Beyond IMO 2020 Compliance: Meeting Maritime Sustainability Challenges

Adam Riccoboni
September 2, 2020

Part of our ongoing series on sustainability and IMO 2020 Compliance.  In today’s installment we review the issues, dynamics and challenges around achieving sustainability in maritime

 

Increasing regulation 

 

Shipping is the lowest carbon footprint form of global transportation, relatively as compared to air or road transport. However, shipping volume is so enormous, carrying 90% of the world's trade, it is estimated to be accountable for 2-3% of carbon emissions, and has become a key target in fight against global warming. Resultantly, increasing regulatory pressure is being applied on the maritime sector. 

 

Sailing toward zero-emission container shipping - IMO Timetable 

 

  • 2018: IMO adopts initial strategy to reduce GHG emissions through 2050.
  • 2020: IMO reduces the limit for sulphur content of fuel oil used in ships to 0.5 percent from 3.5 percent, effective in the 1st of January.
  • 2023: IMO sets a short-term decarbonization deadline. Finalized short-term measures are required to reduce CO2 emissions by 2023.
  • 2030: IMO sets the mid-term decarbonization deadline. Mandates an average 40% reduction in CO2 emissions per transport work by 2030 compared with 2008 levels.
  • 2050: IMO sets the long-term annual GHG reduction deadline. 50% reduction in total annual GHG emissions is required by 2050 and moreover, IMO encourages efforts to phase out GHG emissions completely.

 

Meeting these sustainability requirements comes with costs in terms of technology, change management and complexity. For example, ship operators have the day-to-day task of reducing bunker consumption on vessels and fleets, but the onus for building new vessels or retrofitting existing ones falls on ship owners.  In the case of pool operators, they manage vessels from several owners.  In those scenarios, who has the primary responsibility to drive sustainability?  It is also not clear what measures will have the biggest impact on reducing carbon footprint of vessels; will it be fuel types? Or vessel route optimization? Supply chain management? Maritime players are tasked with developing effective sustainability strategies, in an industry known for secrecy, where best practice can be difficult to identify.

 

Business impacts of sustainability

 

Leading banks have also signed up to the Poseidon Principles, meaning sustainability will be considered in lending decisions. There is also the potential of further regulations and carbon pricing in the future, which poses real risks to solvency of non-compliant shipping operators. The regulatory burden is compounded by increasing customer demands for more sustainable shipping. Major consumer goods players have their own sustainability pressures to solve, and the compliance of their supply chain is an important consideration. The best new talent entering the sector seeks employers with sustainability as a key component of a positive social corporate mission.

 

The world changed in 2020, and meeting such sustainability challenges, now takes place in a new normal post-Covid19. As the coronavirus crisis and lockdowns in many advanced countries reduced consumption this had a negative knock effect on shipping revenues. Covid-19 also accelerated digitization as the Harvard Business Review put it, "Nothing quite compares to the physical-digital divide Covid-19 is revealing and how it affects the nature of work. (HBR, 2020)” Digital transformation is a challenge the maritime industry has been grappling with for some years and may be key to solving these interrelated challenges. Winning with digital transformation can improve net revenues, and reduce operating costs important post-Covid-19, while optimizing vessel routes to reduce carbon footprints. 

 

Getting sustainability and environment in the shipping industry right is a source of competitive advantage. Offering numerous benefits from the potential for premium pricing, winning the best talent, enhanced branding, and ultimately improving profitability. New York Stern University have shown with their ROSI model (Return on Sustainability Investment (Stern, 2020)) firms which tie sustainability to their core value proposition see increases in profitability. 

Sustainability is a vital mission in maritime, impacting regulatory and stakeholder management, reputation and brand, talent, customer acquisition and retention and profitability. Therefore, we hope this report will support maritime leaders with strategic insights to craft effective sustainability strategies. 

 

Learn more about Comply, our Sustainability and IMO Solution

 

IMO 2020 Compliance Sustainability In Maritime

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