How to Achieve Sustainable Development in the Arctic
Professor Dan Vermeer said that business, governments and civil society need to work together to ensure long-lasting development in the region
The Arctic region sits at the top of the globe, encompassing the North Pole, vast swaths of water circumnavigating the earth, most of Greenland, Iceland, and the northernmost regions of Scandinavia, Russia, Canada and Alaska.
It is a region rich in natural resources, a major reservoir of fisheries, and a possible shipping corridor for global supply chains.
But the Arctic is also a fragile ecosystem, particularly sensitive to the consequences of climate change.
While Arctic resources offer plenty of opportunities for governments and businesses around the world, it’s imperative that “we meet our needs for today's growth and development without sacrificing the ability of future generations to do the same,” said Dan Vermeer, an associate professor of the practice at Duke University’s Fuqua School of Business and the Executive Director of Fuqua’s Center for Energy, Development, and the Global Environment (EDGE).
In a talk on Fuqua’s LinkedIn page, Vermeer mapped out stakes, risks, and business opportunities in the Arctic, and made the case for a sustainable development of the region, a goal shared by the United Nations’ sustainable development goals.
“How do we balance the desire we have for economic growth on one hand and improve quality of life and healthy ecosystems on the other?” Vermeer said. “Through technological means, policy means, and through new business models.”
Three ways the Arctic is relevant to the global economy
About 4 million people live in the Arctic, 10% of whom are indigenous (in Greenland, 90% of the population is indigenous.).
The region is supervised by the Arctic council, an intergovernmental forum whose member states are Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the U.S.
But growing economic opportunities are driving more and more states to declare an interest in the region, Vermeer said.
“China, for example, calls themselves a near-Arctic country. Why are they doing that? Because there is greater and greater interest and potential for the economic development of the region.”
Vermeer said there are at least three main industrial sectors in the region that offer growth opportunities.
1. Large fisheries, which draw global demand for protein and all sorts of fish by-products. “We're also seeing species previously found farther south, now moving north, some into the Arctic regions,” he said.
2. Renewable energy. This is an area showing “a lot of potential for development in this region,” Vermeer said, including wind and solar, hydropower, and hydrogen production. While local demand is low (because the population numbers are low), this economy would likely focus on forms of energy that could be transported to other parts of the world through ships, pipelines, grids or other carriers.
3. Raw materials. The global quest for raw materials has reached the Arctic, an area rich with the minerals that go in electric vehicles, batteries, turbines and solar panels.
The problem, Vermeer said, is finding ways to develop these industries without disrupting the environment and the wellbeing of the populations who live there.
The challenges of a sustainable development of the Arctic
Often referred to as “the barometer of the world,” the climate of the Arctic is changing “at about four times the pace that it is in other parts of the world,” Vermeer said. Climate change is causing the ice to recede and melt into water, which creates a “feedback loop that increases the temperatures in that region faster” than in other parts of the world.
Any developmental project in the region needs to safeguard this fragile environment, Vermeer said, as well as make sure that the extraction of oil, gas, and minerals doesn’t compromise the biodiversity of its ecosystem.
Among the consequences of environmental change, many indigenous populations are facing mental health issues related to a pace of climatic, economic and political transformation that is “happening in ways that are disrupting traditional patterns of life,” Vermeer said.
Opportunities in the Arctic: Insights from Duke students’ field trip
“Biodiversity is the foundational wealth of any society,” Vermeer said.
In a field trip he conducted with a group of Fuqua students, Vermeer visited many locations in the Arctic region where cutting-edge companies are leveraging “natural wealth to create global markets” (for example the biotech company North Cluster, which is conducting research on ocean science, with applications for cancer and diabetes, among other things).
The trip also touched base with traditional players who are innovating their practices. In one example, a local fishery providing “half of the organic salmon supply for the country of Norway,” BRKarlsen, is “committed not to grow, because they believe that they are at their ecological limit in the fishing operation,” but still want to continue to innovate and create higher-quality products. One of the technologies they adopted is an AI sensor placed in the aquaculture pens, that can detect fish lice – a big problem for the fish industry – and zap them with lasers.
“It’s a fascinating integration of high tech into a pretty traditional industrial operations,” he said.
Other operations are leveraging the resources in the region to contribute to sustainability.
The Iceland Ocean Cluster is creating an ecosystem of startups and investors focused on the many applications of fish waste, or what is left after you strip out the filet from a cod fish. The organization is using fish skin, for example, as raw material for bandaging products, Vermeer said, which has healing properties that make them suitable for fire victims and diabetic patients. The business grew to the point that it was recently acquired by a Danish company for $1.3 billion.
“From perfumes to fuels to packaging, you could use the raw material of the fishing industry and turn it into higher value,” Vermeer said.
In another example of innovation adopted by older players, Nuna Green, the state utility in Greenland, recently switched away from oil and gas as their primary source of energy. Having a large hydro facility, they needed a new solution to deliver electricity to distant villages. Currently, the company is looking at the feasibility of using green hydrogen produced from hydro power, and then using ships to deliver the green hydrogen to remote locations.
A multi-partner path to sustainable development
There are a lot of reasons why the Arctic is appealing to businesses and governments around the world, Vermeer said, but local stakeholders need to be engaged and environmental standards preserved.
“The only way to crack the code on sustainable development is through multi-sector partnerships, where business, government and civil society find new ways to work together around these opportunities and these challenges,” he said.
EU regulations around corporate disclosure and impact measurement are real, Vermeer said, and “especially in fragile environments like the Arctic, every company is going to have to really step up in terms of their ability to measure, report, and make progress on their environmental and social sustainability goals, despite the kind of ups and downs in different countries around ESG.”
“The move toward transparency is here to stay.”
At the same time, governments need to find ways to include the indigenous populations in the conversation about development. In March 2024, Norway reached an agreement with the Sami population, a group of reindeer herders who had sued the Norwegian government because a project to build the largest wind farm in the country was encroaching on their grazing rights.
“We need to resolve that tension between the climate crisis and what you might call a consent crisis. Stakeholder engagement will be key for the future Arctic development,” Vermeer said.
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