2. Marine Harvest ASA
Company Description
Marine Harvest ASA is a fish farming plant, raising mainly Atlantic salmon.
The company processes and packages fish, operates hatcheries, and sells
and markets the products. Marine Harvest operates in Canada, Norway and
Scotland. The company sells salmon worldwide through its sales companies
in Norway, Canada, the United Kingdom and the United States of America.
Marine Harvest is organized into three Business Areas: Feed, Farming and
Sales and Marketing.
•• Feed – 0.1% of revenue – comprises the feed plant, located in Norway.
•• Farming – 2.8% of revenue – comprises a single operating segment
made up of farming operations in Norway (four regions), Scotland,
Canada, Chile, Ireland and the Faroe Islands. This segment also includes
primary processing activities and some filleting activities (a secondary
processing activity).
•• Sales & Marketing is composed of two operating segments:
•• Markets – 60.7% of revenue – comprises activities relating to the sales
of primary processed products obtained from the Farming business
and, to a lesser extent, purchased from third parties. It also includes
logistics and delivery of products to third-party customers, as well as
to the company’s internal secondary processing operations (including
Consumer Products) and some secondary processing activities;
•• Consumer Products – 36.2% of revenue – includes the European sec-
ondary processing and value added operations, as well as end-product
sales, including logistics (including the processing activities in the
Morpol Group, which were consolidated into the figures with effect
from 30 September 2013).
•• Other – 0.2% of revenue – consists of corporate functions and the Ster-
ling White Halibut farming operations.
Revenue breakdown by customer location:
•• Norway – 5.4%
•• Europe, excluding Norway and Russia – 64.9%
•• Russia – 0.8%
•• Americas – 17.2%
•• Asia – 8.7%
•• Rest of the world – 1.1%
Geographic breakdown of the harvested volume in 2015:
•• Norway – 61%
•• Chile – 15%
•• Scotland – 12%
•• Canada – 10%
•• Faroe Islands and Ireland – 3%
Company’s operating revenue as of 31 December 2015:
NOK 27,880.7 million (GBP 2,373.9 million).
Ethical Breaches:
As per research on Marine Harvest, there have been no ethical standards
breaches.
»» Company Name:
Marine Harvest ASA
»» Materiality Risk Rating
Medium
»» Country:
Norway
»» ISIN:
NO0003054108
»» Sector:
Consumer Non-Cyclical
»» Market Cap:
EUR 6.72 billion
(NOK 61.167 billion)
as of 16 May 2016.
»» Number of Employees:
12,454
as of 31 December 2015
»» Company’s headquarters:
Bergen, Norway
»» Company’s website:
www.marineharvest.com
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Positive impact:
Marine Harvest is one of the largest seafood companies in the world. The World Health Organisation (WHO)
has published a report on both the risks and benefits of eating salmon. The report concludes that eating oily
fish, like salmon, reduces the risk of cardiovascular disease and has a positive impact on the development of
the nervous system in fetuses and infants.
Moreover, salmon production is considered more climate-friendly than beef and pork production.
True ESG Risks & Opportunities
Marine Harvest has faced some important challenges during 2016. It started with the sea lice and continued
with the algal bloom in Chile. Farming operations have also been subject to higher costs due to a rise in the
price of feed ingredients, exacerbated by the weakening of the Norwegian krone against the Euro and US
dollar. However, year-on-year, Marine Harvest has been able to grow revenues from NOK 25.3 billion to NOK
27.7 billion, with profits generated in Norway and Canada and sustaining losses in Chile.
The company’s main risks arise in Chile and British Columbia, due to climatic and legislative changes. All
this coupled with a less rigorous ESG management approach that takes advantage of the legislation flaws
in the emerging markets - compared with company’s high standards in Norway - may pose financial and
reputational burdens on the company.
Poor sea lice management:
Sea lice is a significant threat that involves financial and operational risks. It develops in dense numbers
of ocean-based pens and poses an important threat to juvenile wild salmon. Two Marine Harvest oper-
ations were reporting major louse infestations on their Norwegian farms involving higher sea lice levels
than permitted. The impact on the ecosystem is major, as sea lice epidemics spread on sea trout and wild
salmon populations and diminished their numbers drastically. Currently, in Norway, farmed Atlantic salmon
outnumbers wild salmon by nearly 50 to one. In order to minimize the environmental impact, Marine Harvest
is developing a new “egg”-cage concept to combat lice outbreaks and escapes, thus leading to an important
increase of the R&D budget with repercussions on future operational costs.
Important challenges in Chile:
The algal bloom in Chile killed 2.7 million fish out of 2.9 million in Marine Harvest farms in March 2016.
Consequently, in April 2016, it announced the cut of 500 jobs as part of an emergency restructuring of the
area. The fishermen raised their voices against the salmon producers. As a consequence, a criminal investi-
gation was initiated, alleging that the “red tide” may have been exacerbated by the illegal dumping of tons of
toxic salmon into the Pacific. In the most affected region - Chiloe, where Marine Harvest has 2 farms in the
sea - there is evidence of negative effects caused by the salmon farming industry (such as the high presence
of antibiotics and chemicals, discharge of waste in the sea). All these raise reputational and potential future
financial risks for the company.
Important challenges in Canada:
In British Columbia there is an on-going friction between salmon farming companies and the indigenous
people, whose territory they use. For instance, in 2014 the Dzawada’enuxw Nation opposed the renewal of all
salmon farm licenses in their territory, including Marine Harvest and Cermaq farms. Furthermore, the Ahousaht
occupied a farm until Cermaq removed it. As the government of Canada made a commitment to adopting the
United Nations Declaration on the Rights of Indigenous Peoples which offers them the right to protect their
resources, including wild salmon, new reputational and operational risks may arise for Marine Harvest Canada.
Moreover, the Federal Court confirmed in May 2015 the previously challenged right of Marine Harvest Canada
to transport healthy salmon to and from its coastal BC operations. After the court’s decision, Oceans Canada
made public that the Heart and Skeletal Muscle Inflammation (potentially caused by piscine reovirus - PRV)
may be found in British Columbia salmon farms, similar to Norway. In this context, operational and financial
risks may arise as Marine Harvest will need the Minister of Fisheries’ permission to transfer young salmon
into marine pens, and to have enough PRV-free fish to continue farming in British Columbia.
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Unacceptable fish escape:
In 2015, Marine Harvest faced an unacceptable outcome of 94,450 fish escaping mainly due to human error.
The company has a solid history of escape incidents with 2,052 lost fish in 2014 and 73,744 lost fish in 2013.
Considering that the ASC (Aquaculture Stewardship Council) standard requires farms not to have over 300
escaped salmon in order to maintain the certification, the company is at risk of losing its ASC certification
at the affected sites in Norway, Scotland and Chile. Fish escapes represent a danger for the ecosystem by
interbreeding with wild fish thus triggering genetic dilution results, spreading diseases, displacing the eggs
of and competing with wild fish for limited natural resources. However, measures were taken to prevent
future similar incidents in order to achieve the goal of “zero escapes”, although the company’s history does
not confer security in this direction.
Use of antibiotics:
Another concern is raised by the use of antibiotics that increased in 2015 due to the development of Salmo-
nid Rickettsial Septicemia in Chile. Since the infectious salmon anemia (ISA) - a virus that killed millions of
salmon in Chile in 2007 and was first reported at a Marine Harvest farm - the country faced a growing usage
of antibiotics. Even Marine Harvest, whose Norwegian and Faroe Islands’ units do not use antibiotics, does
not follow the same practices in Chile, thus pointing to a double standard approach.
Potential presence of viruses in the Norway farms:
In August 2016, over 100,000 near harvest ready salmon died in a plant in Oslo, representing a loss of NOK
70 million (EUR 7.5 million). According to the company, the death was caused by abnormal currents, too
strong for the fish to swim against. However, this may be a sign of heart damage caused by heart viruses,
such as piscine reovirus (PRV), commonly found in farmed Atlantic salmon. This highlights a weak area of the
industry with important financial impacts and further financial risks for the company, if the fish from other
farms were infested with the same virus.
Other environmental negative impacts:
As the net-pens are posing threats to the environment through daily discharge of tons of fecal waste and
the ease of contamination of wild fish with sea lice and infectious viruses, Seafood Watch red-listed them in
Canada, Scotland, Chile and Norway for the Atlantic Salmon. All this raises reputational and financial risks for
Marine Harvest and puts pressure on changing the current systems with new ones, such as the “egg”-cage
whose prototype will be trialed out during 2016-2017.
Other environmental concerns are the production of smolt exceeding the official level permitted in Norway,
heavy metal contamination of the sediment in Canada and negative impact on the seabed in Scotland.
Climate change impact:
The GHG emissions rose steadily in the Sales & Marketing and Farming segment due to new business in-
corporation, offsetting the improvements in the Feed segment. Reduction targets are still pending, as the
company claims that it does not have all the necessary details to set them. However, the company qualified
for the Nordic Climate Disclosure Leadership Index.
Health & Safety issues:
Despite the aim of zero workplace injuries, Marine Harvest faced an increase of the Lost Time Incidents (LTIs)
in 2015, due to the inclusion of a new business. The company plans to further implement and enhance its
safety program– BrainSafe, to reverse the trend.
Product safety issues:
Overall, the company has proper business certifications and ASC accreditation for 24% of its sites. Neverthe-
less, the company faced four significant safety incidents in 2015, mainly in the USA, due to the presence of
Listeria monocytogens (LM) in its products. Voluntary recalls were performed.
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Sustainability Details on Main Key Performance Indicators:
Environmental Impact:
•• The company uses ISO 22000, 9001, 14001 standards to manage and optimize quality systems and envi-
ronmental performance.
•• After having 2,052 escaped fish in 2014, Marine Harvest reported 16 escape incidents and a total of
94,450 escaped fish in 2015, deemed as unacceptable by the company itself. Most escape incidents were
due to human error. The company’s target remains zero escapes.
•• An escape prevention program was implemented in December 2015.
•• The company’s long-term goal on fish health and welfare is more than 99.5% monthly survival rate. Marine
Harvest achieved a 99% average monthly survival rate (% biomass) in seawater. Infectious and non-infec-
tious losses accounted for 26% and 74%, respectively, of the total number of lost fish.
•• Marine Harvest adheres to fish welfare standards such as RSPCA (Royal Society for the Prevention of Cru-
elty to Animals) and has health plans that require the 100% fish vaccination in order to reduce biological
and disease risk.
•• During 2015, R&D efforts were made to manage sea lice in a more integrated and sustainable manner,
while reducing the use of medicines.
•• The salmon is not treated prophylactically. The use of antibiotics increased from 40 gram in 2014 to 82
gram in 2015 due to the development of Salmonid Rickettsial Septicemia in Chile. Overall, the number of
fish treated with antibiotics was of 0.4% in freshwater and 4.8% in seawater. No antibiotics were used in
the units from Norway and Faroe Islands.
•• The company’s goal is to maximize the volume produced per unit of feed through better feed conversion.
In Canada, the feeding systems and feed monitoring systems were upgraded.
•• Marine Harvest states that it is constantly increasing the purchases of sustainably sourced marine and
non-marine ingredients, and that is searching to find new sustainable and affordable raw materials for
fish feed.
Climate Change:
•• GHG emission per ton was reduced by 19% in Feed, but rose by 82% and 52% in Sales and Marketing and
Farming, respectively, in 2015 due to the inclusion of additional entities. Total energy consumption and
GHG emissions for 2015 were 2,167 TJ and 159,754 tons CO2, respectively.
•• Electricity from non-renewable sources and diesel increased from 65% to 86% of total energy use from
2014 to 2015, mainly due to higher use of diesel in offshore facilities and processing plants operating in
regions with non-renewable energy.
•• In 2015 Marine Harvest achieved top position in the Climate Disclosure Leadership Index for the third
consecutive year and qualified for the Nordic CDLI.
•• Reduction targets are not set as the company claims it has insufficient information, but works towards full
inclusion of all business units in 2016.
Labour Management:
•• The company aims to have zero workplace injuries. There were 280 Lost Time Incidents (LTIs) reported
in 2015, compared to 250 in 2014. The reason for the increase is the inclusion of Acuinova in Chile. LTIs
measured per million hours worked was 11.4 for the company both for 2015 and 2014.
•• Compared to the industry average, the absenteeism has remained low for several years, with 4.8% in 2015.
•• There is a safety program in place – BrainSafe, based on which the employees are trained.
•• Marine Harvest states to have followed up the initiatives resulting from the 2014 global employee survey:
improvement of the communication channels, revised performance management process, benchmarking
the salary level against the industry, initiatives to increase employee wellbeing and increased level of
training. Another global survey is planned for 2016.
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Business Certifications:
•• At the end of 2015, 24% of sites in operation were ASC certified. The company’s target is to ASC certify
all its units by 2020.
•• In June 2015 Marine Harvest Fish Feed received its Global GAP certificate for the standard scope: “Com-
pound Feed Manufacturing”. In addition to this, Marine Harvest Fish Feed has an HACCP (Hazard Analysis
of Critical Control Points) plan implemented.
•• The farms are certified through GlobalGAP, Naturland Organic, BioSuisse Organic, EU Organic Aquaculture,
RSPCA assured, Label Rouge, PGI, COGP and BAP.
•• The processing facilities are also certified through IFS, BRC, BIO, GlobalGAP, ASC, the Marine Stewardship
Council, Safe Quality Food Certificate, Kosher and BAP.
Product Safety:
•• In 2015 the company reported six food safety incidents. None of the incidents resulted in reported illness
or negative impact for consumers.
•• The number of quality claims was higher in 2015 than in 2014 mainly due to problems with soft flesh.
•• There are programs of monitoring and testing of raw materials and fish feed in order to track the level
of environmental contaminants in the end product, such as PCBs, dioxins and heavy metals. In 2015 the
level of dioxin-like PCBs and mercury, and medicine residues in Marine Harvest’s salmon did not exceed
the permitted limits.
•• In 2015 a new Marine Harvest Hygiene Manual was published to set out hygiene standards for all the
processing units.
Customer Service:
•• In 2015 a customer survey was conducted to measure customer satisfaction and identify areas of
improvement. Among the areas identified were: internal competence building and higher proactivity in
communicating with customers.
Business Ethics:
•• The Code of Conduct sets the ethical standards for business practice and personal conduct and use the
company’s HSE routines as a requirement for all subcontractors.
•• The whistle-blower channel is handled confidentially by the independent third party, PwC.
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Due Diligence – Summary of company’s controversies related to its
key performance indicators:
Product quality:
•• In 2015 Marine Harvest reported six food safety incidents of which four were considered significant. None
of the incidents resulted in reported illness or negative impact for consumers. The four significant ones
were all due to the detection of Listeria monocytogens (LM) in Marine Harvest products.
•• The company voluntarily recalled Ready to Cook (RTC) salmon and smoked mussels from the US market
and cold smoked salmon from the Austrian market.
•• In the second quarter of 2013 one container of fresh salmon shipped from a third party processor in Chile
to the USA was stopped by the FDA due to the detection of trace amounts of crystal violet (CV) in a product
sample. Crystal violet is a dye with antibacterial properties but which is not approved for use in salmon.
•• Marine Harvest and Primar, the third party processing plant, carried out a root cause analysis that identi-
fied the most likely source being contamination of a small number of products from CV-containing ink at
the processing plant Primar, even though no positive product samples were found. Corrective actions were
taken at Primar.
Environmental Matters:
•• Currently, Marine Harvest Norway is under investigation for production of smolt exceeding the official
permitted level in Norway, for which a fine of NOK 2,00,000 (EUR 220,000) was issued. The company is
also under review for incidents of fish escapes and has received a fine of NOK 360,000 (EUR 40,000) for
one of the incidents.
•• In Canada, the company is under review with regards to heavy metal contamination in the sediment under
some of its farms.
•• In Norway, the Directorate of Fisheries claimed that Marine Harvest did not have the required permission
for mooring a barge and some of the cages they operate in the North. This case resulted in a monetary
fine of NOK 441,000 (37,407 GBP). There were also two incidents involving higher sea lice levels than
permitted in the West and Midlands. These incidents did not result in monetary fines, but in non-monetary
sanctions such as reduced allowed biomass in the respective geographical areas for a period of two years.
•• In Chile, the company was required to improve its cleaning routines at a site where parts of equipment
were found on the seabed. No fines or sanctions were imposed.
•• In Scotland, there were four cases of non-compliance that resulted in non-monetary sanctions in 2015.
These cases were on four sea farms where impact on the seabed was greater than predicted, resulting in
a reduction of biomass permissions.
Business Ethics:
•• The NGO Women and Life on Earth – WLOE nominates Marine Harvest for Public Eye Award 2014. The
NGO accused the company of double standards, acting according to the law in Europe while proving
irresponsible business practices in Chile by exploiting the country’s weak legislation. All this have led to
environmental disasters and social injustice.
Labour Related Matters:
•• In Norway, the company had one instance of non-compliance with national regulations due to late reporting
of foreign contractors and contracts.
•• The company explains the reason for the breach as a lack of experience in this area. Training to address
the issue has been completed.
•• Since 2011 Marine Harvest Chile S.A. has been having a dispute with one of its former directors over
certain contractual benefits and obligations.
•• In 2015 the dispute was settled, with Marine Harvest Chile S.A. paying indemnification to the former
director.
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EU Merger Regulation Matters:
•• After having approved the takeover of Morpol ASA by Marine Harvest ASA on 30 September 2013, the
European Commission informed the latter that it was investigating the company for infringements of the
suspension obligation and of the notification requirement under the EU Merger Regulation by acquiring an
initial shareholding in Morpol ASA, before notification and approval of the European Commission.
•• On 23 July 2014, Marine Harvest was informed that the Commission had decided to impose a fine of EUR
20 million, and decided to appeal the decision. The EU General Court’s judgment is expected by the end of
2016.
•• Marine Harvest ASA has made an endowment of EUR 20 million (NOK 192 million) in connection with this
matter.