Sustainable Aquaculture in a changing world Observations for consideration

1. Sustainable Aquaculture in a changing world Observations for consideration Scotian Pride, January 30, 2008 Trevor Swerdfager, DFO, AMD Canada: A Leader in Sustainable Seafood Production

2. THANK YOU for inviting me: I would like to offer you my take on … • The evolving market context for aquaculture • Successful company behaviours • What DFO is doing to help • And, anything else you would like to talk about … Canada: A Leader in Sustainable Seafood Production

3. Seafood markets are truly global in nature We never were an island: we are becoming more integrated with global markets every day • Overall demand for seafood is growing and diversifying globally • FAO projects continued rise in demand for seafood; • Consumers are open to a wider range of value added products • Market trends and policies in other countries have huge impact on Canada • EU is a major policy driver • USA emphasis on food safety will escalate hugely • Developments in Chile, Norway have major impact on Canadian salmon industry Canada: A Leader in Sustainable Seafood Production

4. Wild capture fisheries are the historic base for global markets… But are under increasing pressure • Many global stocks either fully or overexploited • Canada working to bring global attention to Illegal, Unreported and Unregulated (IUU) activity on the high seas • Bottom line is that major production increases from wild fisheries are unlikely and aquaculture will assist in meeting the global demand for seafood products Canada: A Leader in Sustainable Seafood Production

5. Globally, aquaculture has grown steadily – it is the only way to address the gap between seafood production and demand The Canadian aquaculture sector has grown steadily from its origin in early seventies • Value of production in 2006 was over $912Million – up from $35M in 1986. Aquaculture occurs in all provinces • Accounts for 14% of total Canadian fisheries production and 33% of its value • Over 16,000 Canadians are employed in the industry, 2/3 of all workers are under the age of 35 Canada: A Leader in Sustainable Seafood Production

6. Canada and world aquaculture Canadian seafood value, 2005 • Aquaculture provides nearly 50% of the world’s seafood • In Canada, value of aquaculture products accounted for 33% of the total value of seafood in 2006 • Canada ranked 16th in world aquaculture in 2006 (in terms of value) • Canada is the 4th largest farmed salmon producers (8%) after Norway (43%), Chile (35%), and UK (9%) Canadian seafood value, 2006 6 Canada: A Leader in Sustainable Seafood Production

7. Structural changes affected production in 2007 • Production declined 1.3% from the previous year to 170 thousand tonnes worth $846 m • Consolidations and closures were responsible for the decline • However, compared to 2000: • production in 2007 increased by 33% • value in 2007 increased by 39% Canada: A Leader in Sustainable Seafood Production

8. BC produce and east coast production ~ equal • Benefiting from species diversity, BC produced 80,430 t • On the East Coast, NB held the highest share (26%), followed by PEI (12%), NS (6%), and NL (5%) • Ontario, Quebec production fairly flat • The share of the Prairies is small but its production in 2007 increased somewhat Regional distribution of production, ‘07 Canada: A Leader in Sustainable Seafood Production

9. Salmon accounted for 69% of total production • Of the total 117,306 t of farmed salmon, BC produced 71, 370 t, NB 39,000 t, and NS 6,936 t • Mussels—second important species—contributed 13% • Trout and oyster production has been somewhat stagnant for the last 4 years • Clams, scallops and a few other minor finfish and shellfish contributed a sizable portion (7.2%) Canada: A Leader in Sustainable Seafood Production

10. A variety of external factors are shaping markets for farmed salmon Few of them are within our control or influence including: • Production problems in Chile • Growing EU attention to Ilegal, Unregulated and Unreported fishing – IUU regulations • World wide economic downturn • Increasing competition for labour • Canadian dollar • Etc… Canada: A Leader in Sustainable Seafood Production

11. But most importantly, a “New Environmentalism” is shaping the context for seafood production “The environment” has become a mainstream issue; it is a tide that will not reverse • Effects of environmental change are more obvious – eg. weather • Information age is resulting in more aware and engaged public • Strong expectation for government and industry to act, but… • Personal concern/guilt about the environment is growing • Corporate social responsibility “movement” continues to expand with growing sustainability focus • And individual consumers are translating the new environmentalism into market decisions Canada: A Leader in Sustainable Seafood Production

12. The ENGO “community” is undergoing significant change as well ENGOs are accelerating the new environmentalism and capitalizing on its rise • Scope of ENGO activity broadening to include human health, animal welfare, social justice • Shift in focus from government policy to market-based measures • Strategic, sophisticated and well-resourced global campaignstargeting major retailers • Focussed and well-marketed science papers • Forging new strategic alliances amongst themselves and with business Canada: A Leader in Sustainable Seafood Production

13. ENGO focus on sustainable seafood is growing ENGOs typically have three main messages: • World fish stocks being unsustainably harvested through destructive fishing practices that impact stocks and wider ocean ecosystems • Aquaculture further depletes wild stocks for feed, destroys habitat, spreads disease, pollutes the marine environment, threatens genetic diversity of wild fish • Retailers and consumers have a responsibility to take action Canada: A Leader in Sustainable Seafood Production

14. The media is clearly interested and continues to develop the “sustainable seafood story” Occasional headline news, plenty of trade journal coverage, food media, blogs… • Giant’s Seafood Makeover – WashingtonPost.com, July 24 • Fishing for Sustainability – BostonGlobe (boston.com), July 2 • Grocers' Rules Follow Wave Of Sustainably Farmed Fish - WashingtonPost.com, July 16 • Greenpeace gives grocery chains failing grade on seafood buying practices – Seattle Times, B1-Front, June 19 • Supermarkets asked to take seafood off shelves– CTV News, June 17 • Finding seafood that is harvested in a sustainable way won't make you crabby – Vancouver Sun, B1-Front, June 21 • Love seafood? You'll need the FishPhone, wallet cards, and DNA testing before dining – Maclean’s.ca, June 18 • US Supermarkets not doing enough to protect fish – Greenpeace Report – BostonGlobe (boston.com), June 17 Canada: A Leader in Sustainable Seafood Production

15. Retailers/distributors are the connector point between producers and consumers The ENGO focus is switching from government policy to retailer behaviour • Retailer procurement policies and product lines decisions are the main focus • A variety of sustainability profiles and lists used to define “acceptable” purchasing behaviour • High quality communications materials and spokespeople • Collaborative approach underlain with threats of market action etc • Bottom line goal is to change retailer behaviour in a manner that drives change in the seafood production industry Canada: A Leader in Sustainable Seafood Production

16. Retailers/distributors are caught between producer views, ENGO “facts” and consumer demands They are not seafood experts; they seek clarity, certainty and positive market image • Retailers frequently express desire for a “single standard” for sustainability • Many trust yet fear ENGOs; often they look to government for impartial view • They are adopting sustainability policies of their own – M&S, Walmart… • And they are conducting their own assessments – Connors, Walgreens • Bottom line, they are not going backwards on sustainability, their demands will grow Canada: A Leader in Sustainable Seafood Production

17. But really, in this market context, Canadian aquaculture companies have choices to make Companies will likely fail if they choose to: • Debate the definition of “sustainablity” endlessly and hide behind the uncertainty the term gives rise to • View “the environment” as a fad and ENGO’S as enemies that can be vanquished • Meet environmental standards to the letter and nothing more • Cut marketing and communications budgets • Remain a “closed shop” sharing little information or data beyond annual reporting requirements • Underestimate Chile Canada: A Leader in Sustainable Seafood Production

18. But companies will obviously want to opt for success not failure Companies will likely succeed if they choose to: • Substantially surpass environment standards and regulations • Demonstrate and document superior environmental performance • Secure third party certification for 100% of their operations and products • Become highly transparent to the public, to regulators and to markets • Communicate effectively with their neighbours, with markets and with governments • Work together collegially as and strengthen their industry associations Canada: A Leader in Sustainable Seafood Production

19. DFO’s Sustainable Aquaculture Program is designed to create the conditions for industry success Our goal is to foster a stronger, larger more sustainable aquaculture industry across Canada by: • Improving the governance and regulatory regime for the industry • Substantially improving the science base for environmental regulation of the industry • Catalysing and supporting industry innovation • Supporting the development of certification systems and expanded market access Canada: A Leader in Sustainable Seafood Production

20. Regulatory reform is critical to industry efficiency and expansion In 3 years time, Canada will be viewed as a world leader in the environmental management of the aquaculture industry • Immediate priorities are to: • Develop and environmental management framework for ministerial signature in fall, 2009 • Modernize the Introductions and Transfers regime • Integrate with Health of Animals Act regs • Address aquaculture issues under the NWPA • Complete CSAS process re: Pathways of Effects for common risk assessment Canada: A Leader in Sustainable Seafood Production

21. Regulatory science will like at the core of our program In three years time, research results will directly support aquaculture decision making • Lead and coordinate the CSAS Aquaculture POE review workshop • Focused development of PARR priorities, objectives and governance to address key issues such as sea lice • Ecosystem carrying capacity and ecosystem and far-field indicators of aquaculture effects on fish habitat • Core funding for Centre for Integrated Aquaculture Science • Integrated Multi-Trophic Aquaculture (IMTA) research and support for the development of an NSERC Canadian IMTA research network • Ongoing delivery and alignment of ACRDP with other programs Canada: A Leader in Sustainable Seafood Production

22. Innovation, technology development, product diversification are essential to a dynamic industry: AIMAP provides catalytic support for innnovation • 26 projects were approved for 2008-09 • Total of $4.7M in federal funds levered $29M in total project activity • Call for proposals for 2009-10 is on our website now • Priorities, applications guidelines etc are all there • Bottom line goal is to support industry innovation not conduct “new research” Canada: A Leader in Sustainable Seafood Production

23. We need clear national strategies for the major aquaculture sectors “Sector strategies” are in development to: • Chart a strategic direction for finfish, shellfish, freshwater • Guide government management action and priorities • Set out progress measures and means for reporting • Drive the establishment of provincial strategies for each sector as well • Communicate to the world re: where aquaculture is going in Canada Canada: A Leader in Sustainable Seafood Production

24. And we must be able to report on our progress In 3 years time we will have “sustainability reports” in place • Established performance indicators to be reported against • Reports will likely be by sector • They will chart progress toward sustainability; they are not judgements or “report cards” • Strong reporting will promote transparency, enhance our positioning re: certification Canada: A Leader in Sustainable Seafood Production

25. Certification is the wave of the future We need systems that work for Canada and for markets • Detailed analysis of various standard systems is under way in DFO • DFO has provided $105k to CAIA to form an “Aquaculture Standards Forum” to bring the industry together around certification • Will improve collective understanding of certification • Working groups will focus on sectors • Intent is to better position CAIA members to respond to and LEAD re: certification • FAO process is continuing and will result in global guidelines for aquaculture certification; DFO is very active there • Work is under way to develop an organic standard for aquaculture, target completion date is spring, 09 Canada: A Leader in Sustainable Seafood Production

26. We collectively need to communicate more proactively with the public and with markets DFO and industry are launching a major Sustainability Outreach Strategy • Initial training session for US based Canadian Trade Commissioners December 10th • Outreach sessions will be organized by all 15 Consulates in the US to convey information to market leaders and learn from them • Expanded presence at Boston, Brussels and San Diego trade shows • Training sessions and outreach with EU based DFAIT staff, possible sessions with Euro-markets • We can’t afford to remain passive; we need to push information to markets, not just individual customers or organizations Canada: A Leader in Sustainable Seafood Production

27. The federal government strongly supports aquaculture and is putting its money where its mouth is The challenges before the industry are great but: • The industry is Canada is strong and is built on a very solid foundation • It has tremendous market opportunities as a sector • The sector can and will compete well with the rest of the world • And we are Canadian! Canada: A Leader in Sustainable Seafood Production

28. Questions / Comments?