How Social License Shapes the Future of Salmon Aquaculture

Over the past two decades, the concept of a social license to operate has gained prominence in the business world. Initially coined in the mining industry, it refers to the essential elements of legitimacy, trust, and credibility that businesses must obtain from their communities to commence operations. However, recent developments such as fish health concerns in Norway, sea lice outbreaks in Iceland, and algae blooms in Chile have dealt a significant blow to the social license of the salmon farming industry. Although encountering challenges is typical for rapidly expanding businesses, it is crucial for industry players to uphold the trust they have established with the public in order to foster growth.

Importance of Social License Beyond Local Communities

Dag Sletmo, a senior executive DNB Bank, has mentioned many times in recent months that the salmon industry needs to improve their social license to operate, and we agree. As a seafood bank that operates around the entire world, they must constantly assess how the social license can impact the ability for companies and sectors to grow.

Over the past few years, we have witnessed the detrimental effects that negative events can have on a company's social license. The farming ban in Washington State, the removal of farms in BC Canada, and the protests in Iceland could all be attributed to degrading social licenses between the industry and communities. The public feels that promises to prevent escapes, manage sea lice, and maintain fish health haven’t been met, and that has pressured politicians to take action. Over time, this lack of an established social license can completely stagnate an entire industry, and is one of the reasons that contribute to the lack of consistent grow in certain regions of the world. 

Today, industries in one area of the world must obtain a social license of an entire global market. Images of promises not kept, like the sea lice outbreak in Iceland, are not just seen by a coastal town but instead it can spread across the entire world within minutes. In Iceland’s case, we’ve seen pop superstars like Bjork and clothing companies like Patagonia speak out against the salmon farming industry, both of whose influence is highly likely to make some sort of impacts the thinking of politicians who are responsible for regulating the quickly growing industry. Patagonia in particular has developed an extremely successful social license as a responsible clothing maker that supports climate issue. For a country like Iceland where tourism driven by their natural wonders is a large economic driver for the country, politicians must be paying extremely close attention to the social license that salmon farming has globally to make decisions on its future growth.

Norway's Success in Balancing Growth and Social License

Salmon farming started in the 1970s in Norway, and many countries since them have grown their own internal industry. Today a handful of countries, Scotland, the Faroe Islands, Chile, Canada, and Australia are all growing salmon. When you compare their growth, however, what you will see is an extremely stark difference between the overall growth of two countries, Norway and Chile, compared to the rest. Throughout history, Norway and Chile on average add 32 and 21 thousand tons of salmon each year, whereas the UK has done less than 5 thousand across their last 40 years.

Throughout the history of salmon farming, there has been no country who has accomplished this balance better than Norway. Throughout Norway’s 40 year salmon farming history, they have been able to continuously grow their industry in a far more consistent manner faster than any other nation, and we'd argue a large reason is because of their social license. And currently, one of the largest drivers of that social license is the management of sea lice. 

Sea Lice Management and Norway's Traffic Light System

The management of sea lice has become a linchpin in maintaining Norway's social license. The country's 'traffic light' system has been a sophisticated approach to the sea lice challenge, segmenting the nation into various production regions. Each region is assessed on its sea lice situation, influencing the permitted growth of the salmon industry in that area. The upcoming round of assessments is set to commence shortly, with the active participation of the Norwegian government and the Marine Institute. This process holds significant importance as it forms a crucial part of the social license agreement between the salmon industry and the public.

Every two years, the country undergoes a process of repainting its traffic lights. With the new appointment of Fisheries Minister Cecilie Myrseth, there is anticipation surrounding the unveiling of new zones in the first quarter of 2024. The assessment conducted by the esteemed Marine Institute of Norway serves as the central source of data to monitor the sea lice situation in each region. Recently published, the report has sparked a strong reaction from the industry. Farmers and industry organizations have voiced their concerns, asserting that the report fails to accurately depict the reality on the ground.

How the Traffic Light System Works

Let's guide you through the assessment process. The driving force behind sea lice regulation is the concern that these parasites at farming sites have a detrimental impact on small wild salmon as they migrate from rivers. As spring arrives, juvenile salmon in streams undergo smoltification and embark on their journey to the open ocean.

Sampling of Wild Salmon

During a span of 6 weeks, the Marine Institute diligently collects samples to gauge the effects of sea lice on these fish. The sampling occurs in 3 ways and each has a separate purpose.

The first sampling method is bait and net fishing at a number of designated routes that are checked daily. They record the number of lice on the animal and monitor the date.

The second method is trawling boats that use nets to capture salmon in specific outer parts of the fjords along the coastline and this method used to measure the overall accumulated sea lice impact on smolts on their way out to the open ocean. They take efforts to make sure that the fish captured caught are wild smolts at the right size and use specially designed nets to less scale loss. 

The last method is strategically placed cages of 30 farmed smolts each that are replaced every 2 weeks to give a baseline for how the infection pressure changes over time in this particular season. They suspect a 1M cage in about 1 M below the surface of the water.

Timeline & Calculations

These activities happen over the course of a few weeks in the April - May, and the sea lice counts from the fishing and trawling sampling methods are used to determine a number of metrics. They calculate the overall percentage of fish that have any lice attached on them, the average number of lice, and percentage of fish that have more than 10% body coverage of lice. The significance of the 10% number is that based on laboratory studies, that 10% body coverage is the threshold that salmon will start die from having too many lice. 

Recent Sampling Results

And here are the results, they’ve publicly stated that roughly 30% of all salmon leaving wild streams are dying due to lice, and that number is even higher in the current red zones of production area 3 and 4.
By our calculations, of the fish capture that had lice, the percentage of fish exposed to deadly levels of lice in PO3 was 53% and PO4 was 68%, definitely worse than the rest of the country.

Industry Response to Sea Lice Assessment

These results have resulted in some strong response from the industry. Krister Hoaas’s, the industry’s working group representative in those regions have authored points countering in the report, and we completely understand the concern. Responses to the Marine Institute of Norway's recent report on sea lice have been varied within the industry. Some stakeholders argue that the report doesn't accurately capture the efforts made by farmers in mitigating sea lice and improving fish welfare. There is a sense that despite significant investments in treatments and new solutions, the government's metrics may not fully reflect these improvements.

The key point that the industry feels isn’t fair is a holistic view of the situation. Farmers feel that their efforts to mitigate lice aren’t being accounted for. In a previous analysis that our team conducted, you could see that based on sea lice counts at farms, significant improvements have clearly been made in the response to sea lice in those regions, and even more improvement than other regions. Millions of dollars have been invested by farmers in coordinated treatments, new sea lice solutions, and changes to farming operations to address the situation. 

Even with that progress, however, the ruling continues to be that production areas 3 and 4 have needed to reduce their volumes of fish year after year since the traffic light system came into effect. Farmers feel that they have put in the effort and improved on metics within their control, but the metrics that the government is using to measure the impact doesn’t reflect the same story.
And it’s easy to blame each side and try to shoot holes through each side. Farmers claim the process that the Marine Institute’s uses to measure pressure is flawed. Sample sizes are too small when you are only catching 5-10 fish in certain regions and statistical significance can’t be reached. On the other side the public claims farmers are lying about sea lice numbers and there aren’t enough protocols to ensure that the results on the farming side are truthful.

Dialogue Between Government and Industry

When you take a broader view of this dialogue, you can see that it plays a crucial role in establishing and maintaining the social license to operate. Both sides are seeking to minimize their own risks. Farmers are striving for a clear path to sustained growth, while the government aims to safeguard the public's desire to conserve wild salmon. Ultimately, everyone is driven by the quest for truth, delving into the depths of the ocean, which can only be attained through the passage of time and the relentless pursuit of more data. As we piece together this intricate puzzle, it is inevitable that imperfections and uncertainties will arise along the way.

And if each side can agree that enough progress has been made and promises kept, what we see is that aquaculture continues to grow in the way that we see in Norway. If not, the patterns seem to be more like regions Scotland, who started farming around the same time but has seen stagnating growth for many years. It will be really interesting to see what develops in the years to come, and it doesn’t just apply to the salmon industry.

Overall, this dialogue is central to upholding the social license for aquaculture, allowing for the industry's expansion while ensuring the protection of wild salmon and other environmental concerns.

How Data Intelligence Can Vastly Improve Aquaculture's Social License

Aquaculture companies worldwide must recognize the currently precarious state of the industry's social license. However, amidst these challenges, industry leaders have a golden opportunity to not only restore but also enhance their social license. One avenue to accomplish this is by wholeheartedly embracing the power of data intelligence and data sharing, both on an individual and global scale.

Investing in data intelligence is a strategic move that can yield numerous benefits.

1. Addressing Criticism through Proactive Measures: Data intelligence platforms can help the industry proactively address issues like fish welfare, lice, and mortality rates. By using real-time data analysis, the industry can detect and mitigate problems before they escalate, addressing the criticisms raised in the Stortinget debate and media reports.

2. Building Public Trust with Transparency: Investing in data intelligence can increase transparency in across the global industry. Manolin gives companies accessible data intelligence as a resource that can be utilized for rebuilding public trust eroded by recent negative incidents.

3. Informed Decision-Making for Regulation Compliance: By having detailed, accurate data, the industry can better align with existing regulations and adapt to new ones more efficiently, mitigating risks associated with weak social licenses.

4. Improving Industry Reputation: The industry needs more data-driven insights to improve its reputation. By showcasing a commitment to sustainability and welfare through data intelligence, companies can shift the narrative from criticism to positive recognition.

5. Predictive Analysis for Risk Management: Manolin's predictive analytics enables the industry to foresee and manage potential and unforeseen risks before they occur. This proactive approach is pivotal in preventing incidents that might trigger regulatory or public backlash.

6. Economic Benefits and Efficiency: Data intelligence leads to cost savings and increased efficiency. By optimizing processes and preventing crises, companies can drastically reduce mortality and disease prevention based on Manolin's advance AI modeling.

7. Enhancing Dialogue with Regulators and the Public: Highlight the role of data intelligence in fostering constructive dialogue with regulators and the public. Accurate and comprehensive data can serve as a foundation for discussions and help in formulating rational and effective regulations.

Want to learn more about how AI data intelligence is transforming the industry? Here's why the aquaculture industry is leaving a AI data intelligence opportunity on the table and what companies can do about it heading into 2024.