% of landings can likely be classified as IUU (berried females & sub 10cm).
Boats with lowest supply chain loyalty appear to have higher levels of IUU (an assumption to be tested in additional sites)
It is now possible to identify the specific boats that are causing the high levels of infractions, and to address with through the supply chain in a focused manner.
Less than 20% of the surveyed vessels were responsible for 80% of the IUU landings
Fishery Management Implications
The ability to specifically identify vessels not complying with agreed harvest controls will permit a more targeted, focused and cost-effective approach to monitoring and enforcement of infractions. With less than 20% of the vessels are causing 80% of the issues with regards to IUU landings, efforts can be made to reduce IUU in a focused manner.
The data provides:
Ability to provide shore-based landing information
Ability to identify both geographic and seasonal potential closure options based on real data
Ability to target enforcement based on recorded infractions
BSC fisherman with new vessel tracking device
Links to SDGs
In addition to the business and fishery management implications, the findings are directly linked to at least three SDGs:
SDG 8 Decent Work and Economic Growth
Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
Biological data indicates a quick (less than 1 year) stock recovery when undersized crabs are left in the water, thereby increasing the economic value of the fishery and decoupling growth from environmental degradation (Target 8.4)
SDG 9 Industry, Innovation and Infrastructure
Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
Increasing the transparency of the supply chain means that small-scale enterprises, like the mini-plants, can have better access to financial services (Target 9.3).
SDG 14 Life Below Water
Conserve and sustainably use the oceans, seas and marine resources for sustainable development
Using the data generated by the app, progress can be made towards sustainably managing fish stocks, combatting IUU, and providing meaningful market access for small-scale artisanal fishers (Targets 14.4, 14.6 and 14.B).
Recommendations and Next Steps
A key recommendation of the initial pilot is the need to establish unique vessel IDs with the support of local government authorities, which will allow more meaningful monitoring and enforcement of landings.
In addition, the need to engage with, and involve, other firms purchasing from the fishery was identified in order to reduce the opportunities for side selling.
A second phase is being planned to address the constraints of the first. The goal of the second phase is to:
Capture a minimum of 25% of the Blue Star Foods Indonesia sourcing;
Integrate improved vessel activity geographic data
Expand geographically
Include more processors, mini-plants and fishers in Indonesia, particularly in co-packer conditions
Replicate into the Blue Star Foods Philippine supply chain
Conclusion
The drivers of market access compliance requirements, improved social and financial impact in in artisinal fisheries and greater supply chain integration are powerful drivers for change in any industry. The relatively low cost now associated with data capture tools mean lead firms can utilize almost ubiquitous cell phone availability to cost effectively assess the degree and extent of IUU in their supply chain, while strengthening their impact objectives and improving market recognition.
This approach provides resource managers and NGOs as well as development agencies with a relevant, cost effective tool to engage private sector supply chains in achieving SDGs in a measurable, informed and data driven manner.
[1] “U.S. Seafood Import Monitoring Program”. Retrieved on 7 March 2018 from: https://www.iuufishing.noaa.gov/RecommendationsandActions/RECOMMENDATION1415/FinalRuleTraceability.aspx
[2] “Sustainable Development Goals”. Retrieved on 19 March 2018 from https://sustainabledevelopment.un.org/?menu=1300
[3] “Capture Fisheries Standard (CFS)”. Retrieved on 8 March 2018 from: https://www.fairtradecertified.org/business/producer-certification
[4] “Rescate de Valor”. (English: Value Rescue) Retrieved on 8 March 2018 from: http://rescatedevalor.org/
Do you know of fisheries that have considered or implemented Value Rescue?
Your knowledge can help others scale fisheries’ enterprises with positive social, economic and environmental impacts.
We are researching fishing groups, including businesses, associations, co-operatives and similar entities that have tried improving the value of their catch or production while also improving their social and/or environmental performance.
We are conducting case studies to characterize these interventions and then develop best practice manuals and other materials that can be shared to create a community of practice and scale implementation of the value rescue methodology around the world.
You can play a role by submitting basic information (location, contact information, intervention, etc.) that we can follow-up for additional research. Click here to begin the 15-minute survey.
What is Value Rescue in Seafood:
a process to improve the social and environmental performance of sustainable fisheries through improved financial incentives, product differentiation and market segmentation
Key components:
Enhancing social cohesiveness and decision making around resource management
Community based management of sustainable fisheries
Culturally appropriate business decision making
Product differentiation to secure market access and pricing advantages tied to mission
We’ll be closing the survey on July 31. Contact Jada at jada (at) wildernessmarkets.com if you encounter any problems submitting your reply or have questions.
A previous post outlined our pilot project in California with Changing Tastes; this post provides a peek into a culinary workshop that is part of the planning phase.
To discover how local fish can create a winning combination of flavor, presentation, and affordability for chefs in corporate dining, our partner Changing Tastes arranged a culinary workshop in California. More than a dozen chefs and several sustainability managers from the same or similar groups joined us in mid-November at a test kitchen in the Bay Area to develop the recipes and messaging needed to successfully bring back Californian West Coast Groundfish.
Palate and Pocket
To explore which fish could please both palates and pocketbooks, the chefs spent the morning preparing a sampling of locally-caught fish, including Dover and petrale sole, boccaccio, chilipepper and black gill rockfish, and sablefish (AKA black cod) provided by Real Good Fish. These fish represent the spectrum of species that are part of the West Coast Groundfish program, one of the most sustainably managed fisheries in the world, and one that has the fish to prove the stocks are healthy. These are fairly common landings that span from very inexpensive Dover to higher-end sablefish. The variety of textures, thicknesses and tastes were highlighted in Latin and Asian-inspired themes, such as black gill fish tacos with mango slaw (Chef Ochoa), petrale-coconut ceviche (Chef Fogata), black and white coconut crusted black cod (Chef Thomas), and steamed Szechuan boccaccio (Chef Hernaez).
Heart and Mind
Equally important to taste and cost is persuading diners to try these new dishes. In a nearby space, restaurant industry marketing and communications executives as well as sustainability managers and representatives of groups that support sustainable seafood brainstormed marketing ideas for the dining spaces where the fish will be offered to diners next spring.
Common themes included emphasizing that the fish is locally-caught in California. They noted that “local” often implies fresh to diners. Including a map of the different ports where the fish originates from for the pilot, and identifying fishermen and women from each was another popular theme.
Marketing experts, chefs, sustainability managers and others agree on not using the word “groundfish” in marketing materials. This group and others realize that this collective term for these species isn’t one that necessarily appeals to diners, nor does it help them understand the diversity of species and flavors within the broad category.
Pilot Evaluation
Among potential evaluation methods and data points, our participants identified these as the most likely:
On-site, established food focus groups
Measurement of orders by volume
Gauging the relationship between price of dishes and purchases
Comparison to sales of other seafood dishes
Comment cards
Online commenting system
Surveys, potentially with incentives, and/or provided in a quick format via touchpad at the point of purchase
Querying the culinary team during and after the pilot
Post-workshop steps
Our next tasks are confirming which specific dining halls and cafes will participate from each of the corporate dining partners and confirming likely order volume by species or species group, e.g., petrale sole is a species and rockfish is a species group. Almost simultaneously, we will work with the corporate dining partner and their existing distributors to determine the likely sources, feasible start dates, and volumes. We look forward to sharing updates as this work progresses in 2018.
At the core of our work, we believe taking a value chain approach to investing in development is the most responsible and most sustainable. Interlaying this approach with the development of the blue economy will ensure proper assessment of opportunities and threats.
Blue Economy
No single definition of “Blue Economy” exists; like the word “sustainability”, answers are scattered and subjective. To economic theorists, it refers to a type of circular economy where nothing is wasted, but to those involved with oceans or fisheries work, it refers to development and use of marine resources, although even this definition is subjective.
The marine-focused usage of blue economy has numerous definitions and is interchanged with “blue growth”. Many, like WWF, the Economist Intelligence Unit and the World Bank Group include sustainable economic, environmental, and social outcomes, i.e., triple-bottom line outcomes, while others refer to all economic activity generated by maritime industries.
In March of 2015, John Tobin, Global Head of Sustainability at Credit Suisse said,
“The “blue economy” is about conducting economic activity in a way that is consistent with the long-term capacity of marine ecosystems to sustain themselves.”
Figure 1 Fishing vessels, California, USA Credit: By specchio.nero (San Diego harbor) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons
Value Chain Approach
While Wilderness Markets’ employs the USAID Value Chain Approach, a value chain approach is, at its core, market systems approach to development. These approaches acknowledge that industries do not operate in a vacuum – outside forces, like governments, resource and labor availability, and similar industries – create a dynamic system in which value chains exist. The value chain approach seeks to understand these so that the principal constraints to competitiveness, which can lie within the system or the environment, can be understood and mitigated. Failure to do so can result in unsustainable growth or detrimental impacts.
Figure 2 Women harvesting seaweed, Zanzibar, Tanzania Credit: Jada Tullos Anderson
Synergy of the Blue Economy and Value Chain Approach
One of the striking aspects of the multiple definitions of the blue economy is that the definitions imply a comprehensive approach to developing and using marine resources, aligning well with the value chain approach to development. Indeed, considering the main purpose of the value chain approach is to account for the dynamism of an industry or supply chain, then there can be no more perfect example of a dynamic business environment. The natural coastal and marine environment is always in flux and resource availability must be accounted for when considering the threats to a value chain. Similarly, global markets affect most marine-related activities and must similarly be considered when determining blue economy development pathways.
Figure 3 Women sorting catch, East Java, Indonesia Credit: Jada Tullos Anderson
Applications
Integration of the blue economy and the value chain approach is well-suited to fisheries, aquaculture, maritime services, tourism, and, particularly, to locational development that integrates multiple sectors, such as fisheries, tourism and port development as the unique and common needs of each can be considered as part of a whole solution. This can be useful for government authorities as they seek to cost-effectively develop and regulate coastal areas. Funders and financiers may also be receptive to this approach as it allows simultaneous de-risking through diversity and bundling of financing to decrease transaction costs.
Figure 4 Honolulu and Waikiki Beach economy includes tourism, fishing and shipping, Hawaii, USA Credit: Jada Tullos Anderson
Final Thoughts
The value chain approach naturally fits blue economy development, offering improved value to developers and funders, while adding to the sustainability of the marine environment for people, business, and nature.
We know all the problems associated with overfishing and we know that research shows:
1) that switching to more sustainable management will lead to increased revenues and food security; and
2) the cost for doing so exceeds what can be provided through traditional development and philanthropic organization.
How do we get past the second to make the first possible? Supported by the World Bank, and with input from dozens of impact investors and fishery experts, we detail the main barriers and potential approaches to overcome them in our latest paper: Developing Impact Investment Opportunities for Return-Seeking Capital in Sustainable Marine Capture Fisheries.
Who Should Read This Paper
This paper provides an overview for international development organizations, development finance institutions, NGOs, and the governments they work with of (i) the key concerns that impact investors may have when considering the financing of sustainable fisheries, and (ii) potential approaches for public-private partnerships to overcome these obstacles. It is intended as a primer for these actors, to understand the perspective of the commercial impact investor.
Overview
This paper explains the central challenges that keep impact investors from participating in sustainable fisheries, and is structured along four main barriers:
A lack of reliable fishery data
Ineffective fisheries management
Unreliable infrastructure systems
A paucity of investment-ready enterprises
It then proposes three models for sequencing and combining different sources of capital to overcome these obstacles:
Serial approach: Public and philanthropic funders first support the establishment of strong governance arrangements, improved data collection, and fishery management. Once these initiatives mitigate some of the risk associated with a fishery investment, then return-seeking investors are incentivized to finance sustainable infrastructure projects (often through public-private partnerships) and/or enterprises along the value chain, focused on outcomes that achieve a triple bottom line: social responsibility, economic value, and environmental impact.
Consolidated approach: Governments negotiate agreements with a single private sector entity or cooperative to delegate fishery management responsibilities. The private firm or cooperative then simultaneously invests in fishery data, management, infrastructure, and triple bottom line enterprises.
Parallel approach: A range of investors and other stakeholders (for example, governments, nonprofit organizations, fishing collectives) develop coordinated investments to improve fisheries data, management, infrastructure, and triple bottom line enterprises. Efforts can be separately funded, but they work in tandem and share the ultimate goal of achieving sustainable catch with an appropriately capitalized and profitable fishing sector.
Each of these sequencing models presents particular challenges and opportunities. Structuring investments to achieve triple bottom line outcomes is still a new idea within the fisheries sector. There is growing evidence from other sectors, however, including agriculture and forestry, that these types of investments are achievable. Examples include the Moringa Fund[1] and Livelihood Funds,[2] which bring together public institutions, private investors, and NGOs, using innovative investment models to simultaneously address environmental degradation, climate change, and rural poverty while helping businesses become more sustainable.
The Impetus
Attracting impact investments is critical for the future of fishery recovery and expansion—these projects cannot rely on short-term loans and grants; they need longer-term finance that is committed to sustainability and responsibility. Development organizations, NGOs, and other noncommercial actors have a critical and catalytic role to play in crowding-in impact investment for sustainable fisheries by sharing risk with the private sector, promoting policy reforms, and funding interventions (through either concessional lending, grants, and/or technical assistance) with the intention of removing the barriers to impact investment.
[1] The Moringa Fund is a EUR 84 million investment fund that targets profitable large-scale agroforestry projects with high environmental and social impact in Latin America and Sub-Saharan Africa. The fund makes equity investments of EUR 4–10 million per project and adds value through its technical skills, environmental and social expertise, and global network.
[2] The Livelihood Funds are a series of investment funds created by Danone, which brings together investors—including Schneider Electric, Crédit Agricole S. A., Michelin, Hermès, SAP, CDC Climat, La Poste, Firmenich, and Voyageurs du Monde—to invest over EUR 40 million to finance nine on-the-ground programs for mangrove restoration, agroforestry, and rural energy.
The New Middleman: Service Provider and Quality Assure
“Middle man — the very term itself is associated with extra hoops to jump through, farmers being cheated, and limited value being offered to farmers and value chains generally. The idea of cutting out the middle man is frequently thought of as a selling point, casting these intermediaries as the “bad guys” of the value chain, worth avoiding whenever possible.” -Robert Anyang, Chemonics
Reading this recently on the Agrilinks blog, I subconsciously substituted “fisher” for “farmer” because the same is true for our marine resources. Our friends at Smartfish, in Mexico, led us to imagine how a “good middleman” could lead to a more equitable distribution of money along the value chain, i.e., greater social impact, while also promoting fishery health, i.e., environmental impact.
Parallel Approach to Fisheries Development
At Wilderness Markets, we believe that middlemen, whether they are called intermediaries, buyers, or agents, can provide a vital link in low governance fisheries. (We consider simultaneous governance and value chain development in emerging markets as a “parallel approach” to fisheries. You can read more about this here and here.) Processors and distributors committed to promoting responsible fishing can employ “good middlemen”. These can provide services and also act as service providers and informal fishing rules enforcers in geographies where official government management is lacking.
The Current Role of Middlemen (and Women)
Often viewed as part of the problem, in many instances independent middle buyers often take on a great amount of risk in the value chain. By paying cash for goods, they then take responsibility for ensuring they’re able to make a profit. This may require days of transport, during which any delays or excess heat cause spoilage and loss of value. They also take on the burden of finding the best paying buyer. In Indonesian tuna, snapper and swimming crab value chains, middle buyers also forward cash and supplies to the fishermen they purchase from.
Yes, some middle buyers take advantage of the harvesters they buy from – charging exorbitant interest, or not paying a fair amount for the product. This is an opportunity for competitors.
Better Use of Resources: The Role of Intermediaries in Parallel Development
Smart end buyers have started taking advantage of these vacuums as opportunities to assure quality, but this could be leveraged even more. So far we’ve seen a processor in Indonesia who keeps local middle buyer on their payroll; the community knows and trusts her, and she targets the best quality tunas. She pays well and in-cash; however, she does not let the community know she’s actually working on behalf of the processor because they fear the community may either not want to sell to her or may expect higher prices.
In Indonesia, fisheries are generally data poor and enforcement of regulations, if they exist, is lax in most fisheries. As is common, the fishing industry is as or more developed than fishery management. This situation is prime for parallel development, whereby industry, government, NGOs, and philanthropy work together to promote sustainable development of the fishery so that fishers can continue to harvest but not to the detriment of successive generations.
Localized data collection and management are increasingly popular ideas and are of great interest in the blue swimming crab (BSC) fisheries where exporters are trying to avoid overfishing due to its high costs, like smaller and fewer crabs, that may force companies to eventually relocate their operations. Efforts like this is one of the ways to increase enforcement in locations where the government has difficulty doing so. Middle buyers working on behalf of companies affiliated with exporters can promote responsible fishing is by not buying undersize or actively reproducing females.
Sumatran Fisherman with Blue Swimming Crabs
Using the Middle for Management
We recently worked with one US importer of Indonesian BSC (about 80% of Indonesian BSC is exported to the US) to create a mobile app that allows the picking plants, who are a first or second level “middleman”, to keep track of landings data, including size, fishing grounds, and weight. Among the benefits are the ability to avoid areas with undersize crabs and egg-bearing females. As both have lower quality meat, it means that not only are the plants more able to avoid this lower quality crab, but also that the crab population has more of an opportunity to regenerate. A win for the plants, the fishers (who can make more money) and the environment.
Working together to promote smarter management produces benefits for fishers and the environment which improves stability of the resource for the importers. Companies can gain more agency over the product quality as well as improve fishery management by employing middlemen as agents and intermediaries.
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Figure 1 Fishing vessels, California, USA
Figure 2 Women harvesting seaweed, Zanzibar, Tanzania
Figure 3 Women sorting catch, East Java, Indonesia
Figure 4 Honolulu and Waikiki Beach economy includes tourism, fishing and shipping, Hawaii, USA
