Governing aquaculture sustainability through global value chains
Simon R. Bush MARE People and the Sea Conference VIII, Amsterdam, 24-27th July 2015
Salmon farming in Hvannasund in the Faroe Islands. IMAGE: PATRICK DIEUDONNE/ROBERT HARDING/CORBIS
The blue ‘boom’
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14019
61
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%
Prod
uctio
n (m
illio
n t)
Aquaculture
Capture fisheries
Aquaculture's % contribution to globalfood fish supply
Year
24% 197% 78% 28% 13%
10 year % change
The blue ‘bust’?
Aquaculture hit list Disease Habitat Loss Biodiversity Effluent Feed Labour issues
PRIVATE GOVERNANCE
Limits to market-based regulation?
Bush et al. 2013
Limited market demand
Narrow take on sustainability Issues more relevant to commercial production, and strong farm level focus
Low capacity/Self-selection Danger of not focusing on those with larger (potential) sustainability gains
Dependencies of small-holders Reliance on public and private intermediaries to improve
Questions
1. What characteristics of value chains enable or constrain market-based improvements in aquaculture?
2. How do these characteristics, and opportunities for improvement, differ between species?
3. What alternative market-based approaches could strengthen improvement?
Global value chain analysis
Beyond supply and demand, cost and benefit
Focus on institutions, relations and norms that structure economic practices of firms
Includes questions of environmental and social performance
Can identify new arrangements for improving equity and performance
CABs
LABEL
PRODUCER
Product
CERTIFIED CHAIN
ACTORS
CONSUMER
Gibbon et al. 2008; Bush et al 2014
Governance as coordination
A. Complexity of transaction Information and knowledge transfer required to sustain transaction, particularly with
respect to product and process specifications.
B. Ability to codify transaction Extent information and knowledge codified and, transmitted between the parties to
structure product type.
C. Capabilities of suppliers Capacity of suppliers to meet requirements of the transaction, including public
support/
D. Risk profile Degree of vulnerability faced by a supplier to deliver product, and opportunities to
transfer risk.
E. Spatial configuration of production Location of suppliers in relation to each other, inputs and infrastructure.
Adapted from Gereffi et al. 2005
Price
Lead firm
Turn key supplier
Material and component
suppliers
Lead firm
Relational supplier
Material and component
suppliers
Lead firm
Captive suppliers
Integrated firm
MARKET MODULAR RELATIONAL CAPTIVE HIERARCHY
Gereffi et al. 2005, Review of International Political Economy
Degree of chain integration
0% 20% 40% 60% 80% 100%
1
2
3
4
5
Salmon Shrimp (Penaeus monodon)
Num
ber o
f fun
ctio
ns in
va
lue
chai
n
Sample of 396 companies registered on Sea-Ex. Functions: Buyer, processor, wholesaler, exporter, agent.
87
n
366
441
276
135
Salmon
Large number of vertically integrated firms
No major species shifts, production is highly uniform
Subsidies and risk transfer in place
Professionalised production, seed and feed
Problems and capabilities internalised by companies
Social issues – minimal (labour union issues in Chile)
Area management driven by disease
Emergence of industrial coalitions
Shrimp
Low number of vertically integrated firms
Major species shifts, production is highly differentiated
(Implicit) subsidies and weak or no risk transfer
Mixed professionalization of production, seed and feed
Capabilities externalised by companies
Social issues – major issue (community standard, labour)
Integrated agro-ecologies – weak area based management
Emergence of national standards
Type of coordination
Factors Salmon Expected Shrimp Expected
1. Complexity of transactions
High High High Low/High
2. Codification High Low High High
3. Capabilities High Low Low High/Low
4. Risk Low High
5. Spatial connectivity
High Low
Coordination type
Modular Vertical integrated
Captive Market, modular, relational
So what does this tell us?
Shrimp Low producer capabilities should push to vertically integration, but high levels of risk constraining lead-firm investment. Salmon
High producer capabilities should push towards market coordination, but high capacity for codification leads to integrated industrial organisation
Certification paradox
MARKET HIERARCHY We assume certification
can strengthen capabilities of producers on market ...
... but individual farmers tend not to have capabilities and require support and/or integration
Certification is not market-based because producers engaging in sustainability require high levels of external
support
Area-based approaches
Standards and auditing practices being developed
From vertical horizontal capabilities between farmers
Beyond farm scale to include social and environmental improvement (?)
Open up opportunities for risk transfer and financing (?)
Integration with state regulation (?)
Firm-level certification
Lead firms should be seen as objects of regulation rather than drivers of coordination and sustainability
Strategies of firms – portfolio or dedicated firms?
Invest because of increased brand risk, or need to maintain stable supply?
More relational outcomes, such as aquaculture improvement projects.
Attention needed to ensure that these downstream firms enforce these AIPs
Sampson et al. 2015
Conclusions
Limitations of market-based approaches can be related to the structure and function of value chains
Innovations in market-based approaches are needed that strengthen capabilities of producers, manage risk, and regulate firm actors
Species differ – so value chain profiling is needed
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