ESG reporting is about to loom much larger for shipowners in 2024, according to shipping sustainability expert Irene Loucaides.
The founder and managing director of Grow Sustainability Consulting in Cyprus told TradeWinds the introduction of new European Union reporting rules this month means the topic has just become “a lot more complicated”.
The Corporate Sustainability Reporting Directive builds on the 2014 Non-Financial Reporting Directive but with stricter criteria and more KPIs.
Previously limited to listed organisations with more than 500 staff, it will also now include private companies with more than 250 personnel or €40m ($43.5m) in turnover.
This will draw five times more companies into the reporting net, Loucaides explained.
“There is this saying, you can manage what you measure,” she said.
“So once you have data for all of these KPIs, you can really start to build your strategy with regards to the impact that you have on the environment and people. And that’s where we should be focusing, and not just reporting and staying just with numbers.
- The directive started on 1 January in the European Union, covering ESG reporting.
- It builds on the 2014 Non-Financial Reporting Directive.
- It will expand the number of reporting companies from 11,000 to 50,000.
- Privately owned companies are now included.
- It applies to firms with more than 250 staff or more than €40m in revenue.
“We should look through the numbers and see how we can improve this performance and use ESG and sustainability as a way to improve our performance on all of these key performance indicators, whether that’s health and safety or whether that’s employee well-being or whether that’s anti-corruption or emissions.”
Loucaides argues that there is always room for improvement, whatever the maturity of a company.
Her operation has set up a shipping unit, Grow Maritime, to handle reporting and risk management for owners when it comes to environmental, social and corporate governance issues.
Grow has a mainly European client list, but also operates globally.
An MRI for a shipping company
She describes her services as not being “a hard sell”.
“I mean, some of them come because it’s mandatory. They are listed organisations and they’ve been mandated to report their ESG actions since 2017,” she added.
“Others come because they are forced by their stakeholders. Others come because they think that it’s a way to gain a competitive advantage and market their services.
“But what is most satisfactory to us is that whatever the reason all these companies come to us, they end up recognising the value of sustainability. Because it’s like doing an X-ray or even an MRI of your organisation.”
The new rules will include third-party Scope 3 emissions, although this is being phased in over two years because data must be obtained from sources outside shipping companies.
Loucaides talks of dealing with “massive Excel spreadsheets”, with thousands and thousands of data points.
“Now, to be able to be in a position to do that, you don’t just need guidance, you need to rearrange your whole internal structure, build a governance structure to also assign accountability to the people that are not just collecting this data, but are responsible for achieving the goals,” she told TradeWinds.
“It’s not enough to just report numbers.”
Companies will now be forced to disclose their targets on emissions, health and safety and anti-corruption measures for example, and then every year report their progress against these goals.
Game-changer
“So, if something is not working that well, you need to explain the reason why and explain what you’re doing to shift your strategy and make that a realistic goal,” Loucaides said.
She views this as a game-changer for the way business is conducted.
“It’s a way to wipe out the greenwashing phenomenon, because we had a lot of companies disclosing ambitions such as net zero by 2050. But nobody was following up on these commitments, so we didn’t know whether they achieved it or not.”
Then there are the financial questions arising from ESG performance.
“Investors and financiers will be providing and driving capital towards sustainable activities. So they needed to have credible, reliable, consistent data … to base their decisions on,” she said.
Asked if those not getting to grips will be left behind, Loucaides said: “Of course. This is the way that the European Commission is planning to bring this to life. It’s the only way.”
