Best Practices- Sustainability & Replication
The GFCR supports interventions that implement or seek sustainable solutions for coral reefs and associated communities including long-term access to finance technology transfer, building local management and governance capacity, enhancing ongoing support for sustainable resilient livelihoods, and replicating or scaling these solutions where feasible.
The blended finance approach of the Global Fund for Coral Reefs is designed for the sustainability and replicability of successful initiatives. By seeking to support and invest in reef-positive enterprises and market-based solutions, different forms of revenue can be used for continuous financing of reef-positive actions. As well, where profitable enterprises can be identified, supported, and documented, replication and scaling of those enterprises could rapidly increase their geographic coverage and impact. Best practices around sustainability and replication are built around an understanding of these concepts as they relate to coral reef-positive initiatives.
Sustainability has been defined in many ways, but the core concept is the ability to implement an activity or livelihood indefinitely without ecological, financial, or social harm. To achieve sustainability for reef-associated initiatives – there should be a combination of ecological, financial, and social benefits and a minimization of harm or risk. The ecological and social elements are largely covered in other GFCR general and sector-specific investment principles. The financial sustainability issues are addressed here.
To achieve financial sustainability within the context of the GFCR, there are several options that can be pursued. The most obvious is the for-profit enterprise model where a reef-positive enterprise generates enough revenue to cover its operating and administrative costs and can ultimately use the profit to grow and maintain viability during changing economic conditions (resilience). There are enormous resources available for good business practices including books, online resources, continuous education offerings, and business schools. Building good business practices in reef-positive enterprises is an essential role the GFCR is seeking to support through Technical Assistance Facilities, partnerships with incubators and assistance providers, the Blue Bridge support efforts, and other approaches.
Revenues from the sale of goods and services can also be used by non-profit organizations, associations, cooperatives, and other diverse institutional forms to assure funding of ongoing initiatives that have positive impacts on reefs and associated communities. The main difference between for-profit enterprises and most of these other organization forms is that profits can be distributed easily to owners in for-profit companies whereas any net gains in these other structures often have other uses. Some of these other forms of organization may only use revenues to complement other forms of financing – i.e. from government, private and public donors, etc. whereas for-profit companies tend to raise investment capital through debt and equity and count almost exclusively on sales of goods and services for ongoing financing.
A wide range of finance mechanisms can also be used for financial sustainability. These include diverse economic instruments such as fees, charges, fines, penalties, taxes, etc. – many of which accrue to the government but can also be retained at the local or agency level and directly spent on reef-positive outcomes such as protected areas, fisheries management, or sustainable livelihood support. Even the revenue that is retained by the government can be earmarked or funneled through national or subnational budgets to actors generating reef-positive outcomes. Some key design elements of these finance mechanisms should include alignment with social and environmental objectives, stability of financial flows (which can also be achieved through effective financial management such as Conservation Trust Funds), attention to the risk of unintentional consequences, and user or polluter pays principles. Additional information on the diverse finance mechanisms that could support conservation and sustainable development can be found in Conservation Finance: A Framework.
Replication and scalability are key to achieving the desired impact of the GFCR. Replication and scaling of business models can be achieved through the expansion of an enterprise directly – i.e. to cover a range of locations – or through the sharing of the business approach and the creation of multiple companies using a similar business model or finance mechanism. For example, the use of debt conversion for conservation (also called Blue Bonds when new bonds are created as part of the transaction) has been done for decades but recently revised through an initiative by the Nature Conservancy with other partners for the Seychelles and Belize. Additional programs are underway in a range of countries that combine debt conversion approaches with enhanced marine spatial planning and conservation. Replicable business models are likely to be found in ecotourism, mariculture, waste management, and other sectors important for the GFCR. To achieve the second form of scaling, it is essential to share the models and some details of the business or finance mechanism with a broad audience and this is one of the goals of the GFCR’s knowledge management system and communications efforts.
One often underappreciated element of scaling and replication is the importance of government and governance systems. In most cases, for a model to scale in different environments, certain underlying conditions must be met and government regulations or governance systems are key. The general business environment must be conducive to successful business transactions including investment and access to capital – basic conditions that are not always met in developing countries and remote areas. Some examples where a combination of conditions are essential for replication include the Blue finance model where the government must be open to public-private partnerships, adequate tourism infrastructure (airports, hotels) is in place, and general respect for contracts and regulations are key. In another example, regulatory and policy clarity are essential for blue carbon projects – including local governance systems must be functioning to assure fair and effective engagement with local communities.
One additional pre-condition to scaling and replication is access to capital. This is not only necessary at the individual and community level – where it is most often missing – but also for local businesses, including small- and medium enterprises (SMEs). The inclusion of individual, micro, and small business into the formal sector can be challenging but essential for access to capital and other financial services that are key to successful scaling.
Based on the discussion above, some supporting approaches to scaling and replication include the following:
- Supporting Technology Transfer – there are emerging technology companies and organizations developing effective technological solutions for sustainable fishing, aquaculture and mariculture, sustainable agriculture, and other areas that could have positive impacts on reefs and associated communities. Technology transfer can build local capacity for replication and scale including supporting local enterprise development through technical assistance facilities, capacity development, and knowledge sharing amongst stakeholders.
- Building Local Management and Governance Institutions and Capacity – this is often the most essential underlying condition for sustainable enterprise and often creates conditions for success – especially for private companies working in natural resources. One of the greatest impacts is the ability for effective local management and good governance to align incentives of key players towards sustainability – such as in seafood marketing and sales – facilitating access to capital, assuring the rule of law is upheld, etc. Some of this effort is achieved through enacting and especially enforcing legislation and regulations that govern access to and use of resources.
- Direct Support for Sustainable Resilient Livelihoods – Although not the target of scaling and replication, the support for local livelihoods feeds into most of the interesting supply chains for sustainable investments. The principal support needed is access to capital, financial services, and insurance – this is covered in another principle. Secondly, basic training on business approaches, standards, and accounting coupled with the formalization of many current informal businesses and solo entrepreneurs forms the bedrock of stability needed for achieving longer-term sustainability, scale, and replication. One approach that would link return-based investment and grant-making is built upon key supply chains – working across the supply chain to assure sustainability coupled with economic and social justice. This approach can create fair wage long-term jobs – thus, enabling longer-term thinking than is possible without these key pieces in place.
- Cultural and Community Engagement – the success of new enterprises is dependent on a wide range of conditions, knowledge, action, and commitment of the entrepreneurs. Assuring strong outreach and communication to key stakeholders can tip the balance towards success – this is especially the case when the initiative is seeking both a financial return and measurable social and environmental impact.
You can access more GFCR Investment Principles' best practices here.
The full document covering all the best practice series can be downloaded from here: GFCR Best Practice General Principles 2022.pdf
