A sea-change for shipping

Sensemaking / A sea-change for shipping

Take a look around you as you read these words, at the objects that make up your life. You’re using a computer or smart phone made in China, the wood for your desk came from the Far East, as did most of your clothes. The fuel in your car’s tank originates in the Middle East. Half the food in your belly is imported: beef from Argentina, potatoes from Israel and fruit from South America, just to take a few typical examples.

By Rupert Fausset / 17 May 2011

You are completely dependent on these things, and on the industry they all have in common – shipping. Ninety percent of global trade, including all the items above that are your lifeblood, is transported worldwide by some 100,000 ships carrying fuel, raw materials and finished goods.

And yet, when did you last see a cargo ship? Unless you work in the industry or live near the sea, the chances are that ships are out of sight and mind. You don’t see their enormous impacts, which cover not only the goods you depend on, but also a carbon footprint roughly the size of Germany’s.

The industry has had a low profile in sustainability terms compared to other transport sectors. While the car and aviation industries invest frantically in cleaner, more efficient products, shipping has remained largely unchanged: a conservative business with a large proportion of private and family ownership, and complex relationships which make change more difficult. While the bridge of a vessel may boast high-tech navigation and communications equipment, its engines still burn a dirty, sulphurous oil known as bunker fuel, which has long been phased out in most of the world’s power plants.

Why is shipping different? Its international nature makes it hard for nations to regulate, especially given the flags of convenience most ships sail under. Shipping’s main governing body, the International Maritime Organisation (IMO), operates by consensus, which for many observers limits it to the “speed of the slowest”. And shipping has so far been little exposed to consumer scrutiny. Finally, the combination of a relatively cheap, dirty fuel and the inherent efficiency of water transport (more energy efficient per tonne km even than rail) has limited exposure to the increasing price of fossil fuels.

But this is now changing. A “perfect storm” of global trends are combining which will force major change in the industry, according to a group of 13 of the world’s leading shipping organisations, which together with Forum for the Future and WWF have formed the Sustainable Shipping Initiative (SSI). The SSI members have just released a Case for Action, which sets out why social and environmental responsibility are crucial to the future success of the maritime sector.

The Case for Action shows how shipping faces three key challenges in the next 30 years:

  • Massive economic change, most obviously due to the rise of China and the other emerging economies. But there are also reasons why trade might stagnate or decline, which would throw the industry into turmoil.
  • Increased scrutiny and higher expectations, as technology and social change enable – or force - a new transparency for shipping. Customers and other stakeholders will be able to favour strong performers and expose poor ones, generating risks and opportunities accordingly.
  • Energy constraints and climate change. The age of cheap oil is over, and the whole global economy faces the challenge of declining fossil fuel supplies – that is well known. But shipping has barely begun this process, and has not yet developed a clear path ahead that can tackle the unavoidable fuel, carbon and sulphur challenges simultaneously.

To give the industry the best chance of thriving in this new world, it will need to work constructively with customers, regulators and other stakeholders to implement new technologies and a progressive, co-ordinated regulatory framework that provides investment certainty, transparency and, of course, sustainability. Otherwise a two tier industry could develop, with dirtier laggards excluded from supply chains and ports, and even the leaders could face disjointed, uncertain regulation increasing costs and risks.

The SSI members plan to take action to achieve this goal. The next step for the group will be to develop a shared vision of how the industry will need to change over the next 30 years (the potential lifetime of a ship ordered today) so that it is resilient, sustainable and profitable. This will create the platform on which to build an action plan of practical innovation projects which test and implement the technical, regulatory and policy changes that will be required, and enable the industry as a whole to shift onto a sustainable path.

The Sustainable Shipping Initiative brings together leaders from across the maritime sector with Forum for the Future and WWF. Its members are: ship owners and charterers BP Shipping, Cargill, Gearbulk, IMC, Maersk Line, Morgan Stanley, Rio Tinto Marine and Tsakos Energy Navigation ; shipbuilders, engineers and service providers Daewoo Shipbuilding and Marine Engineering and Wartsila; ABN Amro bank; RSA insurance; and the classification society Lloyd’s Register. For more information click here.

Rupert Fausset leads Forum for the Future’s work on transport.

What might the implications of this be? What related articles have you seen?

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