ESG stands for Environment, Social and Governance and in the shipping world, it may be translated into sustainability practices within the business model. Lately, the ESG topics have surfaced the agenda of several stakeholders in the maritime community with many announcing ESG initiatives and reshaping their strategy via ESG lens.
In this context, SAFETY4SEA launched the ‘ESG Climate Survey’, a wide-ranging industry survey conducted during the first months of 2024. It examines the crucial factors around industry’s perception about the ESG challenges and provides a picture of how shipping responds to the new ESG trends and challenging requirements, by shaping their agenda.
This year, 1,589 individuals participated occupying different positions in the maritime industry. The responses were mainly derived from ship managers and service providers, and a smaller part from Associations, Ports, Machinery and Equipment Providers, as well as Offshore personnel. Half of the participants were Senior Executives, followed by CEOs, Directors and Young Executives.
A quick glance at ESG
The term ESG refers to a set of metrics used to measure an organization’s environmental and social impact and has become increasingly important in investment decision-making over the years. In 2004, the term “ESG” became official after its first mainstream appearance in a report titled, “Who Cares Wins.” The report illustrated how to integrate ESG factors into a company’s operations, breaking down the concept into its three basic components: environmental, social and governance (or corporate governance). But while the term ESG was first coined in 2004 by the United Nations Global Compact, the concept has been around for much longer.
Its widespread adoption can be attributed to the growing recognition of the importance of sustainability, responsible business practices, and stakeholder value in the global economy. Today, ESG considerations are integral to investment strategies, corporate governance frameworks, and business operations across various industries.
What tops the ESG agenda in shipping?
The ESG journey has many aspects to consider; however, which aspects take priority on the industry’s ESG agenda? Here, we present the top 21 ESG factors revealed by the latest survey among industry stakeholders:
Rank | Factor Group | Factor | Score % |
1 | Social | Staff/Crew Skills & Training | 84.9 |
2 | Environmental | Emissions Trading Scheme(s) | 84.9 |
3 | Others | Effects on Supply Chain due to Geopolitical Conflicts | 84.5 |
4 | Environmental | IMO Air Emissions Package, CII, EEXI | 82.6 |
5 | Social | Staff/Crew Welfare | 80.4 |
6 | Environmental | New Alternative Fuels | 79.6 |
7 | Social | Occupational Health and Safety | 78.1 |
8 | Social | Anti-Corruption & Ethical Behavior | 77.0 |
9 | Environmental | Continuously changing Environmental Legislation | 76.6 |
10 | Governance | Internal & External Stakeholder Engagement | 75.8 |
11 | Governance | Cyber resilience | 75.1 |
12 | Governance | ESG Reporting | 73.2 |
13 | Governance | Shipping 4.0 – Digitization | 72.8 |
14 | Governance | ESG Program Oversight | 72.8 |
15 | Social | Diversity & Inclusion | 72.1 |
16 | Environmental | Ballast Water Management | 70.9 |
17 | Governance | Poseidon Principles & Responsible Financing | 70.2 |
18 | Environmental | Responsible Ship Recycling | 69.4 |
19 | Environmental | Responsible Ship Recycling | 66.8 |
20 | Others | Business Interruption | 66.4 |
21 | Social | Local Community Support | 63.8 |
The survey results reveal that the maritime industry is currently addressing important social and governance topics, raising awareness over issues such as Staff/Crew Skills & Training, Staff/Crew Welfare, Occupational Health and Safety, and Anti-Corruption & Ethical Behavior on the social front.
On the governance front, there is increasing focus on Internal & External Stakeholder Engagement, Cyber resilience, and ESG Reporting. Overall, there is comprehensive approach to ESG (Environmental, Social, and Governance) considerations within the maritime industry, with distinct priorities emerging across the three pillars.
Key findings of the survey
According to the survey:
- The industry places a significant emphasis on social factors which underscore a commitment to human capital management, employee welfare, and ethical business practices, reflecting a strong sense of social responsibility.
- Environmental concerns continue to feature prominently in the industry’s ESG agenda, with a focus on addressing emissions reduction, pollution prevention, and compliance with evolving regulations.
- There is an increased recognition of the importance of investing in workforce development and skills enhancement.
- Governance-related factors play a crucial role in shaping the industry’s ESG agenda, with a focus on improving transparency, risk management, digital transformation, and accountability.
- Initiatives related to governance practices can strengthen operational resilience, and align business strategies with ESG principles, reflecting a commitment to good corporate governance and long-term value creation.
- Supply chain resilience in the face of geopolitical conflicts and business interruptions is placed high on the agenda, revealing the need for proactive measures to mitigate risks, enhance resilience, and ensure continuity of operations amidst geopolitical uncertainties.
Comparison with previous survey: What has changed in two years
To remind, SAFETY4SEA first conducted the ESG Climate survey back in 2022, identifying at that time a heightened focus on the environmental aspects. Specifically, Continuously Changing Environmental Legislation (88.3%), IMO Air Emissions Package, CII, EEXI (85.0%) and Business Interruption (84.7%) were the top three concerns two years ago. Since then, there have been some notable shifts and consistencies in priority areas:
- Continuously Changing Environmental Legislation: In both surveys, this factor ranks high, indicating ongoing concern and awareness regarding regulatory changes affecting environmental practices.
- IMO Air Emissions Package, CII, EEXI: This factor maintains its prominence across both surveys, emphasizing the industry’s focus on complying with emissions regulations and improving environmental performance.
- Staff/Crew Welfare: While Staff/Crew Welfare remains a top concern in both surveys, it has slightly decreased in priority in the 2024 survey compared to 2022.
- Staff/Crew Skills & Training: This factor has gained priority in the 2024 survey, reflecting an increased recognition of the importance of investing in workforce development and skills enhancement.
- Geopolitical Conflicts’ Effects on Supply Chain: This is a new addition to the top factors in the 2024 survey, indicating a heightened awareness of geopolitical risks and their impacts on supply chain resilience.
- New Alternative Fuels: While still significant, the priority of this factor has slightly decreased in the 2024 survey compared to 2022, suggesting a possible shift in focus or progress made in alternative fuel adoption.
Analyzing the critical ESG factors: Why they matter
Overall, this year’s survey findings underscore the multifaceted nature of ESG considerations in the shipping industry. Stakeholders have shed their attention to promoting sustainable practices, enhancing resilience, and creating long-term value in alignment with ESG principles.
The significant emphasis on social factors and governance-related factors highlights the industry’s recognition of the importance of embracing the three dimensions of ESG equally to foster a sustainable future.
Environmental sustainability remains a key area within the industry’s ESG agenda, however the focus has been shifted to other topics as well, rather than maritime decarbonization and climate change. Efforts to address emissions reduction, pollution prevention, and compliance with regulations underscore a commitment to mitigating the environmental impact of maritime operations and promoting sustainable practices.
In addition, initiatives related to social and governance practices are seen as integral to long-term value creation within the shipping industry. Furthermore, due to recent developments, the survey highlights the importance of supply chain resilience in navigating geopolitical conflicts. In that regard, proactive measures to mitigate risks and ensure continuity of operations are vital to ensure resilience in the face of uncertainties.
Moving forward
In conclusion, the findings collectively suggest a holistic approach to ESG within the maritime sector addressing diverse aspects that can identify the fine balance towards maximizing overall stakeholder satisfaction, between internal and external stakeholders needs, financial performance, social interests and the environment or in other words, the fine balance that will ensure sustainable shipping for both the organization and the industry.
The maritime industry can make significant progress in embracing and implementing ESG principles to promote sustainability by considering the following thoughts and considerations:
- Integration of ESG into safety practices: There is an opportunity to integrate ESG principles into safety practices within the maritime industry. This could involve incorporating environmental considerations, social welfare initiatives, and governance practices into existing safety protocols to enhance overall maritime safety.
- Focus on environmental impact mitigation: Clear policies on environment pollution and port state control can help maintain shipping efficiency and reduce waiting times, ultimately saving fuel costs and minimizing waste and pollution.
- Collaboration and partnerships: Embracing collaboration and partnerships across the industry can facilitate the sharing of best practices and lessen the initial economic burden of ESG implementation. This can involve industry-wide initiatives to address common challenges and promote sustainable practices collectively.
- Top-down approach to ESG goals: ESG goals should be set at the top management level and aligned with regulatory requirements to ensure effective implementation at the operational level. This ensures that ESG principles are integrated into business strategies and operations from the outset.
- Education and training: Incorporating ESG education into training programs can help raise awareness and ensure that seafarers are equipped with the knowledge and skills to contribute to sustainable practices at sea.
- Consistent ESG reporting framework: Establishing a consistent and consensus based ESG reporting framework for the entire shipping industry is crucial. This would enhance transparency, enable stakeholders to assess and compare companies’ ESG performance, and promote accountability across the industry.
- Addressing complex challenges: Recognizing the complexity of sustainability and environmental challenges, such as climate change and geopolitical conflicts, requires a collaborative approach. Effective change management and stakeholder engagement are essential in driving and sustaining ESG practices within organizations, enabling a smooth transition towards a more sustainable business model.
The ESG journey requires commitment beyond compliance. Companies in the maritime industry can lead by example by incorporating ESG principles into their business operations. This may involve investing in cleaner technologies, issuing green bonds, promoting diversity, equity, and inclusion (DEI), and implementing measures to improve employee engagement and well-being.
Developing a successful ESG strategy, that will provide for impactful ESG performance and reporting is the next crucial step for all maritime stakeholders.