Environmental, Social, and Governance, or ESG, should be “very much on your agenda now” if you have any involvement in the shipping industry; a lack of clear reporting targets is not an excuse for inaction.
A discussion hosted by Ince during London International Shipping Week saw panellists discuss the challenges and opportunities of ESG to shipping companies. Collectively, the panel discouraged ‘greenwashing’ – using green PR and green marketing to inflate the environmental benefits of services or products – and warned that broader ‘ESG-washing’ would also fail to make the cut in this increasingly environmentally conscious climate.
And with COP26 a matter of weeks away, shipping needs to step up on its ESG reporting and commitments. Mark Cameron, executive vice president and COO of Ardmore Shipping, noted that COP21 was a “pivotal moment for our industry” where shipping was excluded from the Paris Agreement.
At COP26 you are going to see so much more involvement from shipping executives as the responsibility has landed.
Reporting gaps
But reporting and specifically what to report has meant that outputs are hard to compare, and sometimes hard to reconcile. Capt Michael P Elwert, senior maritime industry advisor and former COO of V.Ships Global Ship Management, asked what the industry should be measured on when it comes to ESG. “To my knowledge that has not been agreed yet.”
Deanna MacDonald, founder and CEO of Bloc and co-founder and managing partner of BunkerTrace, noted that the industry is just at the early stages of ESG when it comes to reporting and transparently reporting at that. “Even with the Poseidon Principles, there are no targets yet, just reporting. We actually don’t have any standardised reporting in place, so data is coming in in various forms.” She asked how the industry plans to standardise ESG data.
Tommy Olofsen, president and CCO of OSM Maritime Group, suggested that reporting against the 17 United Nations’ Sustainable Development Goals (SDGs) would be a good start. Shipping companies should be clarifying how they are meeting them, both qualitatively and quantitively. He added that customers are increasing passing the onus of ESG reporting on to service providers, so this is an issue that is not going away.
Ince head of shipbuilding and offshore construction and joint head of energy and infrastructure Chris Kidd agreed that the UN SDGs make a good starting point for ESG reporting. But, he cautioned, what is measured and how it is measured depends on where a company is the industry. And while metrics are being built up and evolving, pressure is building from a number of stakeholders to comply, be that from youth, banks, insurers, or from a political level. “All of these are coming together, forming a perfect storm for the ship owner,” he said.
Ardmore Shipping currently reports against the UN SDGs, but rather than refer to a sustainability report, it prefers ‘Progress Report’. “It is about documenting and demonstrating what we are planning to do,” Cameron said.
Regulation request
There is a need for more regulation on the ESG front, said Beatrice Russ, a partner at Ince, but it needs to be sensible regulation at a level that everyone can reach a consensus on. “At the moment, being green doesn’t pay. At the moment you can get finance at a similar rate for a dirty non-compliant vessel as a clean compliant vessel. Going green has to pay and it has to make sense.”
Faststream CEO and founder Mark Charman noted that shipping companies currently fall into two camps: companies that have to report, perhaps for banks or regulatory reasons, and companies that choose to report because they see competitive advantage and the benefit of doing so.
To encourage more companies to report calls for a sea change in ESG thinking. “We talk about the ESG agenda, but how much does it really come up with executive recruiting for shore staff? Does it figure as a metric in the recruitment process? Not very much,” said Charman. However, he believes that ESG is moving up the agenda and that companies will soon start to see a competitive advantage by pushing ESG.
This move will also lead to increased litigation stemming from the green agenda, commented Kidd. And if the maritime sector does not rise to the ESG challenge, “people will vote with their feet,” Charman added.
Transparency and sharing of data are also important. Olofsen pointed out that companies can’t hide any more. “You need to be totally transparent all the time,” he said. “I’m seeing a lot of shipowners investing to make themselves greener in their structures. Those shipping companies are starting to take a lead. It’s happening and we need to talk more about it.”
MacDonald added that sharing of data also needs to happen more, explaining that there is such “a reverence” around data. Culture also needs to be reviewed:
“We can write good ESG strategies and measure what we want, but we also need to look at culture,” said Olofsen. “What is unacceptable behaviour and what is acceptable? We know that culture eats strategy.”
Ultimately, concluded Russ, ESG is a team sport: “This will only work if everyone is driving it. We are all in this together.”
Source: Baltic Exchange