Countries around the world are transitioning to a 'green economy' that is low carbon, resource-efficient and socially inclusive, as they look to address the issues of climate change, resource scarcity, and rising inequality. Oceans play a critical role in the green agenda but they don't receive the same degree of priority as policymakers face complex social, economic and environmental governance challenges.
But by adopting a 'blue-green' approach, opportunities exist to close this gap in governance, according to KPMG's new report, You can’t go green without blue. Business leaders and investors can act now to capture the value found in a healthy, sustainable ocean economy that balances both the socioeconomic development of oceanic resources with the protection of its natural capital.
The sustainable management of oceans is highly complex, with challenges that include a mix of national and transnational ownership that create compliance and enforcement difficulties for regulators and policymakers. With developing nations taking the initial brunt of the negative impact from developed nations' terrestrial activities, the balancing of economic and environmental priorities has taken a back seat. Additionally, the lower visibility of natural risks such as habitat loss, compared to climate risks, is present within the blue economy and incentivizes the notion of "out of sight – out of mind."
You can’t go green without blue identifies the actions that government, investors and corporations can take along a spectrum of environmental, social and governance (ESG) compliance. 'Learners,' for instance, will need to make incremental changes toward sustainable business practices to create a 'safe space' to operate in the blue economy. 'Leaders' will gain a first-mover advantage in defining comprehensive sustainable management models that address the full scale of risks and opportunities inherent in the blue economy.
The blue economy is critical to all companies’ ESG ambitions
The blue economy is critical to all companies’ ESG ambitions
Traditional maritime sectors will need to transform
Traditional maritime sectors such as fisheries and maritime transport that rely on the oceans for business will begin to receive significantly more scrutiny around their ESG practices and performance from investors and the wider stakeholder community.
These industries will need to undergo a radical transformation to 'qualify' as having blue economy initiatives at the centre of their business. For example, they'll need to become more efficient to achieve low or zero emissions and the 'Social' and 'Governance' aspects of ESG will receive more scrutiny as the interests of the most vulnerable—such as small-scale artisanal fisheries and seafarers rights—are often marginalized for more visible sectors.
Learners in this sector will be exposed to new regulatory measures and will need to adopt a strategy of operating on a "do no harm" principle or risk being screened out by consumers and investors. Medium to large-scale maritime companies will be expected to set measurable ESG goals and produce climate-related financial disclosures.
Companies leading the way will develop enhanced climate risk modelling to quantify the physical and transitional risks of weather patterns on the industry and integrate these into their business processes and investment decisions. This information will also help in the adoption of circular economy principles within their business models and in securing future revenue streams. These companies will also need to prepare for terrestrial multinationals to use their supply chain relationships to influence downstream industries such as shipping or support upstream industries such as small-scale fisheries.
Biodiversity will be the next focus
Oceans are changing the way some companies are doing business as demand for new sources of minerals, energy and biological compounds drive 'terrestrial' industries into the maritime arena. As these industries expand their reach, companies should expect to be part of an emerging conversation around nature risks, the biodiversity impact of their activities and how changes they make under the water will directly affect our terrestrial stability, including our efforts to limit temperature rise.
Learners will need to direct resources to R&D around best practices for 'blue' business activities. These companies will need to go beyond low-carbon models and minimize their environmental impact more broadly by employing circular economy principles which will reduce environmental impact and provide socially inclusive opportunities while maintaining or delivering additional revenue streams.
Leading companies need to be aware that the next step in climate-related financial disclosures will be nature-related, including an assessment of supply and value chain impacts. They'll also need to explore new financing options, such as public-private partnerships, to fund green & blue innovation and initiatives as they move into newly created sectors such as underwater data centres, ocean thermal energy and autonomous ships.
Terrestrial industries will need to acknowledge and address their blue impact
Ocean and land-based economies are inherently interlinked, so some companies rely on the oceans but may not know it. Sectors with maritime-transported supply chains, high-carbon industries and terrestrial sources of marine threats, such as agriculture and natural resources, are exposed to this blue-green agenda.
As the consequences of ocean degradation become more well-known, a broad range of terrestrial industries will need to reassess their impact along the interlinked land and ocean value chain and revalue the environmental services that oceans provide.
Social opinion is increasingly dictated by what is 'right,' not merely by what is 'legal,' and in many markets, regulatory compliance is no longer seen as enough. Learners in these terrestrial sectors will need to be concerned with reputation management. They're increasingly being expected to 'internalize the externalities' to better address the nature-related impacts of their activities.
All companies will need to develop a better understanding of the role of the ocean economy within the climate change context to analyze, understand and manage the risks that ocean degradation has of reversing progress on the climate agenda.
Leading businesses can create an economic environment that incentivizes blue-focused strategies and the restoration and protection of blue carbon ecosystems—for instance, the establishment of a 'blue carbon' market alongside the forest carbon market.
These leading companies can also employ 'social' pricing by integrating internal valuations of blue natural resources into their investment frameworks. This would reflect the value of nature-based conservation or the cost of the damage to society and the ecosystem.
In almost all sectors of the economy, companies will need to address, to some degree, their impact on the blue economy. You can't go green without blue provides an excellent starting point to help businesses to understanding the issues, broaden their thinking and develop a corporate response.
Partner, Sustainability Services
KPMG in Canada
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