The role of maritime transport has been vital in supporting the resilience of national economies during the Covid-19 pandemic. While shipping delays and port congestion have caused chaos throughout the maritime industry, the supply chain is not its biggest threat.
In fact, according to the Global Maritime Issues Monitor 2021 survey, the biggest challenges are centred around environmental issues, which will have a significant impact in the coming decades.
Back in November, during the United Nations COP26 climate change conference, the severity of the global climate crisis was highlighted alongside the need for governments and industries to reduce their carbon footprints.
Agreed by all 197 participating countries, COP26 concluded with the Glasgow Climate Pact, which aims to limit global warming to 1.5C above pre-industrial levels and recognises that, to achieve this target, rapid, deep, and sustained reductions in global greenhouse gas emissions are required.
In the lead up to COP26, the maritime sector came under fire for being too lax in setting climate targets, with UN secretary General Antonio Guterres criticising the International Maritime Organization for not doing enough to cut carbon emissions.
While the IMO had previously agreed to a cut of 40% of carbon emissions by 2030, this would still mean that shipping would be emitting more than double the emissions compatible with limiting global heating to 1.5 degrees.
The IMO, which represents 174 member states, acknowledged that shipping must raise its game and, in the immediate wake of COP26, the IMO’s Marine Environment Protection Committee (MEPC) agreed to initiate a revision of its greenhouse gas strategy, the outcome of which will be considered at its Spring 2023 meeting.
With regards to alternative sources of energy, experts agreed that there is no single solution. Different energy sources are likely to be used on ships depending on their needs, such as wind, batteries, hydrogen, methanol, and clean technology retrofits may be installed on existing vessels during the transition.
Some operators are already moving in this direction, by developing innovative new builds or by refitting their existing fleet.
More than 20 countries signed the Clydebank Declaration during COP26, pledging to create emission-free corridors that will encourage the development of alternative fuels. The plan is for at least six green shipping corridors to be launched by 2025, and to see many more corridors in operation by 2030.
The world’s shipping fleet has quadrupled in size since the 1980s and accounts for 3% of global greenhouse gas emissions — the equivalent to what Germany produces. Clearly, shipping manufactured goods across the seas using fossil fuels has a significant effect on our climate as well as causing environmental and health problems for communities around the world.
It is for this reason and global pledges to net zero that banks and lenders are offering preferential rates for greener and cleaner businesses.
Ship operators will be at a significant advantage if they are able to show real-time and transparent information about complying with fast developing environmental, social and corporate governance (ESG) standards and the sustainability status of a vessel and its route, that banks and lenders are prepared to trust.
While conventional manual methods can compile this information, it would be a substantial task. What shipping operators require is integration of verified, trusted data into their workflows with audit trails so they can prove they are being compliant, rather than making unsubstantiated claims.
Vessels with superior environmental ratings will earn preferential terms, while operators with a track record of sustainability will find it easier to finance business expansion. In addition, ports will charge lower registry fees if carbon-efficiency is compliant with best practice.
If the maritime sector delays or does not make sufficient progress in transitioning to a sustainable economy, then there is the serious risk of sudden policy implementation being imposed forcing the rapid decarbonisation of the maritime sector economy and creating financial disruptions that would hit shipping companies hard.
The cost of transitioning gradually will be significantly less for shipping companies than non-compliance after new regulations have been introduced. Besides, investors and client interest will peak when companies adhere to ESG programmes and reduce their supply chain emissions.
Now more than ever, shipping companies must integrate ESG policies into their operational and financial decision-making processes to work towards a sustainable future. They will require technology that will allow them to access ESG base compliance in a simple and streamlined manner.
With a greenhouse gas calculation tool, shipping companies will be able to measure their emissions, and incorporate this data into their financial reporting and sustainable trade finance programmes.
Simon Ring is Global Head of Maritime Trade Technologies & ESG, Pole Star
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