Corporate reports miss the mark on ocean health

Key Takeaways:

• Amid growing scrutiny from policymakers and financiers on how corporations report their climate- and nature-related impacts, a new paper summarizes industrial impacts on the ocean and compares them with what leading companies in the ocean economy disclose.

• The work shows corporations disclose little about their ocean-specific impacts, especially on biodiversity and ecosystems, and rarely set targets for reducing them.

• These insights can help improve reporting frameworks with ocean-specific needs, allowing investors better understand their risks and incentivizing companies to change their practices. 

Covering nearly three-quarters of the planet, the ocean may seem vast, yet it is rapidly becoming a crowded space. While it was initially slower to develop than land-based industries, the ocean economy is now surging thanks to new technologies. Companies and governments are vying for food, raw materials, energy, and geopolitical influence. In just two decades, shipping has grown fivefold and now carries 80% of global trade by volume; offshore wind has expanded more than 500 times; and nearly one million kilometers of seabed fiber-optic cables transmit 99% of international communications. 

“Humanity has relied on the ocean for millennia, yet today’s scale and diversity of use are unprecedented,” said Jean-Baptiste Jouffray, a Wallenberg postdoctoral fellow at Stanford University’s Center for Ocean Solutions and the Stanford-based Natural Capital Project, and lead author of a paper out today in Nature Sustainability. “While this offers opportunities for human wellbeing, it also poses severe risks to ecosystems and the communities that depend on them.” A simple example: one new invasive species is introduced in a new part of the ocean every three days, in many cases taking over local ecosystems and fisheries and having far-reaching consequences.  

In the new paper, Jouffray and his collaborators produced a typology of observed ocean impacts, summarizing and categorizing impacts from eight core sectors of the ocean economy: cruise tourism, marine equipment and construction, offshore oil and gas, offshore wind, port activities, seafood, shipbuilding and repair, and container shipping. They then analyzed annual and sustainability reports from the top 10 companies in each sector for the years 2018 - 2020 to see what impacts are being reported, how they are measured, and what targets (if any) are set.

The findings reveal crucial gaps in the current reporting of corporate impacts on marine ecosystems, and establish an important baseline for future comparisons. Companies focus almost exclusively on energy use and greenhouse gas emissions, with few measurements of more ocean-specific impacts such as habitat destruction, overfishing, underwater noise, or the spread of invasive species (see Figure 1). Where reporting does occur, companies use a wide range of indicators, hindering comparability and suggesting a lack of consensus on what should be reported. Notably, less than one-third of the companies reported indicators for biodiversity-related impacts, and none of these indicators were used by more than two companies.

How reporting can translate into regulatory and financial responses 

Why go to all this effort? Once climate or nature-related information is made public, investors and lenders may find investments are too risky because of their potential impacts on other sectors or on their reputations. “In theory, the more information companies disclose about their operations, the better you can influence their behavior. But that requires someone to act on that information. Transparency alone is a necessary, but far from sufficient, basis for corporate accountability,” said Jouffray.  

A number of voluntary climate and nature reporting frameworks, such as the Taskforce for Nature-Related Financial Disclosures, the World Benchmarking Alliance, and the CDP (formerly the Carbon Disclosure Project), are actively working to incorporate ocean impacts. Meanwhile, several stock exchanges now expect listed companies to disclose information on their climate impacts. Over time, such transparency could become standard, much as financial reporting is today. 

Filling gaps in data and policy

The researchers have already shared their work with these reporting organizations in an effort to build consensus around which indicators to focus on. Their analysis also clarifies where there are gaps in what is being measured, and where researchers could play a bigger role in providing baseline information – for instance, when it comes to the introduction of invasive species. Eventually, some of these data may be produced by third-party monitoring systems, much as Global Fishing Watch tracks fishing vessel activity via satellite, since current reports are based on what companies choose to publish. 

The investors are up next 

The research team is turning next to identifying the financiers of these key ocean economy companies, hoping they can help create the right incentives for better corporate disclosure and practices. “There has been a lot of interest in the role the financial sector could play to influence ocean conservation and sustainable use, so we really want to test that idea,” said John Virdin, director of the Ocean Policy Program at the Nicholas Institute for Energy, Environment and Sustainability and a co-author of the paper. “Now that we have a baseline of the ocean impacts that companies report, we’re curious to know: if this reporting is improved, would financiers act on that information? Would it change investment decisions in the ocean economy? These are questions we are turning to now.” 

This work was funded by the Knut and Alice Wallenberg Foundation (2021.0343), the Packard Foundation (2022-73546), and the Walton Family Foundation (00104857).

Jouffray is also affiliated with the King Center on Global Development at Stanford and the Stockholm Resilience Centre at Stockholm University. Virdin is also affiliated with Duke’s Nicholas School of the Environment. Other co-authors are Jan Bebbington of the Pentland Centre for Sustainability in Business at Lancaster University; Robert Blasiak of the Stockholm Resilience Centre at Stockholm University; Andrea Dunchus and Dan Vermeer with the Duke University Fuqua School of Business; Marta Lo Presti, Jeremy Pare, Juan Pablo Quintero and Regan Rosenthal with the Duke University Nicholas School of the Environment; Daniel Prosi with the European University Institute, Department of Economics; and Piera Tortora with the Organisation for Economic Co-operation and Development.