Business and biodiversity: Towards sustainable use value chains?

27 November 2014

Based on current trends the future is bleak for biodiversity. Can private sector partnerships, trade frameworks, and legal architectures be geared towards its sustainable use?

Representatives from nearly 200 governments convened in Pyeongchang, South Korea in October to focus on shoring up biodiversity conservation and sustainable use. The twelfth meeting of the Conference of the Parties (COP) to the Convention on Biological Diversity (CBD) was particularly marked, however, by dire warnings on the state of the biosphere. The launch of the fourth edition of the CBD’s flagship Global Biodiversity Outlook (GBO) publication put forward indicators suggesting that biodiversity decline is set to continue at alarming rates. The report shows many worrying trends around fish stocks, coral reef degradation, species extinctions, forest loss, diminishing plant genetic resources, and the harmful impact of pollution on biodiversity. The news raises serious questions around the future of basic ecosystem services, the species we rely on for food and medicines, and the health of the biosphere.

The report also highlights that the estimated US$150-440 billion needed annually in biodiversity-related funding, aid and investment, is significantly less than the estimated US$36 billion from domestic, overseas development assistance, and Global Environment Facility (GEF) funding currently dedicated to biodiversity-related issues. Against this backdrop, actors with an interest in the CBD are increasingly looking to business sources for biodiversity financing, evinced in the numerous side events at the last COP around business and biodiversity. The BioTrade Congress held on the occasion also highlighted the presence and interest of industry, with various sustainable use ventures showcased, and policymakers looking to industry to contribute more on biodiversity needs.

According to some observers the CBD and the biodiversity issues it treats have not traditionally been approached from an economic perspective. Yet one of the of the CBD’s key objectives is sustainable development and use of biological resources. Helen Clark, the head of the UN Development Programme, at COP12 noted the need to deal with poverty, inequality, and environmental issues simultaneously, amidst calls for biodiversity to play a deeper role in the sustainable development goals (SDGs) that UN members are looking to put in place as part of the post-2015 development agenda. One approach to valuing biodiversity correctly, particularly in relation to trade, is through the principle of the fair and equitable sharing of the benefits arising from the utilisation of genetic resources enshrined as the CBD’s third pillar. However, in order to harness potential buy-in for conservation and sustainable use from the private sector, the right legal and institutional frameworks and tools need to be put in place.

First steps for Nagoya Protocol

The entry into force of the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization – known as access and benefit-sharing or ABS – and the first Meeting of the Parties (MOP) to the new instrument was a highlight of the Pyeongchang meet. The Protocol seeks to ensure genetic resources are appropriately valued and that benefit-sharing is provided as monetary or non- monetary compensation towards biodiversity conservation and sustainable use or, in other cases, towards the indigenous and local communities that hold useful traditional knowledge vis-à-vis the resource. Notably, ABS has been included as one of the targets under proposed SDG 15, as part of a suggested set of goals put forward by a UN working group this summer. A large part of the focus of the inaugural Nagoya MOP was on issues related to compliance with the new instrument given that much of its success will depend on national implementation and laws.

A newly-formed compliance committee would oversee countries’ commitment to the Protocol and be able to receive reports of non-compliance submitted by Nagoya parties. It was agreed that the committee could review a situation where a party fails to submit its national report on ABS or where it is having difficulties complying with the obligations set out by the Protocol. After some sparring around details, it was agreed that the CBD Secretariat could review submissions of information about non-compliance from indigenous and local communities (ILCs) against that provided by relevant parties, which helps to increase the voice of those often closely connected with genetic resources. Two ILC observers will also sit on the compliance committee.

A related ABS-Clearing House (ABS-CH) was also established with the support of an informal advisory committee (IAC) to provide technical advice around the ongoing refinement of the body and web portal which will receive recognised certificates of compliance from parties to the Protocol. These certificates will mirror permits provided by a party’s competent national authority on ABS and provide a publicly visible checkpoint against the possibility of access to genetic resources and associated traditional knowledge without permission and/or without benefit-sharing – often termed biopiracy.

Putting ABS into practice

The MOP also included several discussions seeking to find ways to implement ABS on the ground, including capacity-building for governments implementing ABS systems, model mutually agreed terms for ABS contracts, and ABS-compliant value chains. The idea of an ABS-compliant value chain emerges out of concern about the likelihood of benefits arising from utilisation of genetic resources. Since the CBD came into force in 1993, a handful of ABS agreements or examples have been discussed at length including the San- Hoodia agreement, the Costa Rica InBio agreements, and the Shaman Pharmaceuticals venture. These focused primarily on pharmaceutical products that often failed to result in the “green gold,” in other words millions in royalties from blockbuster drugs, that was originally anticipated from ABS agreements.

In the context of genetic resources and ABS, commentators have often focused on royalties and milestone payments as providing a long-awaited windfall, after several years or decades of research and development. [Ref 1] However, this often leaves local resource providers or stewards with high expectations and low odds of eventual benefits, especially from natural products-based pharmaceutical research that may require decades of clinical trials and tens of millions in investment. This has led to the idea of ABS-compliant value chains, which are about ensuring more upfront benefits, sustained purchase of a natural product, and increasing value addition or at least greater value capture, at the producer end of a supply chain. These value chains could be structured in different ways and will depend on the product, biological resource, and industry.

This shift in the value chain can occur in different ways. In some cases, technology transfer, training, and quality control have led to increased production and income for producers. The establishment of ABS value chains may not always be successful but the aim is to increase the likelihood of earlier and more sustained benefits than under a royalty model of benefit-sharing. For example, a natural product supply of “mamala” (Omolanthus nutans) from Samoa began in the 1990s for research and development (R&D) towards the potential antiretroviral drug Prostratin. This could have been set up as an ABS-compliant supply chain. However, some challenges associated with extractions from the mamala plant supposedly led to synthetic production of Prostratin in the US for R&D towards the pharmaceutical industry, which was a lost opportunity for Samoan farmers some of whom had already planted additional mamala plants around their properties.

Although there are relatively few positive examples to draw upon, some are arising from cosmetic, skin, and personal care products, and their intermediary supply companies. This is likely due to the shorter R&D timelines when compared to pharmaceuticals, growing awareness about ABS in this industry sector, the importance of a socially and environmentally responsible brand image, and the clearer legal direction offered by the Nagoya Protocol, which explicitly mentions biochemical derivatives from genetic resources. [Ref 2]

Securing sustainable development with Moroccan argan

Trade in argan oil from Morocco is estimated at over 700 tonnes per year, with most of the oil heading to Europe for use in cosmetics and hair care products, as well as alimentary oil. In the absence of a dedicated ABS law in Morocco, a specific corporate sustainability partnership has been established between an economic interest group (EIG) of argan oil producing women’s cooperatives, named Targanine, as well as chemical company BASF as the intermediary ingredient supplier, and French cosmetics group L’Oreal, with the in- country support and training of the non-profit group Yamana.

This supply chain was established through progressive negotiations with EIG Targanine, their co-founder and a co-inventor on a number of patents – Professor Zoubida Charrouf from University of Rabat – and various other government permissions and interactions. These range from sanitary and phytosanitary certificates to guidance on compliance for the collection of argan fruits from the Moroccan authority dealing with water and forests. Harvest by local families and cooperatives is generally considered to be sustainable, but as the industry grows there is some evidence that its scale and several threats to the argan forest may be cause for concern, in relation to firewood or charcoal harvest, goat and camel herding, drought extremes and climate change. [Ref 3]

A rolling two year agreement for the supply of argan oil and related products has meant the expansion of the original Targanine cooperative to approximately 557 women in six cooperatives by the end of 2014. The payment is audited by organic labelling group EcoCert as fair trade, which means the bulk of their supply to Europe – estimated at approximately 80 tonnes of oil – is paid at a higher rate than usual, with the benefits going to the cooperatives and women. Aside from the oil, the attribution of funds from the pressed cake – namely, the hard residue derived from pressing kernels to extract the oil – that L’Oreal uses is at least 15 times that paid on the local market where it is purchased for use in soap or even as fodder for goats. As outlined in some recent papers, this dramatic premium, paid into a social fund administered by EIG Targanine and the cooperatives, is essentially benefit-sharing for use of a genetic resource derivative. This means that the tens of thousands of Euros paid to the cooperatives provide for Arabic literacy programmes, health care expenses, eye glasses and optometry clinics, festivals and weddings, crèches, and many other items chosen by the women. A quick check of the Annex to the Nagoya Protocol indicates that these are among the many suggested options for monetary and non-monetary benefit-sharing.

If we return to the idea of value-addition in the Targanine argan case, funds have been made available through the partnership towards the purchase of equipment that speeds up the production process for the women’s cooperatives. Technology transfer is also noted as a form of benefit-sharing in the Nagoya Protocol Annex. For example, “de- pulpage” machines have been purchased which remove the sun-dried fruit from the argan nut, an otherwise tedious process that provides no immediate income to the women. By cutting the time spent on de-pulpage from hours to minutes, the women are able to focus on cracking nuts for almond kernels, which they are paid directly for. In addition, filtration devices and mechanical presses improve the quality control and productivity of the cooperatives, allowing them to charge a higher price for proven quality oil to their European buyers. With the assistance of Yamana and BASF this has also helped Targanine overcome phytosanitary and export hurdles to sell wholesale argan oil to the EU thereby increasing market access and economic opportunity.

While not perfect, and benefiting a relatively small group of producers, the argan example as outlined suggests that ABS-like arrangements are being deployed in a way that seeks to comply with the three pillars of sustainable development taking into account economic, social, and environmental considerations. Through partnership, some of the actors in the argan industry are arguably helping to empower and improve participation of these women in the global economy, in the context of the sustainable use of a natural resource. This is the sort of positive example the proponents of the CBD and Nagoya are hoping to foster and also fits in with the narrative of a sustainable post-2015 development agenda.

Geographical indication protection for argan

Aside from currently working on a draft ABS law – Morocco has signed but not yet ratified the Nagoya Protocol – the government has also sought to safeguard the regionally-distinct uniqueness and quality of argan oil through geographical indications (GI) protection. This intellectual property tool is increasingly being used by a number of countries to protect products derived from biological resources and traditional knowledge. Morocco has had a geographical indications law since 2006, after which argan oil was registered in 2010 and a code of practice has been established against which cooperatives, such as those at Targanine and several other cooperatives in the Souss-Massa Draa region can be certified. [Ref 4] The GI protection has been sought such that the name argan/argane is only used by those from the region, notably there have been some European and US companies with trademarks close to or using elements of “Moroccan argan oil” that registered before Morocco had their GI protection in place, making them exempt under Article 24.4 of the WTO’s Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement. The GI protection is also intended to ensure argan oil from the region is produced according to specific standards. To date, this protection has been limited to Morocco, with a pending application for Argane to become a Protected Geographical Indication (PGI) with the European Commission since 2011.

Further options for the expansion of GI protection at the multilateral level have been considered in recent years. This holds the potential for a trade-related tool to be made to work for sustainable development in the context of local communities and their relationship with natural resources. A group of 28 countries are party to the Lisbon Agreement, and its associated international registry, covering appellations of origin (AOs). These are a specific type of GI with a narrower scope than the GIs protected under TRIPS. Discussions are afoot in the World Intellectual Property Organization (WIPO) to expand the scope of the Lisbon Agreement. The move comes as efforts in the WTO talks remain stalled on extension of the higher level of GI protection availed to wines and spirits to other agri-food and handicraft products, and on a multilateral register for wines and spirits. At a recent preparatory meeting for a Lisbon Agreement diplomatic conference due to be held next May, disagreement emerged around whether observers to the instrument should be allowed to vote on its expansion, and what the best forum would be for moving forward with multilateral GI protection.

While much debate will continue on this issue, through various case studies such as the argan example, we are just beginning to see how trade and legal tools such as ABS and GIs might contribute to, market, and fund the sustainable use of biodiversity. In addition, initiatives like this are exactly what are being called for towards finding solutions to tackle poverty, environment, and inequality issues, against the backdrop of the anticipated SDGs and post-2015 development agenda.

Daniel Robinson, Visiting Research Fellow at the International Centre for Trade and Sustainable Development (ICTSD), Lecturer at the Institute of Environmental Studies at the University of New South Whales

[Ref 1] Wynberg, R., & Chennells, R. (2009), Green diamonds of the South: A review of the San-Hoodia case. In R. Wynberg, D. Schroeder, & R. Chennells (Eds.), Indigenous peoples, consent and benefit sharing – Lessons from the San Hoodia case. Berlin: Springer.

[Ref 2] For a more detailed examination of this example see Robinson, D.F. (2014), Biodiversity, Access and Benefit-Sharing: Global Case Studies. Earthscan/Routledge: London, chapter 6.

[Ref 3] Travis J. Lybbert, Abdellah Aboudrare, Deborah Chaloud, Nicholas Magnan, and Maliha S. Nash. (2011), Booming markets for Moroccan argan oil appear to benefit some rural households while threatening the endemic argan forest Proceedings of the National Academy of Sciences 108(34): 13963-13968.

[Ref 4] Reviron, S. (2012), Argan oil from Morocco in Blakeney et al. (eds) Extending the Protection of Geographical Indications: Case Studies of Agricultural Products in Africa, Earthscan-Routledge, Oxon and NY.

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