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Lead Firm Strategy Implementation – Indonesian Blue Swimming Crab

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Overview

In 2015, Wilderness Markets completed a value chain summary of the blue swimming crab (BSC) fishery in Indonesia in which we analyzed the current state of fishery data systems, resource management, infrastructure, and enterprise capacity. Based on these findings, we recommend a lead firm strategy to move the fishery toward sustainability. Like many fisheries in emerging markets, the Indonesian BSC fishery lacks reliable data and, despite new national policies, functions largely without effective management. The value chain has strong, established commercial and social relationships, indicative of the power and influence of a small group of 16 processors buying from 400 mini-plants that, in turn, purchase crab from more than 65,000 fishermen.

In this case, the lead firm is a U.S. based company, Blue Star Foods. Blue Star is working to create financial and social incentives to enable fishermen to transition faster to sustainable fishing practices. Through its purchasing power and relationships, Blue Star is therefore in strong position to influence the practices of a range of processors, who have commercial relationships with a network of mini-plants, collectors, and fishermen.

BSC traps

Sumatran vessel with collapsible traps

Lead Firm Pilot Design

With Blue Star and local harvesters, we are developing an investment model based on a pilot partnership between the lead firm and a fishing cooperative (in development). The model brings together philanthropic and private capital and provides financial, social, and environmental returns. It includes:

  • Purchase commitments based on price, quality and standards
  • Investments in fishermen cooperatives to motivate gear improvements
  • Improved fishery data collection and traceability
  • Support for harvest control compliance

This pilot is designed to attract private, return-seeking impact investment and complement ongoing work by NGOs to improve fishery management. We expect this approach will enable local fishermen to adopt sustainable practices faster than waiting for the government to independently create and enforce management changes, and without the economic hardship for fishermen that often accompanies changes in fishery regulations. It will also bolster business advocacy for more effective fisheries management policies and enforcement through a local cooperative structure.

lead firm crab

BSC fisherman with new vessel tracking device

Goals and expected outcomes

Ultimately, as a result of better data collection and effective management, the fishery will produce higher yields of BSC. It will also provide a traceable, sustainably harvested product with a competitive advantage in key U.S. and E.U. markets. This will then allow Blue Star and supporting investors to recoup their investments in sustainable practices.

By embedding this lead firm work within existing value chain relationships and practices, we aim to:

  • Demonstrate the financial viability of investments in fishery data collection and management, thus attracting additional private investment in these practices.
  • Create new norms that are sustained because of their business value and not ongoing philanthropic support or government subsidies.
  • Provide clear and reliable financial benefits for small-scale fishermen to make gear changes; follow harvest control measures; and take on other sustainable fishing practices. Immediate economic well-being is thereby aligned with sustainable practices to improve compliance and reduce the localized short-term, negative impacts of fishery restrictions.
  • Finally, test a new, “parallel” investment model for combining philanthropic, government, and private sector funding to address fishery management. If successful, other emerging market fisheries can tailor the model.

We are currently seeking additional partners to join us in this lead firm pilot project. Please get in touch with us if you would like more information and/or would like to get involved.

The What’s and Why’s of Wilderness Markets

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WHAT?

“What do you do?”

The big picture, easily digestible, non-jargon answer: We’re trying to figure out how to make it possible for impact investors to work with fishermen to continue catching fish from our oceans, make money doing so, and still have enough fish for future generations.

The buzzword, jargon answer: We’re using value chain based analysis to determine constraints preventing impact capital from flowing to triple-bottom line SMEs in fisheries.

After that question has been settled with a degree of satisfaction, the natural follow-up question is, “Yes, but WHAT do you do?”

The big picture, simple answer: We use readily available data to give us an idea of how big a fishery is in terms of volume and value and what the important markets are for the fishery. This way we can figure out the most important parts of the fishery and focus our efforts there.

The more in-depth answer: We use readily available data to characterize the value chain flows, and we use interviews, scientific papers, and previously published reports to identify opportunities and constraints within the value chain.

WHY?

Not often asked directly, is the question of “Why?” Why are you doing this? Why is it important?

Millions of people rely on fish as their primary source of protein, and billions more benefit from having fish in their diet. A healthy ocean is a great asset to all of us.

We also think it’s a great challenge. How do you quantify risk for a resource you can’t see and where the capriciousness of weather dictates when you can and can’t fish? The multitude of stakeholders adds another layer of challenge: harvesters, processors, distributors, retailers, restaurants, consumers, multiple levels of government plus the local communities, NGOs, and more. Considering the nature of fisheries and the plethora of stakeholders, it’s no wonder that this sector can be overwhelming for financial institutions to explore.

Finally, and perhaps most importantly, we want to see fisheries investments done well. No one benefits from short-sighted projects that may do more harm than good. If the fishery isn’t properly managed, improving the logistics of the supply chain will just lead to overfishing. We know that ensuring appropriate management safeguards are implemented is one of the keys to sustainable fisheries.