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Accurate estimates of sharp features in the sea ice cover, such as leads and ridges, are critical for shipping activities, ice operations and weather forecasting. These sharp features can be difficult to preserve in data fusion and data assimilation due to the spatial correlations in the background error covariance matrices. In this article, a set of data fusion and data assimilation experiments are carried out comparing two objective functions, one with a conventional l2-norm and one that imposes an additional l1-norm on the derivative of the ice thickness state estimate. The latter is motivated by analysis of high resolution ice thickness observations derived from an airborne electromagnetic sensor demonstrating the sparsity of the ice thickness in the derivative domain. Data fusion and data assimilation experiments (using a 1 D toy sea-ice model) are carried out over a wide range of background and observation error correlation length scales. Results show the superiority of using an l1–l2 regularisation framework. For the data fusion experiments it was found when both background and observation error correlation length scales are zero, the ice thickness root mean squared error for the l1–l2 method was 0.16 m as compared to 0.20 m for the l2 method. The differences between the methods were greater when the background error correlation length scale was relatively short (approximately five times the analysis grid spacing), and were not significant for larger background error correlation length scales (e.g. 10 times the analysis grid spacing). For data assimilation experiments it was found that openings in the ice cover were captured better with the l1–l2 regularisation, with reduced errors in ice thickness, concentration and velocity. In addition, the ice thickness derivatives in the analyses were found to be more sparse when the l1–l2 method was used and are closer to the those from the true model run. [ABSTRACT FROM AUTHOR]