Organic Salmon Farming : An Assessment of Managerial and Organizational Implications, and the Internalization of Environmental Externalities

Abstract

Organic salmon farming has emerged in the wake of tightened competition in conventional production as an initiative to internalize many of the claimed externalities most people associate with modern aquaculture. However, as Norwegian producers have largely dominated the commoditized salmon industry, in terms of volumes and cost-effectiveness, their incentives for diversification are confined (Georgakopoulos and Thomson, 2005). Two case companies were chosen to explore the motives and means for diversifying into organic salmon farming in Norway, and to examine the managerial and organizational implications of this strategic decision. The project draws upon extant theories pertaining to the subjects of industry-based and resource-based strategy, management accounting and environmental management systems. A qualitative research approach was taken to gather primary data, in the form of five semistructured in-depth interviews. The respondents represented various management positions in two Norwegian aquaculture companies. An exploratory case study design was applied to enable cross-case comparisons and to fortify the findings. Secondary data, regarding company characteristics and related studies, was also collected to strengthen the results. The research findings indicate that successful implementation is reliant on distinctive resources pertaining to human capital, well-integrated quality systems and cost control. The shift was made in conformity with the overall firm strategies rather than as a response to external pressure from various stakeholders. Management accounting played a key role in assessing, allocating and actively reducing the environmental costs associated with organic production. The implementation did not activate any large investments and the price premiums offset most of the excess costs related to certification compliance, enabling the companies to achieve margins which equaled those in conventional production. Organic certification was, through the presence and usage of the abovementioned firm resources, revealed as an integrating mechanism for environmental issues in the organizations. However, the environmental performance of organic production was limited by a perceived disparity between the intended meaning of various certification standards and their practical implications, which in turn confines the purpose of advanced management accounting as a means for enhancing environmental performance.