Perspectives on Shipping, Finance and the Environment
25th November 2013 10:25 GMT

In 2007, when the UK's Guardian newspaper published an article with the eye-catching headline: "And You Thought Air Travel Was Bad for The Environment?" the shipping industry was embroiled in debate and discussion on if, and how, shipping should reduce its environmental footprint.

Two years later, the 2009 IMO GHG (Greenhouse Gas) Report confirmed that shipping's carbon footprint was in fact much larger than initially estimated at over one billion tonnes per year. Despite this, the article was widely condemned by the industry. The rest is history and shipping is now beginning to accept its role in reducing its emissions and impact on the environment. However, the fact remains that shipping is perhaps not yet entirely comfortable with words like 'sustainability', and nearly seven years on from that Guardian article, many in the industry still view environmental compliance and the challenges that this brings as a financial and operational burden, and as a hindrance rather than an opportunity.

Regardless of one's perspective, thousands of jobs have been created in an expanding new sector that sits somewhere in between the shipping industry and that ubiquitous word, environment - spawned by regulation and external charterer pressures, and boosted by record and sustained high bunker fuel prices. Billions of dollars of trade exist in developing clean technology for new and existing ships. Companies like Wärtsilä, MAN B&W, Rolls Royce, Alfa Laval, Becker, International Paint, Jotun, DSME, and Hyundai Heavy Industries to name a few of the larger ones, have focused their expansion on what other industries call 'clean' or 'eco-efficient' technologies. Jobs and wealth creation around marine environment doesn't stop there. Class societies have invested millions in positioning themselves as "environmental consultancies", many shipping companies have jobs dedicated to the environment and sustainability, while compliance with regulatory issues provides lawyers, consultants, analysts, NGO's, academics, publishers and insurers with new avenues to explore.

Shipping remains a traditional industry; one that is used to cyclical economics, boom and bust, litigation, and reaction rather than proactivity. There remain a variety of barriers preventing the acceleration of change in the shipping industry, including environmental beliefs, experience and budgets to name but a few. Yet there are signs that the industry is reacting to the opportunities that environmental compliance and energy efficiency can deliver to the bottom line when a strategic and coordinated approach is pursued.

Shipping's attitude to 'Environment' and to the other pillars of Corporate Social Responsibility - 'Governance' (including anti corruption and transparency) and 'Social Responsibility (including training and education) - is shifting. A recent report from the Liu Institute for Global Issues and the Nippon Foundation, "The Role of Corporate Social Responsibility in the Shipping Industry" identified four key findings, summarised below:

•    CSR activities in key global sectors, such as retail, natural resource extraction and investment, are accelerating in response to an increasing demand to manage risk, lower costs, and address cross-jurisdictional issues.
•    An increase in CSR activities in the shipping industry is being driven by regulation, customers, investors, NGOs and market-leading companies. Collaborative initiatives led by shipping companies and their stakeholders (such as NGOs and customers) are increasingly effectively at introducing CSR standards for the sector.
•    Some shipping industry participants, particularly small to medium-sized enterprises (SMEs), could be at risk if they do not have an opportunity to participate in development of CSR standards.
•    Shipping Industry associations have a role to play in addressing barriers to CSR engagement and therefore should facilitate and support their members to participate in voluntary activities to improve their social and environmental performance.

Perhaps most crucially, the report was able to illustrate a direct correlation between introducing CSR policies and increases in revenue and profitability. But worryingly, while the largest shipowners and operators, as well as the larger suppliers to the sector, have embraced the learnings from other leading companies beyond shipping to initiate CSR policies, SME’s are in danger of being left behind. Can associations really help bridge the gap, as the report suggests?

Capt. Claus Thornberg, CEO, Nordic Tankers, which introduced a CSR policy this year, told an audience at the World Maritime University on 12th November, he thinks not; rather, that it will continue to be the larger players that are able to reap the benefits of CSR, gaining advantages through economies of scale. Furthermore, access to finance will be a critical factor in determining which companies will be able to meet regulatory compliance or invest in technologies to lower their operating costs. By their very nature, large companies will have better access to capital and credit.

As regulations such as the 2015 ECAs, EEDI and the Ballast Water Convention begin to bite, the gap between large companies and SME’s is only likely to increase. Therefore, questions and challenges remain.


Alisdair Pettigrew,
25th November 2013 10:25 GMT

Comments on this Blog
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murli nagrani
8th February 2014
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Caroline Clarke - SCM Services Pty Ltd
10th April 2014
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