Introduction and objectives
It is a long-standing critique of private enterprise that management is incentivized to optimize financial return to shareholders over other objectives such as resource use efficiency or avoidance of environmental and social harms. This has been countered through many initiatives including the World Economic Forum Stakeholder Capitalism initiative (World Economic Forum, 2020) and the EU Green Deal strategy (European Commission (2019)). The concept of the circular economy has emerged as a practical strategy to improve sustainability whilst supporting continued economic growth (Tuladhar, A. et. al., 2022). The SmartAqua4FuturE (SAFE) project is one of many that is exploring technical innovations that support a more circular bioeconomy especially in the context of European freshwater aquaculture. As one component of the project, the authors examined the financial viability of candidate technologies from a business perspective to help identify opportunities and constraints that might be relevant for sector stakeholders and governance organsations.
Approach and methods
The main approach taken was that of a marginal analysis, calculating the additional costs of implementing a technology and comparing it with the additional income that could be generated, or savings that might be made through avoiding previous costs. Spreadsheet models were used to conduct a sensitivity analysis to help identify the most critical elements contributing to net benefits and determine potential financial incentives for adoption. The main challenge was access to industry cost data, making it necessary to use a mixture of actual data, information from academic literature and estimated costs from other financial models. The other main issue to consider was the likely impact of operational scale on costs and returns. Data generated within the project was at experimental or pilot scale and potentially unrepresentative of costs and returns at commercial scale.
Results
The main example highlighted concerns the collection of sediment from carp ponds in Poland using straw bales which can subsequently be incorporated into substrate for oyster mushroom cultivation. Oyster stem byproducts can then be incorporated into carp diets, especially those used to prepare juvenile fish for over-wintering. Experimental work showed this to be technically feasible and economically interesting in terms of scale as Poland is both a major producer of farmed carp and oyster mushrooms. Financial analysis suggested that even as a byproduct, oyster mushroom stems would be an expensive feed ingredient, but at low inclusions rates it acts as a functional feed and improves over-wintering survival rates sufficiently to justify the additional costs involved. The collection of pond sediment for incorporation in mushroom substrate appears uncompetitive with current alternatives. However, a second example provides an interesting counterpoint. Analysis of the marginal costs of using a high-efficiency drier to produce biofertilizer from recirculated salmon system sludge in Norway appeared financially attractive. However, the sensitivity analysis showed the most important factors to be the high cost of electricity in the test location and the disposal fees avoided by treating and selling rather than dumping the waste sediment. Where electricity prices are lower, a less efficient drier at lower capital cost would be more cost effective, and where sediment disposal fees are low or non-existant, biofertilizer production is uneconomic. This is broadly the case in Poland where there is no cost for releasing suspended solids from pond aquaculture where carp production is below 1.5 t/ha/yr. If an appropriate solids discharge fee were introduced in Poland, the collection and utililsation of pond sludge would become more financially attractive as a means of reducing total costs rather than increasing farm income.
Discussion
The results suggest that there will be some circular economy innovations that provide financial advantage and are likely to be adopted by aquaculture enterprises providing the technology is robust and there are no significant regulatory barriers. Other innovations are unlikely to be adopted if they impose additional cost on the producer unless they become essential due to regulatory or market drivers. Encouraging enterprises to increasingly internalize their externalilties almost inevitably leads to higher prices for consumers, but could lead to lower costs for society as a whole. There is therefore a need for both technical and policy innovation to support the emergence of more circular businesses.
Acknowledgment
The SmartAqua4FuturE project has received funding from the European Union's Horizon Europe programme under grant agreement no. 101084549. The University of Stirling 's contribution is funded by Innovate UK through the Horizon Europe Guarantee Fund.
References
European Commission (2019). The European Green Deal. In Communication from the Commission to the European Parliament, The European Council, The Council, The European Economic and Social Committee and the Committee of the Regions (COM(2019) 640 final). https://doi.org/10.34625/issn.2183-2705(35)2024.ic-03
Tuladhar, A., Iatridis, K., & Dimov, D. (2022). History and evolution of the circular economy and circular economy business models. In A. Stefanakis & I. Nikolaou (Eds.), Circular Economy and Sustainability: Volume 1: Management and Policy (pp. 87–106). Elsevier. https://doi.org/10.1016/B978-0-12-819817-9.00031-4
World Economic Forum (2020). Measuring Stakeholder Capitalism Towards Common Metrics and Consistent Reporting of Sustainable Value Creation: White Paper. https://www.weforum.org/publications/measuring-stakeholder-capitalism-towards-common-metrics-and-consistent-reporting-of-sustainable-value-creation/