The Sustainable Shipping Initiative: A collaborative approach to the Shipping Industry’s greatest opportunities and challenges

This article by Sam Kimmins, Principal Sustainability Advisor & Network Partner Manager at Forum for the Future, takes a look at the impact of the shipping industry on world trade and the initiatives which have been undertaken to ensure its future sustainability. 

Shipping is one of the world’s great hidden industries.  For most of us, catching sight of the giant cargo ships that ply the seas is a rare event on a distant horizon.  Yet shipping affects the lives of billions of people, with 90% of the world’s international cargo travelling by sea. It has been said that without shipping, half the world would starve, and the other half would freeze - shipping is without doubt a vital engine of global trade.  

The industry is also shaping the world we live in in other ways, however.  Shipping accounts for three to four per cent of global CO2 emissions; Ship breaking practices on beaches such as the Alang Salvage Yards, transport of invasive species in ballast water, air quality around ports, and a wide range of other social and environmental factors  are coming under increasing scrutiny by customers, regulators and the wider public.

Perhaps most fundamentally, climate change, and escalating energy costs are presenting a strategic nightmare to an industry entirely reliant on burning huge quantities of fossil fuels.

Major bastions of the energy world including Shell and the International Energy Agency are predicting that the age of easy oil is over, and the question is shifting from whether we need to shift from oil, to when and how… the Industry is left with a question – Will the ships being built today, based on today’s oil price, still be commercially viable within the next 20, or even ten years? Indeed, we’re already seeing ships built just 5 years ago, being sold for scrap because they’re simply too inefficient to run at a profit. 

Shipping has a compelling case as the most energy-efficient freight service, but industry leaders recognise that any return to growth will be unsustainable if the industry does not innovate to cut costs and reduce its environmental impacts.  This is where the Sustainable Shipping Initiative comes in.

The Sustainable Shipping Initiative, led by global not-for-profit organisation Forum for the Future, brings together 19 industry leaders, along with the NGO WWF, to help the industry make long-term plans for future success. It is the first time the shipping industry has joined forces on such a cooperative global scale to tackle major sustainable issues.  The cross-industry group represents ship owners and charterers, shipbuilders, engineers and service providers, banking, insurance, and classification societies. John Ridgway, CEO of BP Shipping, believes that it is important for ship owners and operators to take sustainability seriously as an industry-wide issue. “While we cannot be certain about market rates and oil prices, we can be certain of the need to do what we practically can to reduce emissions. The Sustainable Shipping Initiative could prove a significant catalyst for change in the industry, both in real terms and in mind-set”.

The SSI’s approach is to prioritise long-term benefit over short-term gain.  The initiative was founded in 2010, and in 2011 published its ‘Case for Action’, which looks ahead to 2040 and identifies the major trends which will affect the maritime sector in the next 30 years.  Members signed up to a joint ‘Vision for 2040’, setting out their vision and aspirations for how the industry should respond to these trends and challenges.  But it’s not just talk: the ‘Vision for 2040’ is backed by specific commitments to action, and four ‘workstreams’ are underway which will provide tangible, useful outcomes that can be implemented by the wider industry – these outcomes will be launched in Singapore in September 2013.  

In 2014 and beyond, we anticipate that the SSI will continue to develop and trial new solutions to tackling the megatrends facing the shipping industry and enable a build-up of a robust and profitable industry with a strong record of social and environmental responsibility. 

What are the workstreams?

The finance workstream is aiming to address the disconnect that exists as a result of charterers and ship owners’ different incentives to save fuel. This is stifling the retrofit of new technologies onto ships that have proven performance and business cases. The participants will innovate and pilot a new financial mechanism that shifts the risks and returns, and enables successive charterers to benefit from fuel savings whilst paying a premium to the owner so that the investment in new technologies can be repaid over time.

The materials management workstream is developing systems to trace and track all the materials used to build a ship. The goal is to achieve full transparency and accountability for the social and environmental impacts from construction through to recycling of ships.  

The energy tech workstream is working on both technologies and techniques that will deliver a step change in the energy requirements and resulting emissions of vessels. Focusing on the opportunities created by wind assist and air lubrication technologies, and a set of low energy marine operational techniques, participants are developing robust business cases that can provide the information companies need to justify large scale investment at scale in lower energy marine technologies and techniques.

The credible benchmarking workstream is focused on helping the shipping industry navigate the growing number of beyond-compliance rating schemes, which will enable greater uptake and drive improved sustainability performance.  The group will develop an independent reference/guidance resource for stakeholders designed to increase awareness and assist in selection and use of the existing rating schemes.

The Power of Collaboration

The SSI is just one example of a collaborative, system-level approach, which is gaining increasing momentum as a way of tackling complex sustainability challenges.  Given the scale of these challenges, we need to think bigger.  We need to go beyond incremental change into collaborative ac¬tion. Organisations working towards sustainable develop¬ment not only need to change their own practices; they need to work with others to change the systems in which they operate.   Mr. O.Y Kwon, DSME (Ship building) believes that in order to ensure that we protect the future of the industry and the environment, we need to work together to find greener, financially sound solutions. “We need to develop reliable and affordable cleaner fuel supplies and realistic technologies that can be implemented on a global scale.  Due to the complexities of the issue, there has been on-going debate about which are the most commercially and environmentally sustainable solutions. Now is the time to put it to the test”.

Now what do we mean by ‘system level’?  As you sit there reading this, you are surrounded by systems: energy systems that heat and light your building; financial systems that move your money; transport and distribution systems that bring you products from the other side of the world.  Our world is made up of complex, interlocking systems that have grown up over time, some planned, and others accidental.

Vital as these systems are, many of them are not working – or, like the shipping ‘system’, recognise the need for some hefty tweaks!  The food system is facing critical challenges from the need to feed a growing population, to coping with the impacts of climate change. In energy, there are a multitude of de-centralised solutions that could reshape generation and network infrastructure to provide clean, secure and affordable energy for all – in contrast to the large, centralised coal and nuclear solutions that still leave vast numbers of rural communities without power, and result in system failures such as the blackouts of 2012.  

And for an individual or organisation seeking to achieve change, the scale and complexity of these systems can seem daunting. But through collaboration it is possible to find solutions. For example, in the shipping industry, fuel represents up to 70% of a ship operators costs – there would seem to be a very strong case for ship owners fitting some of the hundreds of energy saving technologies available on the market, would there not?  But most ship owners don’t actually operate their ships – they charter them out to a 3rd party ship operator, who also pays the fuel bill - so there’s little incentive for most ship owners to invest.   We’re looking to solve this in the SSI, bringing together banks, charterers and ship owners to create new financial models that will solve the age-old problem of ‘split incentives’ and ensure that the right people benefit from investment in fuel savings.

The SSI is still in its early stages – but the leaders involved in this Initiative understand that success and sustainability must go hand in hand.  C.K Ong, President of U-Ming, believes that as one of the world’s major shipping lines, “we felt it was critical to take part in sharing ideas and knowledge for the future and to encourage widespread adoption of new thinking to solve mutual problems.” 

The practical actions which they will help deliver as a result of the SSI will not only make their businesses more robust, but will ensure a more secure future for all of us.

We believe that collaboration is the way forward in tackling the big challenges we face, and Forum for the Future is working with a number of industries – from Shipping through to Tea, through to Energy producers – to help create the big, system level changes we need to see.

To find out more about the SSI please visit www.ssi2040.org

To find out more about Forum for the Future and our work in India, please visit http://www.forumforthefuture.org/our-work-india

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