Forest and Bird is worried about possible cost cutting because of a downturn in fishing caused by the Covid-19 emergency.
Global demand for fish has dried up, leaving half of New Zealand's fishing fleet sitting at dock.
Forest and Bird has sent a letter to Fisheries Minister Stuart Nash highlighting its concern that fishing companies could take environmentally damaging short cuts as the industry gets back on its feet.
Spokesperson Geoff Keey said such measures would have many consequences.
"One is impact on the sustainability of our fisheries but also, the second thing is missing out on a really big opportunity to transform the way we do fishing."
The environmental advocacy group said more observation of boats is needed to ensure proper protocols are being followed.
However, the seafood industry is defending its practices during the Covid-19 restrictions.
The chief executive of Seafood New Zealand, Jeremy Helson, said while there are fewer observers on vessels, they are still meeting requirements.
"Some vessels have just chosen not to go out because they don't think they can meet the government's stringent social distancing measures and others are just putting on extra protective equipment and changing their practices so they can operate safely."
Helson said level 3 will make things easier as more boats will go out and stores can re-open.
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