Standardization is an important step forward for ESG integration in shipping, with divergence between regional and global requirements being a critical issue to consider when thinking about implementation of ESG strategies, speakers agreed at the 2022 GREEN4SEA Forum.
Industry is currently focusing on how to apply a holistic transformation of its operations to address ESG challenges and apply requirements from a monitoring and reporting perspective. This is not only driven by an increased awareness on decarbonization but also a growing awareness on human rights highlighted by the pandemic. For example, there was a huge uptick in ordering in consumer behavior that created bottlenecks as a result of COVID-19, said Carleen Lyden Walker, Co-Founder and Executive Director, NAMEPA, but these bottlenecks were also an opportunity. “Regarding ESG, I think the industry is finding its voice. We saw that in COP 26 last November in Glasgow’’, she said.
ESG considerations & challenges
When talking about ESG in shipping, there is not one-size-fits-all solution, but each company can adapt to, argued Anuj Chopra, Co-Founder, ESGplus LLC. The big challenge for the industry, in this respect, is to understand which its stakeholders are, in order to be able to give focus on what these stakeholders want, added Stavros Meidanis, Managing Director, Capital-Executive Ship Management Corp.
‘’We see charterparties getting altered, there are new clauses coming in for performance specific to ESG requirements and if companies don’t move, it will become difficult for them’’, noted Mr. Chopra. Another important challenge is the lack of a level-playing field when everyone is investing in ESG, added Mrs. Walker, with some shipowners investing heavily in ESG and others “just continuing to make profits”, she commented.
On his part, Dr. Gkonis, , Director / Secretary General, INTERCARGO stressed the importance of leadership in the development of ESG in shipping: “The main challenge regarding ESG is the “G” part, the governors, which means the decision makers, who need to grasp the reality and what is expected from them and their companies. Otherwise, nothing will happen…they will belong to history,’’ he said.
There is enough guidance available. We need to start on the journey. Staying where we are will not work. This is the starting point. Compliance is a given, non negotiable. The younger generations, the Gen-Z, the Gen Y, speak with their wallets, not with their ways.’’ added Mr. Chopra who explained that this is the reason why we see a change in demand of shipping. In that regard, we need to adopt best management practices above compliance; organizations that will follow that path will survive, but others will struggle. “I am delighted when I see a publicly listed company come out with its ESG report, but it is still not as comprehensive as I would like to see. It scratches the surface,
noted Mrs. Walker.
According to Mr. Chopra, there are three steps that the industry should take now with respect to ESG:
- Leadership within the company should be educated – which are often not, especially in smaller companies- to understand what the ESG requirements are and what they can do. Accordingly, they need to allocate resources.
- When talking about standards, these need to be adapted to maritime. This is where associations -such as INTERCARGO, INTERTANKO and BIMCO- are coming in; to create standards jointly, so that companies can create one standard that is clearly defined.
- “Measure to Manage”: A company should start measuring in a standardized way, so that it knows where it stands. And from there, the journey starts forward.
“There are actions that we can take today. We talk about 2050, but there are things that we can do today, that can set us on that pathway, to mitigate our environmental, social, and governance systems and we are not taking it as aggressively as we could. Let’s not wait for these new technologies, let’s not wait for IMO to pass new policies on and such. Let’s start taking action now because there are steps that we can take and build towards our greater ambitions,’’ stressed Mrs. Walker.
What is the role of leadership on ESG?
A critical step in terms of leadership is a bottom-up approach, under which companies are engaging in collaborations and partnerships so that there is a change of mindset in the industry, argued Dr. Gkonis. Then, there will be a development in mentality and adapt and report to some stakeholders, accordingly, he said. “Leadership, strategy, culture; these are the key elements, because then you have the entire organization moving as one and believing in what is possible,’’ noted Andrew Stephens, Executive Director, Sustainable Shipping Initiative.
A key consideration here, added Mr. Meidanis, is that ESG must be part of a wider culture: Leadership has to understand ESG and make it part of day-to-day operations, not just ticking the box in a checklist. ESG is neither a box-ticking exercise nor an enforced compliance framework, concluded Dr. Gkonis, but it just needs a new mindset, culture and visionary people to deliver on the challenges of today and tomorrow.
“We need to honor our relationship with the consumer by doing our part to operate the highest and most scrutable standards. There is something called “the social license to operate”. We will be expected to operate at a level so that we earn. Yes, they need us. But we have to earn the respect and the social license to operate because…public is getting closer and closer to shipping,” concluded Mrs. Walker.
