By Agroempresario.com

The seafood industry faces a pressing challenge with high levels of illegal, unreported, and unregulated (IUU) fishing, contributing to environmental damage, human rights violations, and economic losses. Investors are crucial in addressing these issues by promoting the adoption of traceability systems, which can enhance transparency and accountability throughout the seafood supply chain.

According to a new report from the investor network FAIRR, which represents investors managing $75 trillion in assets, improving traceability practices within seafood companies is an essential first step towards reducing IUU fishing and other harmful practices. The FAIRR Seafood Traceability engagement initiative was launched to analyze the traceability efforts of the world’s largest publicly traded seafood companies.

The report highlights the importance of collaboration between investors and seafood companies to drive improvements in traceability. “Through strengthened collaboration with global seafood investors, our ambition is to drive improvements in traceability as a first step, with the aim of reducing and ultimately eliminating harmful practices,” states the report.

While all participating companies recognized the need for better traceability to mitigate risks such as regulatory penalties and reputational damage, many still need to improve the quality and coverage of their traceability systems.

Traceability as a Financial Imperative

Laure Boissat, senior ESG analyst at the FAIRR Initiative, emphasized the financial benefits of improving traceability. “Increased supply chain traceability is a no-brainer from a financial perspective for companies and investors,” she said. “For companies, better traceability creates numerous benefits, in addition to improving operational efficiency. Improved supply chain traceability helps investors have more trust in their portfolio companies.”

Seafood is considered one of the most illegally produced commodities globally due to a fragmented and opaque supply chain. The report identifies several challenges faced by seafood companies in implementing traceability systems, such as insufficient data, reliance on outdated paper-based systems, and a lack of technical expertise.

For companies, poor traceability leads to operational inefficiencies like product recalls, food waste, and higher labor and packaging costs. For investors, this can result in revenue losses, reputational damage, and legal risks, including regulatory sanctions.

The Path Forward

The FAIRR Seafood Traceability engagement was launched in 2023 with support from various environmental and sustainability organizations, including the World Wildlife Fund and the United Nations Environment Program Finance Incentive’s Sustainable Blue Economy Finance Initiative.

The initiative worked with seven of the world’s largest seafood companies: Charoen Pokphand Foods, Marubeni Corporation, Maruha Nichiro Corporation, Mitsubishi Corporation, Nissui Corporation, Nomad Foods Ltd, and Thai Union. Only two companies—Charoen Pokphand Foods and Thai Union—have implemented strong, group-wide traceability systems. The remaining five companies either lack a traceability commitment or have partial systems in place.

Encouragingly, all seven companies engaged with investors, either through direct dialogue or formal responses to letters. Moreover, many of these companies are aligning with voluntary guidelines from the Taskforce on Nature-related Financial Disclosure (TNFD), which provides reporting standards for nature-related risks and opportunities.

While the progress is positive, the first year of TNFD reporting is often incomplete. Many companies’ assessments do not cover all supply chains or fully align with all TNFD recommendations. However, this marks significant progress, and the industry is expected to continue evolving as the TNFD releases its Fishing Sector guidance in early 2025.

The first phase of this engagement sets a baseline for future progress, and Phase 2 will commence in 2025, with an increased focus on improving seafood traceability across the globe.