Sustainable seafood in the ESG spotlight

Fisheries Act

Sustainability and Environmental, Social and Governance Alert

By:

Seafood sourcing can pose serious challenges for companies looking to improve their environmental, social and governance (ESG) performance. Determined plaintiffs seize on questionable “sustainable seafood” claims, while government policy increasingly targets imported seafood sourced with forced labor. The mounting potential for severe legal, financial and reputational risks illustrates a growing trend showing how seafood sourcing implicates ESG.

A putative class of consumers recently sued Red Lobster in the Federal District Court for California’s Central District, alleging that Red Lobster used deceptive advertising and made false disclosures about sourcing sustainable lobster and shrimp. Elsewhere, the US Customs and Border Protection has issued five Withhold Release Orders against seafood harvesting vessels and detained seafood suspected of being sourced with the use of forced labor in recent years. Allegations included physical violence, debt bondage, withheld wages, and abusive living and working conditions.

Public sentiment has also awakened to risks associated with unsustainable seafood sourcing. A 2018 survey conducted by the Marine Stewardship Council found that 72 percent of global seafood consumers want to consume seafood from sustainable sources to save the oceans. Companies are responding by announcing their commitments to addressing the problem, but many rely on third party certifications. Activist campaigns are garnering increasing attention with exposé-style documentaries streaming directly into consumers’ homes. All this has fueled ballooning demand for sustainable seafood and seafood harvested without the use of forced labor.

Seafood sourcing thus implicates each of ESG’s three dimensions. Environmentalists cite harms from unsustainable practices, including dwindling fisheries in regions around the world, sea bottom impacts from trawling and more. Meanwhile, the “S” in ESG calls on companies to source socially sustainable seafood – particularly seafood imported into the US from regions where forced labor, human trafficking and labor rights violations, including the use of child labor, are broadly associated with commercial seafood harvesting. Sourcing is a governance issue because a company’s ability to respond to these challenges requires programming good ESG practices into the company’s DNA and not just consigning it to a CSR silo.

Examples of good practices for companies trying to eradicate forced labor from supply chains and limit related liability include:

  • Reviewing existing supplier code of conduct to ensure its adequacy for addressing the use of forced labor by both direct and indirect suppliers
  • Creating internal processes, such as periodic audits and site visits, to track the effectiveness of ESG commitments
  • Considering the benefits of meaningful and consistent engagement with multi-stakeholder initiatives targeting the seafood industry

More generally, companies looking to turn ESG risks into opportunities should strive to understand the relevant impacts and engage affected stakeholders in their seafood supply chains. Those efforts will inform the company’s materiality assessment, on which first-class ESG performance is built. To be effective, that program should be incorporated into company policies at every level of decision making, to the extent possible. Disclosure is also key. As recent trends in the seafood industry highlight, consumers and investors increasing insist that ESG disclosures be meaningful, useful, comparable – and accurate.

For more information on these and related topics, contact the authors or your DLA Piper relationship lawyer. For sector-specific ESG insights from DLA Piper, please visit our Sustainability and Environment, Social and Governance portal.