The maritime industry is increasingly subject to scrutiny of ESG credentials by stakeholders including financial institutions, operating partners and end users, making it critical to gather relevant data, writes Kelley Duarte from Orbcomm.
Sustainability is a term that has made the leap from concept to metrics over the past decade, with an increasing number of important stakeholders (such as financial institutions and governments) making it mandatory for companies to disclose Environmental, Social and Governance (ESG) data. Although ESG is a relatively new concept for the shipping world, gathering and publishing these metrics will be vital to secure the millions in funding required to fuel the technological innovation needed to decarbonise, digitalise and recover from the COVID-19 pandemic.
The costs of missing the boat on this are clear: analysts from Bloomberg predict that global ESG assets may exceed $53trn by 2025, accounting for more than a third of the $140.5trn in projected total assets under management. Class society DNV is already raising awareness of ESG through two reports: Uniting Business in The Decade of Action (produced in partnership with the UN Global Compact) and Boards and their Stakeholders (produced in partnership with the World Business Council for Sustainable Development). Both these reports highlight the need to examine the purpose and impact of company actions on the environment and members of society, and to have appropriate means to disclose this information to a plethora of stakeholders.
Discussions about ESG are still in their infancy in shipping, focusing on the need to embrace this way of operating rather than the specific metrics that need to be chosen. As this area gathers steam, shipping will not only need to compete with other sectors for funding from institutions that prioritise socially responsible investment, but also manage the possible reputational impact of being viewed as a major source of pollution by the wider pubic. After all, the ESG metrics selected by companies will serve as a benchmarks for progress, which is intrinsically tied to reputation and trust.
Another aspect to consider is that many prominent maritime customers, including Amazon, IKEA, BMW, Mercedes, Red Bull, LVMH, Husqvarna, Nestle and more, are subject to ESG scrutiny themselves, which includes public analysis of the environmental impact of shipping their products.
There has been a traditional reluctance in maritime to embrace high levels of data transparency, as there is the general assumption that this could lift the curtain and damage a company’s competitive edge. But there is no doubt that data is here to stay and – if harnessed correctly – not only holds the possibility to deliver sustainability and reputational benefits, but also strengthen the financial bottom line.
An easy example would be to look at data on fuel consumption, which not only provides information about carbon emissions per individual ship and fleet, but can also set a benchmark to track the effectiveness of new technologies claiming to reduce environmental impact, and foster best practices by crews. Less fuel consumed translates to lower operating costs and emissions, making this an easy win for absolutely everyone. It’s also worth noting that the technology to measure fuel consumption already exists and can be applied to all vessels, irrespective of age.
In fact, my advice to maritime companies looking to dip their toes into ESG waters would be to start small and choose useful, easy-to-measure metrics that can genuinely help your companies be greener and more socially relevant. Starting small using existing technology that has been proven in the field is likely to be a safe investment and can yield useful data to identify areas of improvement and to track progress. Talk to your customers, investors, shareholders and other stakeholders to find out what metrics are important to them, as this will give you a starting point to invest your time and resources. And of course, talk to your technology providers so that we can find the easiest and most cost-efficient way to assist you with your sustainability journey.