Environmental & Social Information • Mar 19, 2018
Environmental & Social Information
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www.bakkafrost.com/sustainability
| Bakkafrost at a glance | 3 | |
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| Our sustainability story so far | 4 | |
| Our vision for healthy living | 5 | |
| Healthy business: Our commitments | 7 |
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| Healthy business: Growing with our customers | 10 |
| Healthy people: Our commitments | 11 |
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| Healthy people: Supporting our best people | 14 |
| Healthy salmon: Our commitments | 15 |
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| Healthy salmon: Thriving side-by-side | 18 |
| Healthy environment: Fashion meets salmon farming | 24 |
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| Healthy environment: Our commitments | 19 |
| Healthy communities: Our commitments | 25 |
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| Healthy communities: Taking on plastic pollution | 27 |
This document gives an overview of Bakkafrost's new sustainability plan, including our new framework and key 2018-2020 commitments. It also reviews key progress made to date and performance for the reporting period 1 January to 31 December 2017. As the biggest salmon farmer in the Faroe Islands, we believe we have a responsibility to manage and report our impacts on the local economy, society and the environment. Our new plan builds on the work we have been doing with a renewed ambition to become a leader in our field.
To find out more, please visit www.bakkafrost.com/sustainability
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HAVSBRÚN
Salmon, packaging, fishmeal, oil and feed producer
Location: Faroe Islands Headquarters: Glyvrar, Eysturoy Listed on: Oslo Børs Brands: Bakkafrost and Havsbrún
1,104 employees (960 full time equivalent) Business to business Longest integrated supply chain in the industry
FISHMEAL 450 tonnes of fishmeal daily capacity
FISH OIL 300 tonnes of fish oil daily capacity
HATCHERIES 14 million smolts annual capacity
FISH FEED
FARMING 21 farming sites operating across 17 fjords
700 tonnes of fish feed daily capacity
18% salmon
FSV (FARMING SERVICE VESSELS) 4 live fish carriers and two service vessels
HARVESTING 54.6 thousand tonnes of salmon harvested in 2017
PROCESSING 130,000 tonnes in primary and 40,000 tonnes in secondary annual processing capacity
PACKAGING 70,000 tonnes annual salmon packaging capacity
SALES 3.8 DKK billion operating revenues for salmon, fishmeal, oil and feed
21% salmon sales to Eastern Europe sales to USA 44% salmon sales to EU
Map excludes farming sites not in operation in 2017
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BAKKAFROST HEADQUARTERS
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| 2015 | 2017 | Moved to new consoli | |||||
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| 2010 G.A.P. certification |
Havsbrún became first feed factory to receive GLOBAL |
2014 Increased transparency through public reporting to the Global Salmon Initiative |
chain | Bakkafrost became the first Faroese company to get ASC certification at a site and ASC Chain of Custody across value |
2016 Two sites ASC certified |
dated site, reducing our carbon footprint from harvest and processing, through efficiencies |
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| 2003 Faroese Veterinary model introduced, reducing mortality from 18% to 6% (source: www.avrik.fo) |
2013 Bakkafrost became founding member of the Global Salmon Initiative |
2015 Havsbrún became the first company to start filtering all the fish oil produced for feed of dioxin and DL-PCBs |
2015 RS IFFO certification awarded to our meal factory at Havsbrún |
2017 Four sites in total ASC certified |
2017 MSC Chain of Custody standard awarded to meal and oil division at Havsbrún |
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Chief Executive Regin Jacobsen's 2017 Reflections
Q: 2017 was another successful year for the salmon industry in the Faroe Islands. What are your main reflections for the year?
RJ: Even with some hurdles on our way in 2017, the year ended as the best in Bakkafrost's history. Our company has developed significant improvements during recent years to improve sustainable operations, and we know that despite the areas where we still can improve, we are committed to the journey of improving sustainability in our operations. The learning curve has been steep and a big effort has been taken by our employees to amend and change operations into a higher level of sustainability. Several significant improvements are ahead of us, and we are delighted to see these commence.
RJ: To make changes, the first step is to be aware of what needs to be changed. Bakkafrost is a proud founding member of Global Salmon Initiative (GSI), where there is a high focus to lead the way in sustainable salmon farming. Through the initiative, the salmon industry is demonstrating how an industry can improve sustainability, and share information in order to speed up the transformation of the whole industry. I think this model could be an inspiration for other industries to follow. We have invested heavily in the value chain over the last couple of years to improve operations, and we have shared and received information from other GSI members in order to speed up the transformation. The introduction of non-medicinal de-licing treatments, such as lumpfish and fresh and lukewarm water treatment are all important, but ensuring we produce fish feed sustainably and that we filter all fish oil of dioxin and DL-PCBs, are also very important steps for Bakkafrost to take to become more sustainable.
RJ: Bakkafrost started operations in the new factory in Glyvrar during 2016 and 2017. This factory will reduce our environmental impact, as all heating in the building will be by surplus energy from production of packaging material in the new factory built next door to the factory. Laying down seven factories and opening up the brand-new factory in Glyvrar will significantly cut down transportation of raw materials, packing material and other items, between the factories. We estimate an average of 20 fewer truck trips per day. The changes were carried through without anyone losing their job; all employees were offered the option of being part of the new factory.
RJ: The salmon industry has faced some difficult challenges over the years which has made it imperative for us to understand and take a long-term view of the sustainability risks facing our business if we are to survive and thrive. We believe that coming together to address many of these risks through national initiatives, such as our unique Faroese Veterinary Model, has given us an advantage, and we are proud to be leading the way in areas such as fish health and welfare. Our collaboration with the GSI and our commitment to various standards and certifications such as the Aquaculture Stewardship Council (ASC), has also enabled us to work with the rest of the industry to address systemic issues. We have not stopped there though. We have set ourselves apart from our competitors by investing heavily in our integrated supply chain to produce healthy world-class salmon, as sustainably as possible. The new plan outlined in this report is setting out for the first time how we intend to build on our work so far, with a new vision to promote healthy living.
| Healthy business | |
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| Healthy people | |
| Healthy salmon | |
| Healthy environment | |
| Healthy communities |
meet some of this demand. Salmon aquaculture is the world's fastest growing food production system (GSI). Compared to other sectors, it benefits from one of the most efficient feedto-food conversion ratios, low CO2 emissions, and low use of freshwater. However, ensuring social and environmental responsibility of the sector is paramount for its future. This means producing nutritious salmon sustainably and responsibly.
To achieve this goal, and to hand over an environment to future generations that is in the same or even better condition than we found it, where salmon thrive, we must be aware of the impact of our operations and be able to control this.
By providing a healthy source of protein and essential fatty acids to feed the growing population, and by creating socioeconomic value for the Faroe Islands, we are contributing to the UN Sustainable Development Goals (SDGs), specifically Goal 2: Zero hunger, and Goal 8: Decent work and economic growth. Our sustainable and collaborative approach to aquaculture also supports Goal 14: Life below water, and Goal 17: Partnerships for the goals.
While we are already leading the way in many areas, as the biggest private employer in the Faroe Islands, we have a duty to act responsibly and think long-term both for the future health of our business and the islands. Through our Healthy Living Plan, we will continue to look for ways in which we can become more sustainable and create value for the communities in which we operate.
RJ: We are calling this our Healthy Living Plan. We believe that by investing in the health of our business, our people, our salmon, the environment and the communities in which we operate, we will achieve our corporate mission to produce healthy world-class salmon, today and in the future, and realise our sustainability vision to enable healthy living for millions of people globally. Setting out a series of commitments will enable us to increase transparency in how we manage our most material issues. This new refocused approach to sustainability is the result of a 'materiality analysis' carried out in 2017, which involved consultation across our business and with numerous external stakeholders such as investors, customers, community representatives, regulators, NGOs, suppliers and sustainability experts. Our new plan marks a further pledge to address these issues and create long-term value for our stakeholders and society through five strategic priorities, commitments against our top ten issues, and greater transparency against all issues identified in the process.
RJ: Our sustainability vision to enable healthy living is enabled by our corporate mission to produce healthy world-class salmon, and our operational strategies which are designed to achieve this, while addressing our key risks and opportunities. Our core values, which support our performance and guide our behavior, reflect our commitment to create long-term value to our customers, shareholders and the society by acting responsibly, showing respect, and being persistent, efficient and ambitious.
RJ: Continued unprecedented population growth – from 7.5 billion in 2017, to an estimated 9.7 billion in 2050 (UN) – coupled with a 70% increase in demand for protein than is currently available by 2050 (FAO), will require the agriculture and fishery sectors to considerably increase production.
With limited availability of arable land and fresh water, and heavily exploited wild fisheries, aquaculture is stepping up to
• To grow efficiently and responsibly
Financial strategy and performance can be found in our 2017 Annual Report.
Competing in the world's fastest growing food industry, means we must be prepared to maintain and even grow our market share, this is at the core of our corporate strategy. Operating in a small country like the Faroe Islands somewhat restricts the growth of our operations, so it is important for us to be as efficient as possible and continually innovate, if we are to expand within regulatory limits and maximise output. To grow responsibly and sustainably, we must also ensure that we uphold the highest standards of conduct, that we go beyond compliance on important issues, that we always listen to our customers and that we conitnue to maintain good international relations.
In 2017, we produced an average of almost 700,000 meals a day, serving different global markets where consumers are increasingly demanding peace-of-mind about the quality and sustainability of the food they buy. It is no longer enough for us to just run a first-rate business, we must also be able to demonstrate our commitment to producing healthy worldclass salmon, responsibly and sustainably. This means making a commitment to increase transparency and external certification. This is part of our new sustainability plan, championed by our Board.
Further information on our corporate strategy to grow a healthy business can be found in our Annual Report.
As we grow our business we must ensure we continue to meet local and international standards. It is our company policy to comply with all relevant laws and governmental rules and regulations where we operate, and the responsibility of all employees to adhere to the standards and restrictions imposed by those laws, rules and regulations. We strive to meet, and preferably exceed, the requirements of all relevant legislation, this means demonstrating leadership on issues at a national and international level.
Over the last years, customers and consumers have become increasingly interested in where their food comes from and whether it is produced responsibly and comes from sustainable sources. It is equally important to us, being reassured that Bakkafrost, our supplier in long-term partnership, is meeting industry bestpractice and reporting their sustainability policies openly.
Oliver Spring, Group Corporate Social Responsibility Project Manager, Nomad Foods Europe
Our business relies heavily on the Faroe Islands' natural capital, so compliance, leadership and openness on environmental issues is key. We cooperate with the environment agency and comply with Faroese aquaculture legislation which covers production at each stage of the value chain. Our farming licenses are subject to environmental impact assessments which guide part of our approach to reducing our environmental impact. We go beyond compliance by voluntarily signing up to and conforming with international standards, to raise the bar for the industry as a whole on certain sustainability issues.
We have an ongoing commitment to have zero cases of noncompliance, which we met in 2017.
The starting point for our sustainability plan is ensuring that we continue to uphold and promote good business practice throughout the value chain, consistent with Bakkafrost's core values and principles. Our values guide our behavior and approach to creating long-term value for our customers, shareholders and society. For us this means acting responsibly, showing respect, and being persistent, efficient and ambitious. These values are outlined in our Code of Conduct, which aims to create a sound corporate culture. Our Code requires all employees to observe high standards of business and personal ethics in the conduct of their duties and responsibilities. They must employ a fair and honest approach in every dealing with other employees and all external stakeholders.
Ethical conduct not only involves being a good corporate citizen but also ensuring our suppliers also meet our standards. Our suppliers are asked to adhere to our occupational health, safety and wellbeing, human rights, child-labour, and environmental standards, which are aligned with the ASC Standard.
Please see our Code of Conduct for more information on our anti-bribery and corruption, money laundering and other standards of ethical conduct.
Listening to our customers and meeting their changing needs and standards is important if we want to maintain our position as a preferred supplier of world-class salmon in the marketplace. We aim to secure loyalty and trust by providing outstanding service, priding ourselves on our reliable, efficient, and responsible approach. More information on our customer strategy can be found in our Annual Report.
Since the lead-up to our listing on the Oslo Stock Exchange, our sales and customer numbers have increased alongside production. While we have responded well to increasing and changing customer demands, for example through new product categories and a move towards full ASC certification by 2020, inevitably we have met some challenges, particularly as we have expanded and consolidated operations.
In 2018, we will look to bring in new customers, start producing new fresh fillets and portions in response to customer demand, and to ensure we continue our customer focus, we are making a 2020 commitment to have a net promoter score of 9 out of 10, which means our customers will be even more likely to recommend us.
Investing in innovation through research and development is key if we are to meet changing customer demands, capitalise on opportunities, and lead sustainably. Our five-year 2020 investment plan has enabled us to invest heavily in new technologies, which have both helped us manage our risks, such as non-medicinal sea lice treatment, and exploit opportunities for product development and further growth.
In 2018, we plan to invest in a new biogas plant in collabora tion with other Faroese farmers, using waste products from fish and dairy farming to produce energy and fertilizer for the Faroese agriculture industry; and continue building a new hatchery site which will improve productivity by approxi mately 30% by keeping the smolts on land for longer periods.
Following an agreement with the Minister of Industry and Aquaculture, we will also take over and further the development of the Faroese salmon breed, giving us full ownership of the programme by 2021.
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Beijing Dong Long is one of China's biggest importers of salmon, and one of Bakkafrost's most important fresh salmon customers. Beijing Dong Long is a family owned and run company. Their representative, Anthony Chung, credits the success of their company to the top-quality seafood their team sells, and the strong relationships their team has with customers. This relies not only on their ability to source the highest standard products, but also their ability to meet customers' changing needs.
Since making their first order with us in 2012, their weekly order size with us has gone up twelvefold. Anthony explains that this success is down to two things; firstly, the world-class quality salmon we sell, and secondly, our ability to provide this on a regular and reliable basis. Being able to tell his customers that our salmon feed is free from GMO ingredients and antibiotics, has high omega 3 levels as well as the fact that Bakkafrost is a fully vertically integrated company, makes his job even easier. Anthony also anticipates a growing awareness and demand for sustainably and responsibly sourced seafood products will make Bakkafrost salmon an even stronger proposition.
In February 2017, Anthony made one of his regular visits to the Faroe Islands and took to the stage to talk to the whole of Bakkafrost about the things that matter most to his customers. Maintaining a close relationship with him has helped us grow our business as he grows his.
Adapting to our customers' needs is at the heart of our strategy. In 2018, this will mean adapting production to begin supplying Beijing Dong Long with fresh portions and fillets for the first time. We will also work with them to explore new ways to get products to market more quickly.
Investing in human capital is fundamental for a healthy business. Bakkafrost acknowledges that in order to achieve our mission and meet our strategic objectives, we must have a capable and engaged workforce which is committed to our core values. Today we are the consolidation of many farming companies which have grown up across the Faroe Islands, often in insular communities, over a number of years. Integrating people into the business, and into our corporate culture, needs to be a priority, in order to maintain our worldclass standards and all live by the same set of values. This has also involved continually adapting ourselves and being open to learning new ways, as the business continues to evolve with its environment.
We are fortunate to have a culturally diverse workforce today, which gives us a unique opportunity to strengthen our human capital through an inclusive attitude.
The aquaculture industry often involves physically demanding work, so ensuring the health, safety and wellbeing of our employees is also at the top of our list of priorities.
Our ability to have a diverse and inclusive workplace, to attract and retain talent and expertise, to build workforce competency, and to maintain high employee engagement, is the starting block for our human resources team. We employ 1,104 (960 full-time equivalent) people across 24 municipalities in the Faroe Islands.
Strong human capital is the foundation for any successful business. At the most basic level, the health of our people contributes to the health of our businesses. For us this means providing meaningful work opportunities in safe and healthy environments, where people feel valued, listened to and invested in.
survey
2017 PERFORMANCE
2020 COMMITMENTS
• To strengthen our human capital
STRATGIC PRIORITY
• To renew employee strategy and launch engagement
Our Code of Conduct outlines our approach to creating optimal working conditions and culture, including our commitment to create a professional and positive work environment which is inclusive and free from discrimination. Our Ageing and Employment Policy is one example of how we value the expertise and contribution from all employee groups. We make provisions for individuals who wish to continue their duties, and encourage collaboration with younger workers to combine strengths. In 2017, we had 38 people over the retirement age working across our operations.
Attracting young talent is part of our employment strategy. In 2017, we took on two interns studying post-graduate qualifications in aquaculture and marine biology, and eleven work experience students from local schools. We also hired two apprentices in our head office function and one at Havsbrún.
Bakkafrost offers market-leading benefits to employees. These include a share savings plan taken up by 171 employees, bonus shares issued to 746 employees in 2017, and various insurance options for all permanent employees, after three months.
Our parental leave and pension provision is in line with national legislation, we meet regularly with unions (which represent a large proportion of our workforce), and we have a grievance procedure in place.
To ensure we continue meeting the highest health, safety and welfare standards, we carry out annual training using both internal and outside trainers who deliver modules on topics ranging from hygiene, first aid, safety at sea, safe chemical use, to fish welfare. We also offer relevant development opportunities to our management team.
In 2018, we plan to launch an employee engagement survey, a new worker integration initiative, and further training for all land and sea farmers, and by 2020 we will renew our employee strategy.
BAKKAFROST WORKFORCE 2017
BAKKAFROST WORKFORCE BY AGE
Protecting our human capital also involves maintaining a high standard of occupational health and safety and creating a healthy working culture. Our Code of Conduct outlines our commitment to our employees to create a good and sound working environment and to systematically seek to attain an injury and accident free work place. In order to do this, we have adopted a set of guidelines based on the highest health and safety standards, on land as well as sea, and considered the wellbeing of our employees in our internal policies.
The wellbeing of all people in our value chain is important to us, which is why we respect the protection of human rights and make sure that we are not complicit in human rights abuses. Our Code also states our commitment to ensure that neither Bakkafrost nor our business partners shall exploit children as a labour force. This is supported by the standards we ask our suppliers to sign up to when entering into agree ments with us.
Employee wellbeing will be in our 2020 employee strategy review, and in 2018 we will improve our health, safety and wellbeing reporting.
Per Larsen is captain of Vesthav – one of Bakkafrost's wellboats – and has been working at sea since he was 15. He is one of 38 of Bakkafrost's full time workers to continue working beyond the age of retirement. Since 1991, he has been working on a number of wellboats which bring in salmon from the various farms across the Faroe Islands, to be harvested and processed. At the start of every week he receives information from head office detailing customer orders against stock. Per uses his experience to determine the suitability of the weather conditions for the trip – over the years he has seen some spectacular storms hit the islands and knows how quickly the conditions can change.
Vesthav and its team of three has been under his command since 2002 and he has no definite plans to retire: "I am taking it one day at a time, but while I feel this fit and healthy and I am enjoying my work, I plan to carry on." Per keeps fit by climbing the various mountains surrounding his home town of Gøta almost on a daily basis. He enjoys working for Bakkafrost, gets fulfillment from coming to work, and most of all, he likes the atmosphere and camaraderie on board: "We are all different ages – our youngest is 30 – the mix works well."
Bakkafrost has a policy to support employees that would like to continue working beyond the age of retirement, making the necessary adjustments to enable safe and fulfilling work. Per feels supported by the leadership team, which says make him, and his team, feel valued and equal.
• To meet and exceed leading standards
The fast-growing global population and increasing demand for protein is putting a pressure on the planet never seen before. To meet this demand, the aquaculture industry must be able to increase production of healthy and nutritious protein, responsibly and sustainably.
While the Faroese fjords provide optimal salmon farming conditions, over the years, systemic risks of sea lice and disease, aggravated by a fragmented industry, have threatened the health of our salmon. The consolidation of the Faroese salmon industry – from 63 farming companies in 1989 to three in 2017 – has made it easier to coordinate biological improvement, ensure effective cooperation with the authorities, and share knowledge.
The 2003 Faroese Veterinary Model introduced new regulation, tightened controls, and promoted voluntary segregation of farming sites and operations, improving fish health and welfare standards across the Faroes. The new model, combined with additional company efforts, not only reduced mortality rates from 18% to 6%, it also increased the harvesting weight of Faroese salmon by 20% between 1993 and 2010, decreased feed conversion rate by 2%, and improved productivity by over 40% over the same period (source: www.avrik.fo).
As one of the original GSI members, Bakkafrost continues to play a global leadership role in the initiative. Their high level of engagement and willingness to share updates and insights when it comes to improvements in sustainability and biosecurity has been important in speeding the rate of progress, and to driving improvement across the whole sector.
Avrim Lazar, Convenor of the Global Salmon Initiative
However, tackling sea lice and diseases, such as pathogenic ISA, remains a priority for salmon farmers not only in the Faroe Islands. Addressing these risks to ensure the quality and safety of our salmon while maintaining the highest health and welfare standards, has also called for a high degree of voluntary coordination between companies and large investments in new technology for continuous improvement.
Our salmon provides a nutritious, efficient and sustainable source of animal protein high in omega 3. Maintaining worldclass product quality, with high nutritional value, free from chemical contaminants, is our top priority. With nearly forty years of salmon farming experience, we understand that the quality of our product relies not only on perfect environmental conditions, the highest health and welfare standards, but also top-quality feed.
We believe that keeping the diet close to the natural diet of wild salmon provides measurable benefits, including a healthier nutritional value of our end-product. Our feed is produced with a high percentage of (sustainably sourced) marine ingredients which gives our salmon a very high omega 3 content - a mean of 2.2g per 100g of salmon fillet. In 2015, we became the first company to start filtering all the fish oil we produce for our feed of environmental pollutants (dioxin and DL-PCBs) despite it already being well within EU safety limits. Our feed is also free from medicine, growth-promoting hormones, and any salmon meal offal or waste from any other farmed species. We are also far below all the limits in the EU directive on undesirable substances in animal feed.
Through the various standards and certification programmes we adhere to, we also ensure industry-leading food safety standards. A comprehensive internal control system is in place which is regularly inspected by the authorities. This involves daily testing and monitoring of our product, before it is issued a health certificate, to ensure it complies with Faroese and international health and food safety regulations. See more under Collaboration and Certification on page 17.
In 2018, a decision was made to phase out the use of ethoxyquin in all fishmeal produced at Havsbrún and used in the feed for our salmon (in favour of natural antioxidants). We also commit to maintaining our high omega 3 levels and to maintaining our high customer satisfaction with product quality.
We are committed to upholding leading welfare standards and reducing the use of chemicals and medicines in the prevention of disease and sea lice. Our experienced fish health team – made up of certified veterinarians, biologists, and assistants – is always looking for new ways to do this.
We have not used any antibiotics on our salmon since 2004. We have started introducing lumpfish in all new stocking and sea cages to prevent lice infestation, and as part of our fiveyear 2020 investment plan, we have invested heavily in other non-medicinal methods such as freshwater and thermal delicing. The plan also includes upgrading and building new sites on-land to reduce production cycle time spent at sea. This, together with the minimum eight-week fallow period we observe, reduces biological risk.
To reduce biological risk, we are sourcing from selective breeding programmes to improve fish resilience, we vaccinate
Reflecting the views of customers representing 61% of revenue in 2016 and 42% in 2017.
DIOXIN LEVELS in Bakkafrost salmon 2017
2016: 0.4pg/g EU dioxin max level post 2012 3.5 pg/g
DIOXIN-LIKE PCB LEVELS in Bakkafrost salmon 2017
2016: 0.7pg/g EU dioxin-like PCBs max level post 2012. 6.5 pg/g dioxin
all our fish, and take part in systematic group-wide biosecurity auditing. Our fish health team and veterinarians regularly inspect and test all farms and hatcheries, and the authorities conduct regular sample testing.
Through our adherence to the 2003 Faroese Veterinary Model regulation, we commit to various salmon welfare measures, such as fish stock density limits. However, we are continually looking for new ways to further improve fish welfare, which is why we are taking part in research to detect stress factors at various stages of production, and are further investing in highly-skilled qualified people in our hatcheries to improve the welfare of smolts being transported to sea.
For more information on fallow time and medicine use, please visit our sustainability pages online.
Collaborating with the salmon industry is critical if we are to address the systemic sustainability challenges we face. We were instrumental in the formation of the Faroe Fish Farmer's Association, specifically set up to promote a joint approach to the management of sea lice and disease. In 2013, we became a founding (and only Faroese) member of the Global Salmon Initiative (GSI), an international leadership initiative established to improve health and sustainability in salmon farming. As part of this collaboration, we have committed to having all our sites certified by the Aquaculture Stewardship Council (ASC) by 2020.
As well as this, we also subscribe to a number of other external standards and certification programmes to ensure product sustainability, quality and safety. Our entire value chain – feed production, hatcheries, farming sites, and harvesting and processing plant – is certified according to the international GLOBALG.A.P. standard which focuses on food safety throughout production, fish welfare, health and safety, and environmental management. In addition, our harvesting and value-added product (VAP) production has the ASC Chain of Custody certification and our VAP production is certified according to the BRC and IFS food safety standards. Our fish meal, oil and feed production at Havsbrún, also hold multiple certifications, all units are certified to ISO9001:2008, and the meal and oil division is certified according to the GMP+ standards, the IFFO RS certification and the MSC Chain of Custody standard.
In 2018, we expect to have six sites ASC certified and continue working towards certification across all sites by 2020.
Lumpfish
In April 2015, our first delivery of lumpfish (cyclopterus lumpus), was released to our Kunoyarnes salmon farm. The move was part of a trial to test the suitability of this cleaner-fish species in the fight against sea lice – one of the biggest challenges faced by the salmon farming industry globally.
The practice, which to date is primarily used during the early stages of a salmon's life – from stocking to 12 months – has considerably lowered the need for medicinal treatment and improved the health of the salmon by reducing the number of sea lice at this stage of its life. Subsequent full-scale trials have been a success and early indicators show salmon thrive in this shared setting.
The lumpfish live side-by-side with our salmon, in a custom-built environment within the farming pens, and are fed speciallyproduced feed by hand. By the end of 2017, lumpfish were being used across more than half of our sites.
Although the new method has had great success to date and there has been an explosion of knowledge in this area, it is still relatively early days. Bakkafrost is working closely with other farmers in the Faroe Islands to share information and best-practice, and employing Fiskaaling, Aquaculture Research Station of the Faroes, to conduct further research in order to further optimise fish health and welfare. We recognise there are still areas where we need to greatly improve our knowledge to identify the perfect conditions for lumpfish and salmon to thrive together.
This collaborative approach is one of the reasons we believe we are leading the industry in this area. In 2018, we will hire more specialised biologists to enable the successful roll-out of lumpfish across all suitable sites and we will continue sharing our data with researchers so that other farmers can benefit from our learnings. This is just one innovative approach we are investing in to continue improving salmon quality through improved health and welfare. We will also continue to use mechanical de-licing carried out by our two new service vessels: Roland and Martin.
While the salmon industry benefits from the one of the most efficient feed-to-food conversion ratios, low CO2 emissions, and low use of freshwater compared to other sectors, reducing our environmental impact is a priority.
Our 21 salmon farming sites in operation in 2017, extend across 17 of the islands' fjords, and benefit from excellent water quality and circulation due to strong currents, and cool steady sea temperatures. This creates excellent conditions for farming high quality salmon. The islands boast rich biodiversity, with particularly abundant bird and marine life, and rely heavily on income from fishing, and increasingly, tourism.
We operate in many communities throughout the Faroe Islands, where typically industry and people have grown up side-by-side. This unusual set up means that communities are unavoidably impacted by us, whether by the noise and smell of operations, competition for water, or the pollution from production, traffic and effluent water. We also produce our own packaging and rely on various production equipment, so it is also important to consider how our operations contribute to the worlds' waste problem.
While our CO2 footprint is relatively low as an industry, climate change could significantly impact our industry in the future. "The impacts of livestock feed ingredient production, particularly on land use, freshwater use and ghg emissions is increasingly recognised as a significant global challenge exacerbated by increasing population and wealth. Therefore, the sustainability of feed ingredients should be an extremely important consideration for all livestock farmers including salmon farmers. It is encouraging to see that salmon farmers are taking this issue seriously and are rising to the challenge".
Piers Hart, Seafood and Aquaculture Specialist, WWF
Changes in weather patterns (with more frequent storms), ocean acidification and increasing water temperatures, all pose a risk to the business.
We are in a unique position in that we have a fully integrated supply chain, with most of our key farming sites within a 25km radius. While our fish feed factory is located close to the farming sites, and most of the ingredients are produced locally and sustainably, which considerably limits our carbon emissions and gives us unique traceability in our supply chain, we also rely on some plant ingredients to be imported across continents. It is in feed that we believe our largest environmental footprint lies.
• To reduce our environmental impact
We are committed to minimising pollution of the local environment and wildlife from each stage of the value chain, including effluent waste, marine debris, and local water, noise and air pollution.
Conserving the natural capital we rely upon for our product is vital, so we are always looking for new ways to manage our impact and reduce local pollution, whether by reducing the use of chemical substances, adapting our operations or by investing in new initiatives. We regularly send information and are inspected by third parties such as the veterinary authority or the environment agency, to ensure we stay within limits and continue to minimise pollution.
We comply with strict local environmental regulation and adhere to minimum requirements as part of the ASC standard. This includes observing fallow periods between production cycles to allow the seabed to regenerate, which in 2017 was almost double the national requirements. We have also chosen to eliminate the use of diflubenzuron in our de-licing treatments.
In 2018, we plan to employ a more structured approach to environmental management (going beyond the various international standards we subscribe to). We will also continue to reduce use of antifouling agent, continue introducing cameras across all our sites, and look for new ways to de-lice salmon without the use of chemicals.
Maintaining high product quality means we have a higher marine content in our feed than many of our competitors, so the sustainable and responsible production of fish meal, oil and feed, at our feed company Havsbrún, is incredibly important to us. This includes how we source all raw materials.
The fishmeal and fish oil that goes into our feed comes from sustainably sourced fish with low-food-value and a low-marketdemand for direct human consumption. In 2017, a quarter of the fishmeal and almost half of the fish oil in our feed derived from fish trimmings and off-cuts. These species are mainly caught within Faroese waters in well-regulated legal fisheries. The plant proteins and oils in our feed are all non-GM, and the soybeans are Pro-Terra certified, which is our way of ensuring it is sourced responsibly and sustainably. All our rapeseed oil is certified sustainable and we do not use palm oil in our feed.
Please see our sustainability webpages for more information on the source of marine products going into our feed.
• Increased the quantity of marine raw-materials coming from by-products of fish destined for direct human consumption, in our feed.
While all our ingredients are sustainable, we must be prepared to find alternative sources in the future to minimise our exposure to feed ingredients that may become unsustainable. In 2018, we will continue looking into other sustainable highquality marine or aquatic ingredients and by 2020 we will implement a sustainable feed policy.
Wheat 16% (12,348 tonnes)
Non-GM SPC 12% (9,409 tonnes)
Fishmeal 29% (22,680 tonnes)
Fish oil 15% (11,313 tonnes)
Rapeseed oil 16% (12,077 tonnes)
Others 4% (3,117 tonnes)
Taking precautions to avoid spread of disease and sea lice to and between farmed and wild fish populations is incredibly important for us, not only to ensure the health of our salmon, but also that of wild fish populations (despite the low threat of salmonid diseases on other fish families). Avoiding fish escapes is an ongoing challenge for us as the Faroe Islands are at the mercy of fierce Atlantic storms, which cause sometimes unavoidable damage to our nets, causing escapes. While we report all suspected escapes to the veterinary and environmental authorities immediately, it is not until we harvest that we are able to confirm the exact number of escapes, so it can be that escapes reported during one financial year, may have occurred during the previous year.
As well as improving equipment, incorporating practices to reduce the risk of introducing infectious diseases across production, we are reducing the time salmon spend at sea and holding regular third-party inspections to ensure compliance with Faroese legislation.
• Extreme weather conditions casued the escape of 109,515 Atlantic salmon from our site in Gulin.
We have a commitment to have zero fish escapes and in 2018 we will continue to re-evaluate our procedures and equipment.
Reducing and minimising the environmental impact of waste from a product's lifecycle, is an important and growing issue for all businesses globally. Although salmon has the highest edible yield of the five largest groups of animal protein, we must continue thinking about how we reduce, reuse and recycle materials from the moment the eggs enter the hatchery, right up until the salmon leaves our factory, whether from our salmon or the materials we use to produce and package it.
Despite its high edible yield, we also ensure that we utilise all of the by-products from our salmon, selling backbones, offcuts, bellies, skin, and heads.
Around 90% of our old farming nets and chains are recycled or reused, and we repair and reuse cables and pipes from old nets when we build new ones. We are also upgrading our cages using stronger materials to increase their lifespan. At our feed factory Havsbrún, we collect all the feed bags we use at Bakkafrost, recycling almost 100% of these.
In 2018, we will improve our waste reporting., and continue to look for new ways to reduce waste. We will begin a review of our packaging's lifecycle, including the sustainability of raw materials used, exploring how we can reduce packaging and how we can influence its disposal. We will move to 100% FSC certified paper used in our own-brand packaging, and encourage our customers to move to 100% sustainably sourced or recycled, for the paper used in theirs. Some of our organic waste will in the future be processed at a new biogas plant.
Edible yield is calculated by dividing edible meat by total body weight.
These calculations take into account differences in FCR, differences in edible yields, and the cost of progeny. Source: Global Salmon Initiative
Although the Faroe Islands enjoy high and regular rainfall, the lack of infrastructure to harvest water means it is important to use fresh water efficiently in order for communities to have enough during rare dry periods. Our hatcheries have the highest demand for water, so we have invested in new technology to harvest water at all our five hatchery sites and we were one of the first salmon farmers in the world to start recirculating water in our hatcheries, currently recycling up to 99% of the water harvested to reduce pressure on the water board.
In 2018, we will continue managing and minimising water use, for example at one of the new sites we are building a system which will harvest rain water from a neighbouring island, in a joint arrangement with the council, which will improve infrastructure for surrounding businesses.
A carbon footprint measures the total greenhouse gas emissions caused directly and indirectly by the production of a product. A carbon footprint is measured in kilograms (kg) of carbon dioxide equivalent (kgCO2e) per kg edible part of the product.
CO2 e is calculated by multiplying the emissions of each of the six greenhouse gases (CO2 , CH4, N2 O, HFCs, PFCs and SF6) by its 100-year global warming potential (GWP). Source: Global Salmon Initiative
Despite our relatively low CO2 emissions compared to other industries, at Bakkafrost we are investing heavily in the efficiency of our operations which is reducing the relative carbon emissions from some parts of the value chain. This includes modernising and consolidating operations – which has reduced oil consumption and minimised transportation; recycling energy in our feed and processing factories; introducing LED lighting throughout offices and farms; and promoting responsible behaviour, for example, in how we run our service vessels.
Farmed salmon also has one of the lowest feed conversion ratios: 1.3 kg of feed for every 1 kg increase in body weight, compared to between 6-9 to every 1 kg for cattle (GSI). Our biological feed factor was even lower the average in 2017, at 1.2:1.
Though salmon already has one of the lowest carbon footprints, relative to the five largest sources animal protein outlined above, we believe ours is even lower than average, as a result of our local feed production and high level of local and sustainable marine content.
Our electricity provider, SEV, has announced plans to reach 100% green energy by 2030, so we are also sourcing increasingly from renewable sources.
We have included climate change adaptation measures in our long-term plans for the business.
The table opposite outlines the energy consumption and scope 1 and 2 emissions for all our operations in the Faroe Islands, including our hatcheries, farming, harvesting, processing, and packaging and feed production for 2017. We have an 18-month production cycle which means there is some variability in production. Environmental data will be impacted by this and trends will be most meaningful over a four-year period. Our total GHG emissions also include the fish meal, oil and feed which we produce and sell to other fish farmers.
Despite the increase in production, following the consolidation of factories in 2017, we reduced the absolute GHG emissions from harvest and processing. However, in 2018, we will increase our focus on reducing our footprint, and set internal carbon reduction targets in areas where we identify an opportunity for further improvement. We already expect to be able to reduce oil consumption for some of our service vessels, which will be able to access an onshore power source at the harbour for the first time.
| Energy Consumption | 2017 [kWh] |
|---|---|
| Direct energy use - scope 1 | 264,671,752 |
| Direct energy [electricity] use - scope 2 | 48,377,189 |
| Total energy use | 313,048,941 |
| GHG Emissions | 2017 [TCO2e] |
| Scope 1 emissions | 69,826 |
| Scope 2 emissions | 15,723 |
| Tonnes of salmon harvested | 2017 [Tonnes] 54,615 |
|---|---|
| Tonne CO2e emitted per tonne of salmon produced* | 1.57 |
*Includes scope 1 and 2 emissions from Bakkafrost's entire owned supply chain; including all fish oil, meal and feed production at Havsbrún – a proportion of which is sold externally.
Faroese fashion designer, Sissal Kristiansen, received global recognition in 2017 for her Shisa Brand's innovative and sustainable approach to fashion. In August, she was awarded first prize at the Blue Fashion Challenge for her Bakkafrost salmon skin bag and smock design – sourced, designed and made in the Faroe Islands.
"Salmon leather spoke to my aesthetics, also it has a lot of character, it is very strong and I love the story, especially as I eat salmon from Bakkafrost at least twice a week, so it feels like completing my sustainable circle. My tagline was 'I eat fish and use the skin too'."
Using salmon leather has opened up new markets for Sissal, attracting a niche group of conscious customers in markets as far flung as Australia.
FOSAA has also been selling salmon-skin bags as part of her collection for the last eight years. Using salmon skin has become a unique selling point for her business, which sells in Denmark and the Faroe Islands. She also sources her salmon skin from Bakkafrost, making her products 100% Faroese and sustainable.
This is just one example of our systematic approach to optimising raw material use and minimising waste, which is written in to our Code of Conduct, and has been part of our mentality since we started our business in 1968.
The various ups and downs over the years, have meant we've had to be resourceful; reusing, repurposing and selling waste materials wherever possible. Since 2015, we have sold almost 30 tonnes of salmon skin, with a further 50 tonnes projected for 2018. It's not only salmon skin that has a market, all the by-products from our salmon are utilised – backbones, offcuts, bellies, and even salmon heads, leaving almost nothing to waste. There is very little we don't repurpose, reuse or recycle, be it from our core product or its production; the water in our hatcheries, plastic from our feedbags and farming nets, and energy in our feed and processing plants, all contribute towards our circular economy.
In 2018, we will improve our waste reporting and look for new ways to reduce waste for a healthier environment. We will start producing oil and meal from salmon guts and skin, and we will invest in a biogas plant which will process organic waste from our fresh water sites, and organic material from the processing plant and sea site operations.
Shisa Brand salmon skin bag and smock Photo: Karen Sissal Kristiansen Model: Jenny S Wardum
The Faroese economy is ranked amongst the highest in the world based on GDP per capita, which more than doubled between 1998 and 2015. Faroese fisheries and aquaculture represent 95% of merchandise exports and 20% of all GDP. Farmed Atlantic Salmon represents largely half of all seafood exports, 34% of which comes from Bakkafrost.
The Faroe Islands benefit from one of the lowest unemployment rates in the world: 2.2% in October 2017. Bakkafrost is the largest private employer on the islands, employing 4% of all employees (Aug 2017), generating considerable value though salaries, employment taxes, and corporate tax payments. Since our 2010 listing on the Oslo Stock Exchange, we have increased our share value by more than one thousand percent, generating more than 873 million DKK in corporate taxes for the Faroe Islands, and almost 481 million DKK in shareholder tax payments (distributed according to international tax agreements).
Although we are a relatively small company, the considerable value we generate for the Faroe Islands and beyond, through employment, taxes and returns, means we have a big responsibility to everyone with an invested interest in our company; shareholders, employees and local communities alike. Despite our listed status and the fact that we are up against the biggest multinational fish farmers in the world, we are still very much a local company with local operations. Many see us as part of the fabric of our local communities, so we must behave as responsible leaders and look after their interests. This includes making strategic community investments and supporting local cultural and sporting initiatives.
Víkingur football club was formed in 2008, and since then the strategy has been to keep focus on the youth football in order to create own players, as well as engage and activate the young people in our community, which we believe has great importance for them. The support we get from our sponsors, including Bakkafrost, helps us to fulfil this task.
• To add value and strengthen relationships
2017 PERFORMANCE
• N/A
Demonstrating leadership on industry issues, and responsible corporate citizenship means going beyond compliance and optimising our net impact on society. As part of the materiality process we carried out in 2017, reviewing our most important sustainability risks and opportunities, it became clear that this is an area where our stakeholders expect us to excel in. While our leadership on industry issues has been visible and felt at an international level, through our contribution to initiatives such as the Global Salmon Initiative (GSI), we realise we have an opportunity to make our leading commitment to sustainability and value generation be felt more at a local level.
In 2018, we plan to launch a new fund through which we will make our community investments and address some our most material issues, primarily at a local level.
Our status in the Faroe Islands makes it all the more important for the community to feel that we are listening and responding to their concerns on issues of greatest importance to them. While we already have regular dialogue with community representatives, such as the local councils, our 2017 materiality analysis also highlighted that this is an area in which we can do better. We need to be more open on certain issues, including our approach to sustainability and our community investments.
Bakkafrost was one of the sponsors of Kópakonan, The Seal Woman, in Mikladalur
In 2018, we aim to strengthen our community relationships by implementing a stakeholder engagement plan which will give us a more structured approach and increase the opportunities for our stakeholders to give us their feedback.
Adding value through tax contribution, employment and community investment throughout the islands is how we create prosperity locally. Bakkafrost is a consolidation of many salmon farmers which over the years have been integral to the survival of many Faroese communities. Good management of our risks and opportunities has been key to maintaining a healthy business which contributes to healthy communities. Since becoming listed, it has become increasingly important for us to balance our shareholder returns with our voluntary community returns. In 2013, we centralised our community investment approach with a single policy. This has enabled us to support sport and culture, meeting local needs while serving the community as a whole.
In 2018, we will begin channelling our community investments through our new Healthy Living Fund and by 2020 implement a revised community investment plan.
Saksun
2017 was a big year for plastic. People around the world were hit with headlines and devastating images of the effects of human pollution on our oceans. Despite the Faroe Islands' remote location in the Atlantic, hundreds of miles from any mainland, plastic still ends up on the many otherwise unspoiled beaches, throughout the islands. Sadly, some of this waste comes from salmon farms, including ours.
Although we try to minimise the debris from our operations to ensure the health of our local communities and wildlife are not impacted, damage caused by frequent storms means that buoys and ropes can often end up washing up ashore. In June 2017, 17 of our farmers came together with other fish farmers in the Faroes to clean up the beaches around the islands over the course of a week.
Jóan Petur Joensen, farmer at our Selatræð A-80 site, was one of our team of farmers sailing around the beaches "In the Faroes we rely on a healthy environment for our survival. This event was a great way to bring the community together on an issue affecting us all. Our boat collected 8 cubic meters of rubbish, which included washed up waste from around the world. We are looking forward to getting behind this again in 2018."
We were also happy to sponsor a beach clean-up in our southernmost island, Suðuroy, where 55 large storage sacks of rubbish were collected from Trongisvágsmegin beach by 45 volunteers in May 2017.
In 2018, we plan to repeat our week-long initiative and continue to support similar environmental community initiatives to protect the pristine natural capital our economy relies on. We will also increase our contribution to local community needs through a new dedicated fund.
This report was prepared using the Oslo Børs Guidance on the Reporting Corporate Responsibility, which promotes the Global Reporting Initiative Standard and the UNGC Principles.
In 2018, we plan to report against the Global Reporting Initiative Standard and include further information regarding our basis of reporting. We will assess the need for external assurance on selected data.
Visit www.bakkafrost.com for our latest reports and presentations and further sustainability data.
In 2017, we carried out a materiality analysis, reviewing our most important economic, social and environmental risks and opportunities. The analysis included various stages of desk research; a management team review of the issues with greatest operational, financial, and reputational impact; and consultation with a representative group of external stakeholders (selected by the CEO and management team based on their level of interest in the company). All contributors were asked to complete a survey, which was followed with a by face-toface interview.
A list of twenty material topics emerged, which have formed the basis for this report and our new Healthy Living Plan. We have made commitments against the ten topics rated as having the greatest potential impact on the company and of greatest interest to its stakeholders. However, all twenty will feature in our management plans, and have indicators which we will report progress against on an annual basis. Responsible leadership and customer satisfaction arose as 'new' material topics and community engagement and transparency was raised as a topic which Bakkafrost could improve in, (due in part to the limited reporting on sustainability and community investment).
Bakkafrost engages with local, national and international stakeholders on a regular basis. Our approach to engagement is guided by the groups which we consider to be significantly affected by our activities, and who have the ability to influence our successful running of the business, including how we achieve our strategy. These groups include Bakkafrost employees, investors, customers, and suppliers, and community representatives, national regulators, NGOs and sustainability experts.
As part of the materiality analysis in 2017, we interviewed 19 external stakeholders, and also continued regular engagement with an extended list of these groups, including worker unions, through which Bakkafrost has a collective bargaining agreement with its employees.
Sustainability is the responsibility of Bakkafrost's Management team, who report on a regular basis to our CEO. Its management and reporting is a matter for the Bakkafrost Board, and is tabled twice a year, as well as at the Annual General Meeting.
The Board contributed to and approved the 2017 materiality process and sustainability report.
Bakkafrost's core values specify an intent to act responsibly, this includes thinking long-term on economic, social, and environmental issues. We follow a precautionary approach to the management of sustainability risk through an annual risk assessment process which is reported in the Annual Report and materiality analysis reported in our sustainability reporting, from 2018 onwards. The process allocates responsibility for the mitigation of significant operational risks.
Risks are monitored throughout the supply chain and reported against internally on a regular basis, and specific sustainability risks are reported though annual external reporting.
Our Code of Conduct also outlines our intention to "[…] strive to be market leading in environmental protection. All employees will be required to bear in mind the environmental effects work-related activities have on nature and the environment and apply environmentally friendly solutions to the extent reasonably possible."
Please contact [email protected] for further information regarding this report.
Bakkafrost P/F · Bakkavegur 8 · PO Box 221 · FO-625 Glyvrar Tel +298 40 50 00 · Fax +298 40 50 09 · [email protected] · www.bakkafrost.com
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