5 minute read
Francois Mosnier
Out of excuses
Traceability should be the top priority for seafood producers
The Covid-19 pandemic brought to the fore a previously under-addressed problem for companies and, specifi cally, their supply chains: their lack of traceability.
While many management teams are resisting implementing traceability systems due to their cost, they are no longer simply a “nice to have” – in 2022, they are essential for survival. What’s more, they can actually help improve profi tability – particularly in the seafood industry.
And now is the perfect time for seafood companies to implement traceability within their supply chains. Below, we explain why.
Sustainability and transparency
Importantly, traceability systems enable companies to track their products throughout the entire supply chain, from origin to use, and provide crucial identifi cation and measurement.
For the seafood industry – where claims of sustainability cannot generally be guaranteed due to a current lack of sea-to-plate traceability, with companies along the supply chain typically unable to reliably identify seafood products, track their locations and any treatments or transformation – this would be particularly valuable.
Industry-wide implementation of traceability would not only help verify sustainability claims, but also avoid exposure to illegal, unreported and unregulated fi shing and reduce product recalls and investor risks.
By gathering data and knowledge across the entire supply chain, management teams are given the opportunity to share data with stakeholders, providing the crucial transparency needed to verify sustainability claims.
Crucial risk management
Since the onset of the Covid-19 pandemic, the interconnectivity of global supply chains has become painfully obvious. However, in a mapping of the seafood processing universe, comprising more than 4,000 companies, Planet Tracker discovered that there is a stark lack of interoperability between companies due to the current fragmentation of seafood processing supply chains – meaning that traceability is hindered by incompatible systems and poor data capture and management.
Increasing profi tability
While corporate management teams may recognise that traceability systems are desirable, they must also realise that the investment and operational costs can provide a promising return.
Planet Tracker’s recent research demonstrates that the typical seafood processor that implements a traceability solution can double EBIT (earnings before interest and taxation) margins.
This higher profi tability results from fewer product recalls, lower product waste and a decline in legal costs, which mainly explain the three-percentage points margin gain. Interestingly, our research showed that it was rarely driven by receiving an environmentally sustainable premium for the seafood product – rather, it can create greater market access, as retailers are increasingly only permitting certifi ed environmentally sustainable products.
Preparing for regulatory compliance
Yet another benefi t of (and, indeed, need for) implementing traceability systems lies in regulatory compliance. In the US for instance, the Seafood Import Monitoring Program (SIMP) is a risk-based traceability program that requires importers of certain seafood products to provide key data, from the point of harvest to the point of entry into US commerce. On 4 February, through the COMPETES act, the US House of Representatives passed a bill to expand the SIMP program to all species – it covers only thirteen species for now. Other markets, including the UK, EU, and Australia, are not far behind.
The time is right
For companies that have not yet invested in traceability, the current economic environment provides an ideal window to integrate a tracea-
Clockwise from opposaite left: Shrimp in the market; Fresh seafood on crushed ice; Fish in net; Frozen gilt-head sea bream; Francois Mosnier; Trawler nets; Fishing trawler bility system into a corporate’s infrastructure.
Rising infl ation – which some central banks believe will be temporary – could be a convenient reason for companies to push through price increases in excess of their increased cost base, effectively covering the traceability system’s operating costs. And, as CFOs and Treasurers who have to borrow to fund a traceability system will know, corporate debt rates remain low in many jurisdictions.
Out of excuses
One of the major excuses for the lack of implementation is cost. While expenses will vary considerably depending on the size and complexity of the system required, it is worth noting that in some instances, there is no cost.
Organisations such as the Global Dialogue on Seafood Traceability (GDST) have developed traceability standards and materials at no cost to the user, leaving the corporate to pick up “just” the IT costs.
Actually, rather than a net cost, traceability implementation can provide signifi cant cost savings, by drastically reducing direct costs of recalls. These typically include notifi cation (to regulatory bodies, supply chain, consumers), product retrieval (reverse logistics), storage, destruction, unsaleable product and the additional labour costs associated with these activities, as well as the investigation of the root cause.
Traceability also helps reduce litigation costs, the costs from any agreed or mandated governmental oversight post incident, lost sales and the impact on the company’s market value and brand reputation.
When these factors are considered alongside the macroeconomic environment of low corporate debt costs and higher infl ation, the case for traceability is compelling.
traceability standards and materials at no cost to the user, leaving the corporate to pick up “just” the IT costs. signifi cant cost savings, by drastically reducing direct costs of recalls. These typically include notifi cation (to regulatory bodies, supply chain, consumers), product retrieval (reverse logistics), storage, destruction, unsaleable product and the additional labour costs associated with these activities, as well as the investigation of the root cause.
François Mosnier is Head of Oceans Programme with Planet Tracker, an award-winning non-profi t fi nancial think tank aligning capital markets with planetary boundaries. Created with the vision of a fi nancial system that is fully aligned with a net zero, resilient, nature positive and just economy well before 2050. Planet Tracker provides insightful, applicable information to fi nancial professionals to assist investment decision-making through datadriven and fi nancially- grounded research.
