Environmental Social Governance (ESG) for Shipping

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ESG for shipping

(www.MaritimeCyprus.com) ESG (Environmental, Social, and Governance) factors are crucial to the shipping industry due to their impact on sustainability, reputation, and long-term viability. Firstly, environmental concerns are paramount in shipping as the industry is a significant contributor to global emissions and pollution. Embracing ESG practices enables shipping companies to mitigate their environmental footprint by adopting cleaner technologies, reducing greenhouse gas emissions, and addressing marine pollution.

Secondly, social aspects of ESG are vital to shipping companies as they have a responsibility to ensure the safety and well-being of their crew members, promote fair labor practices, and contribute positively to the communities they operate in.

Finally, the governance component focuses on transparent and ethical business practices, including effective risk management and responsible decision-making. By integrating ESG principles, the shipping industry can enhance its sustainability, attract socially conscious investors, comply with evolving regulations, and adapt to changing market demands.

The business landscape is rapidly changing on ESG. New regulation is passed such as the inclusion of shipping in EU’s Emission Trading Scheme (ETS), IMO’s EEXI and CII ratings, and CSRD-mandated ESG disclosures. Customers are increasingly willing to pay a green premium and many investors look to divest from carbon-intensive assets without a clear decarbonization strategy. To navigate the changing landscape and capture ESG value pools, it’s best to have a structured and proven approach. The ESG Playbook for Shipping embodies such an approach and is developed to assist shipping companies of all sizes on their ESG journey.

What is ESG?

Environmental

A company's environmental impact includes sub-topics such as CO2 emissions, pollution, waste, biodiversity, and natural resource management incl. circularity. A company's performance on the environmental dimension is increasingly being scrutinized by investors, regulators, and customers.

Social

Health and safety of employees, product liability and the assumption of responsibility within a company's environment shape its public image.

Governance

Corporate governance such as leadership's orientation on ESG-aligned company policies and supply chain management are steering mechanisms of ESG implementation.

ESG Shipping Approach

Performing well on sustainability is not just a positive differentiator – it is increasingly becoming tomorrow’s license to operate. The shipping industry is lagging behind other industries, with limited transparency and concrete actions largely in their infancy. Only 46% of the largest shipping companies have made pledges in line with IMO or net-zero commitments and only 41% have GHG and sustainability reporting. To act, shipowners and operators face a complex supply chain of conflicting needs and mounting external pressure from regulators, customers, employees, and investors. The ESG Playbook for Shipping provides a tried and tested approach to navigating the entire value chain and unlocking new value.

Greenhouse gas emissions

Of all greenhouse gas emissions worldwide, the shipping industry contributes 3%

Commitments

The percentage of large shipping companies that have made pledges in line with IMO or net-zero targets is only 46%

ESG reporting

The percentage of large shipping companies that have GHG and sustainability reporting is only 41%

How to get started

There is a significant decarbonization potential in wider adoption of ESG practices. Thousands of vessels, millions of seafarers and gigatons of CO₂ are currently not covered by any ESG ambitions. While many companies are working on this topic, they are not thinking holistically or in a coordinated way and many companies are trying to do everything at once which slows down the progress.

This leaves shipping executives with two questions: how to get started and what is the true benefit of acting today.

The ESG Playbook for Shipping enables shipping companies to diagnose their current state, define focus areas, articulate commitments and develop initiatives to accelerate their ESG journey. In an easy step-by-step format it makes ESG more accessible for more companies but also makes the value proposition and opportunity space associated with a solid ESG strategy very clear.

The playbook is relevant both to shipowners and operators, but also to investors, cargo owners, industry associations etc. who would like to engage their shipping stakeholders in becoming more sustainable.

Creating a credible ESG strategy

The playbook is a step-by-step guide outlining the value proposition in ESG and outlines the key building blocks of a solid ESG strategy. The playbook introduces the material topics in the shipping industry as well as eight different shipping segment, allowing ship owners and operators to get an immediate idea of the topics that are long-term business critical and their importance to stakeholders.

To make this even more tangible, the playbook proposes three phases for shipping owners to engage in with ten key meetings towards a robust ESG strategy (and contacts to reach out to in case of need for further assistance).

The following elements characterize a solid and credible ESG Strategy:

  • Set time-bound long-term and ambitious ESG commitments with interim targets
  • Develop a strategy for how to achieve targets
  • Invest in initiatives and governance
  • Track progress and report using a global standard

Unlock the value proposition of ESG through concrete tools and processes tailored for the shipping industry

Industry transition through ESG
For businesses, environmental, social, and governance (ESG) is an increasingly critical component of their value propositions to stakeholders including investors, customers, and employees. ESG involves setting clear targets, developing roadmaps for meeting targets, and reporting progress. Therefore, it has the potential to drive climate action and more sustainable behavior, including but not limited to reducing GHG emissions by improving the reliability, comparability, and transparency of company ambitions and actions.

There is a growing number of voluntary ESG frameworks and methodologies which has made the ESG reporting landscape increasingly complex to navigate. This document is not an attempt at yet another framework or methodology. Rather, we encourage use of those already out there in combination with an observant eye on the most ambitious upcoming regulation. There is good reason to believe that this along with the ongoing work for an international standard will define future requirements from your main stakeholders including investors and customers.

The below ESG Playbook for Shipping is co-developed by Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping and Boston Consulting Group to help shipping companies create robust ESG strategies. The playbook will enable shipping companies to navigate the ESG landscape and develop future-proof ESG strategies. It provides recommendations on how to identify the most valuable focus areas, set specific targets, implement best practice initiatives, and ensure organizational readiness.

Download below, the guidance paper ESG PLAYBOOK FOR SHIPPING:

download

 

Source: Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping and Boston Consulting Group

 

 

 

 

 

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