In this presentation we will be taking a cursory look at market benefits of seafood
ecolabelling. The goal of ecolabelling is to harness the power of the market to achieve
environmental goals, and, in the case of seafood ecolabelling, to promote sustainable
fisheries. Seafood ecolabelling may not only apply to fisheries, but may also apply
to aquaculture. During this presentation I will generally be speaking about capture
The premise behind ecolabelling as a programme is that when offered a choice between an ecolabelled product and a non-ecolabelled product, some consumers might prefer the ecolabelled product (e.g. seafood from sustainable fisheries). This might lead to things such as a price premium for the ecolabelled product and/or increased market shares. It might also allow access to markets to which products from certified fisheries previously did not have access.
The sustainable seafod movement
My first goal in this presentation is to put ecolabelling in the context of the larger sustainable seafood movement. The sustainable seafood movement is taking place in only a few of the worlds major seafood markets. Earlier presentations in this symposium showed us the worlds major producing and consuming nations. We found that a significant portion of seafood exports are coming from the developing world, but are being exported to three major markets: the European Union (EU), the United States of America (USA) and Japan. The sustainable seafood movement is active in the USA and the EU, primarily, although also in the small markets of Canada, Australia and New Zealand. The sustainable seafood movement uses the market, via consumers, chefs and the supply chain, to influence demand for seafood in an effort to affect ultimately management of either fisheries or aquaculture of a variety of species. Generally, these movements are initiated and run by environmental non-governmental organizations (NGOs), or at least private non-profit organizations. Among the tools being used are: boycotts, consumer guides to sustainable seafood (such as wallet cards), and labelling. A detailed analysis of the costs and benefits of each approach appears in Roheim and Sutinen (2006).
What are these boycotts? Well, in the USA it is a little bit more of an issue than in the
EU, but in the USA we have had a couple of major boycotts. Give swordfish a break
was a fairly well known boycott. This was promoted by an environmental group called
National Resource Defence Council and a public relations firm called SeaWeb. The
issue of concern was global overfishing of swordfish, fishing of juvenile swordfish,
and importation by the USA of products from juvenile swordfish. One of the intents
of the boycott was to pressure the USA government to make changes in the fishing
management related to swordfish and also imports of swordfish, both domestically and
internationally. There were claims of success by the sponsors of the boycott, in that the USA government did make changes to fisheries management, although it is not clear
what the actual market effects of the boycott were (SeaWeb, 2002).
There continues to be another boycott in place aimed at consumers and the supply chain to reduce their consumption of Chilean Sea bass (i.e. Patagonian toothfish). This is being led by an environmental group called National Environmental Trust (National Environmental Trust, 2002). There have been retail supermarket chains and restaurants that have taken the product off their shelves and menus. The market impacts of the boycott are not clear, and it is not clear that the boycott is being effective at the environmental level.
Another boycott, focused on chefs more than on consumers, has been related to Sturgeon caviar from the Caspian Sea.
The interesting economic questions regarding boycotts are many, and include:
- do they have a market impact?;
- do the market impacts cause the boycotts in turn to have an environmental impact?; and
- how are the costs of the boycotts distributed among those in the fishery who are practicing poor fishing practices versus those who are practicing good fishing practices?
With respect to the last question in particular, only costs are put onto the fishing
industry (e.g. a stick as opposed to a reward or carrot). So if any members of the fishing
industry in question are in fact fishing in the fishery sustainably, they are not being
rewarded for their practices, but rather punished.
Consumer guides to sustainable seafood products, such as wallet cards, are something that you find in Europe, the USA and other places where environmental groups take it upon themselves to provide the consumers with a list of suggestions of what they should eat and what they should avoid. Some of you are probably familiar with these. One that is produced by the Monterrey Bay Aquarium in California has rather small print so you may not be able to see it, but on the right it says Make choices for healthy oceans and it says You have the power so this is what they are telling consumers Your consumer choices make a difference, Buy seafood from the green or yellow columns. It is based on a traffic light system. Buy seafood from the yellow or green columns to support those fisheries and fish farms that are healthier for our oceans, wildlife and environment. The cards help the consumer identify which seafood product they should or should not buy, including products from both capture fisheries and aquaculture.
Some of the issues with these cards are their lack of specificity. For example, Atlantic cod appears on the red list consumers are being told not to buy Atlantic cod. Theres no distinction here of where that cod comes from. It could come from Canada, from the North-Eastern USA or it could come from Iceland or Norway. The consumers are not told that if the cod comes from Iceland, then it is permissible to buy it because Iceland has an excellent management system and cod stocks are sustainable. There is no distinction as to who is doing a good job of fishing, managing their fisheries and who is doing a bad job. Further down the list, farmed shrimp and imported wild-caught shrimp is on the red list. Again, there is no distinction as to who is doing a good job and who is doing a bad job, so even if you are doing a good job, you are not being rewarded for it.
So into this mix I toss ecolabelling and assessing the benefits of ecolabelling. If one views the sustainable seafood movement, a distinction then of ecolabelling programmes relative to the other approaches is that ecolabelling rewards sustainable fisheries or good aquaculture practices certified to scientifically-approved standards. In contrast to the previous approaches, good management practices of fisheries for Chilean sea bass, Atlantic cod, and others that lead to sustainable fisheries can lead to certification and ecolabelled products that potentially reward the good fisheries within these species, as opposed to punishing the good fisheries with the wallet card or boycott approaches. The same can be true for aquaculture certification.
A good ecolabelling programme ought to be based on an independent third-party
certification process, and be transparent. It should include, and generally would
include, stakeholder involvement from all sources, industry, environmental groups and
scientists. It would include objections procedures, so that you can have an objection to
a ruling from any particular party, and the standards would be based on sound science
consistently applied. A good ecolabelling programme would be 100% compliant with
the FAO guidelines for ecolabelling.
Of course, the programme that we all know, because it exists, the only major international programme for capture fisheries, is the Marine Stewardship Council (MSC). I think everyone knows it was established in 1996, it uses independent thirdparty certification firms to assess fisheries against its principles and criteria and as of right now there are upwards of 40 fisheries that are either certified or in the assessment process. This does not include fisheries that are in the pre-assessment process, which is a confidential process. The standard is made up of three principles. The fishery must have a healthy and productive stock, ecosystem function must meet certain criteria, and there must be effective management. The standard has roots in the FAO Code of Conduct for Responsible Fishing (FAO, undated).
Now of course the questions that everyone wants answered are What are the market benefits from fisheries certification? and Does the consumer actually reward those that have sustainable fishing practises and who get certified? As of right now, and based on the market research seen in the paper from Denmark (Karen Bruns, this volume), it is not clear that the consumers themselves are driving the demand for ecolabelled products. Rather it seems, in particular in Europe, where most of the action is happening with respect to ecolabelled products, that retailers and processors are creating the market. In other words, the supply chain is creating sustainable seafood products and providing it to the consumers.
Corporate social responsibility
So the question becomes: What is the motive behind the supply chain providing
sustainable seafood to the consumer in the absence of consumer demand? One
hypothesis might be corporate social responsibility (CSR). Portney (2005) defines
corporate social responsibility as a consistent pattern of private firms doing more
than they are required to do under applicable laws and regulations governing the
environment in the communities in which they operate. It is reasonable to begin with
an investigation of the potential drivers of corporate social responsibility. What is
motivating major corporations such as Findus in Sweden, Frosta in Germany, Youngs
in the UK, and Walmart in the USA to sign up to procuring sustainable seafood? What
are some of the things that are driving these companies to supply ecolabelled products,
most particularly MSC-labelled products from MSC-certified fisheries?
One might hypothesize that it is a minimization of supply risk. That is one possibility. Unilever, when they first joined with World Wildlife Fund to create the MSC, had as one of their stated objectives that they were concerned about the future of supply. If fisheries continued to be overfished, the company would not have anything to supply to their customers. So there was an issue of assurance of future supplies of stocks of fish at a reasonable cost. Thats certainly addressing suppliers risk. More recently in Europe, there have been some issues related to purchase of illegally-caught fish. Reportedly vessels were catching cod illegally that then made its way into the supply chain of well respected processors and brands (Leigh and Evans, 2006). So companies are now requiring increased traceability in the supply chain and demanding that boats provide proof that they caught their fish legally. These are additional benefits of sustainability certification and chain-of-custody certification. The Patagonian toothfish fishery certified in South Georgia by the MSC has a very rigorous chain-ofcustody certification, in order to make sure that no illegal, unreported and unregulated (IUU) fish are entering the supply chain of Patagonian toothfish.
Another possible benefit brought about by CSR relates to public relations issues. ASDA in the UK was probably not particularly happy when Greenpeace protested on their rooftops as ASDA customers were coming into the store (Cherry, 2006). Basically, why was Greenpeace there? If you are not familiar with that story, Greenpeace was protesting that ASDA was selling some species believed to have been unsustainably harvestedparticularly skate, dogfish, Dover sole and ling. Rooftop protests can create public relations nightmares. Shortly after this, coupled with subsequent press releases aimed at ASDA by environmental groups, ASDA adopted sustainable seafood buying practices, and announced it would follow its parent company, Walmart in the USA, in sourcing all its wild-caught fresh and frozen fish from fisheries certified by the MSC within the next three to five years (IntraFish Media, 2006).
Other possible reasons for pursuing a policy of CSR include customer loyalty, and the creation of a more loyal workforce. In addition, in corporate reporting, environmental responsibility and social responsibility are important sections of annual reports, particularly in Europe.
Market benefits from sustainable seafod
Assessing market success, one question frequently asked is What are the market
benefits of fisheries certification and sustainable seafood? Put in another fashion: Is
there a price premium for sustainable seafood? This is a very difficult question to
answer, for a number of reasons, and in fact may not be the most appropriate question,
as market access may be a more appropriate market benefit to assess (or reduction in
supply risk or other market benefits). However, price premiums are what most people
focus on as the measure by which they wish to quantify success of certification.
If we look specifically at the MSC, MSC-labelled products are sold in more than 25 countries worldwide (MSC, 2006). Retail sales, in US dollar terms, showed a 76 percent increase between 2004/2005 and 2005/2006, to US$236 million.
Now let us look at price premiums. There are several levels of the market one can investigate to ascertain the presence of price premiums: the retail, wholesale or ex-vessel levels. In our research, we have purchased scanner data of the UK market from Information Resources Inc. The UK, Switzerland, and Germany are the leading markets in terms of numbers and volumes of MSC-labelled products sold that can be tracked with retail scanner data. Scanner data provides weekly unit sales and prices on a brand-level basis.
The leading MSC-certified products in the UK market are pollock, salmon, hake and hoki. We are trying to establish whether there a premium for these products. We have just obtained the data, so below are three graphsone each for frozen processed salmon, hoki and Pollockto try to determine in a qualitative fashion if there are price premiums. This is not statistical analysis, but just cursory glance.
Below (Figure 1) is a graph that shows retail prices for three different frozen processed wild Alaska salmon products, two by Birds Eye and one which is a private label (unknown source, store own-brand) sold in the London, UK, metropolitan area from 11 February to 4 November 2006.
Figure 1: Comparison of salmon retail prices in a supermarket in London, UK,
at fortnightly intervals in 2006
Unit Retail Price, Frozen Processed Salmon in London
11 Feb - 4 Nov 2006
The two Birds Eye products are both labelled with the MSC ecolabel. The prices are
adjusted to be on a per-100-gram basis. Generally, the two Birds Eye (MSC-labelled) products have higher prices than the own-label (non-MSC-labelled) product, with the
exception of three different periods. These prices do not account for promotions that
may have occurred in the markets.
The next graph (Figure 2) shows retail prices for frozen processed pollock fillets compared to products that the dataset terms whitefish, but which are highly likely to be Pollock. The two Youngs pollock products are MSC-labelled, and show higher prices than the other non-MSC labelled products. Again, these prices are on a per-100- gram basis.
Comparison of prices (two-day basis) for three fish categories in supermarkets
in London, UK, in autumn of 2006
Unit Retail Price Frozen Processed Pollock and Whitefish - London
26 Aug to 4 Nov 2006
Finally, the third graph (Figure 3) shows prices for hoki from September to April 2006. There are some issues with hoki. A Birds Eye hoki product was labelled with the MSC logo, as well as a Youngs product. The prices in between are unlabelled ownbrand hoki products. There were some marketing issues related to hoki, both in terms of positioning it as an alternative whitefish to cod and haddock, and quality issues suffered by Birds Eye in processing of the product, which had an impact on the success of the launch of this species in the UK market (Porritt and Goodman, 2006). Youngs appears to have been able to capture a premium from the MSC logo, while Birds Eye did not.
Comparison of retail prices of four hoki products, both commercial and own-label,
in London, UK, from September 2002 to April 2006
Unit Retail Price, Frozen Processed Hoki in London
Sept 2002 - April 2006
The question remains: if there is a retail price premium, is there also a transmission of that premium down the supply chain to a wholesale premium and further to the ex-vessel level? We do not know. Research continues. We do not even know in any rigorous fashion if there is a retail premium yet. What was presented above is only a snapshot, for only one area in a country, and not conclusive.
The purpose of ecolabelling programmes is not to just provide a market benefit, but
ultimately it was intended to provide an environmental benefit. The point is to improve
the environment, to create sustainable fisheries if they do not already exist or to reward
those that do exist. So do market benefits lead to environmental benefits?
The MSC recently posted an environmental benefits study on its website, conducted by Marine Resources Assessment Group (MRAG) (Agnew et al., 2006). This study looked at the environmental benefits generated from certification of fisheries. Some selected outcomes from this study are that in the case of the certification of the New Zealand hoki fishery, habitats and trawl grounds have been mapped. For the same fishery there has been increased observer coverage on the reliability of detection of the seal mortality that has resulted. In the case of the Western Australian rock lobster fishery, there has been a reduction in seal mortality as a result of the assessments. In the Patagonian toothfish fishery of South Georgia, there has been a reduction in hooks that have been discarded, and a reduction in albatross mortality.
Of course, environmental benefit is not only about improving fisheries that have met certification standards, it is also about providing market incentives to improve fisheries that do not currently meet the standards. One of the things that we have seen is that the Alaska pollock has been successful now that it is certified, evident in terms of increased market access into markets that it did not have previously. It could be concluded that the reason the Russian Pollock fishery has now entered into preassessment which required making changes to their fishery management institutions and policies to improve their practicesis the incentives created by losing high-value markets to the Alaskans post-certification (Rogers, 2007).
In conclusion, we have to recognize that the sustainable seafood movement is here to stay. Some of the alternatives approaches to market-based mechanisms, such as boycotts and consumer choice guides, are what I would classify as less preferred to ecolabelling, for a host of reasons. Market benefits of ecolabelling are as yet unproven from the rigorous statistical perspective of an economist, but the behaviour of corporate social responsibility on the part of many fisheries, processors, retailers and others in the supply chain of the international seafood industry seems to indicate that there are market benefits in a sense broader than simple price premiums. In the future, quantification of those benefits will be of interest to many: industry, environmentalists and policy-makers alike.
Agnew, D., Grieve, C., Orr, P., Parkes, G. & Barker, N. 2006. Environmental benefits
resulting from certification against MSCs Principles and Criteria for Sustainable Fishing.
Final Report. Available for download at: www.msc.org.
Cherry, D. 2006. Rooftop protest forces ASDA to drop fish. IntraFish Media, Jan. 17.
FAO [Food and Agriculture Organization of the United Nations]. undated. Code of Conduct for Responsible Fisheries. See: www.fao.org/DOCREP/005/v9878e/v9878e00.htm
IntraFish Media. 2006. ASDA to switch to MSC-certified fish. 27 March.
Leigh, D. & Evans, R. 2006. Cod sold in hundreds of chippies linked to Russia black market. The Guardian (UK), 20 Feb.
MSC [Marine Stewardship Council]. 2006. Annual Report 2005/2006. London, UK.
National Environmental Trust. 2002. Boston and southern New Hampshire food professionals take a pass on Chilean Sea bass. See: www.net.org/proactive/newsroom/ release.vtml?id=26415
Porritt, J. & Goodman, J. 2005. Fishing for Good. Report commissioned by Unilever. Forum for the Future. See: www.forumforthefuture.org.uk.
Portney, P.R. 2005. Corporate social responsibility: an economic and public policy perspective. pp. 107131, in: B. Hay, R. Stavins and R. Vietor (editors). Environmental Protection and the Social Responsibility of Firms: Perspectives from Law, Economics and Business. Resources for the Future, Washington, DC, USA.
Rogers, L. 2007. Alaska Pollock group says Russian MSC approval unlikely. IntraFish Media, 30 April.
Roheim, C.A. & Sutinen, J.G. 2006. Trade and Market-Related Instruments to Reinforce Fisheries Management Measures to Promote Sustainable Fishing Practices. Report prepared for the International Centre for Trade and Sustainable Development, Geneva, Switzerland, and the Organisation for Economic Co-operation and Development High Seas Task Force, Paris, France. See: www.high-seas.org.
SeaWeb. 2002. Give Swordfish a Break! See: www.seaweb.org/programs/swordfish/ index.html