The Tide is Turning Against the Shipping Sector

Working in the technology and innovation space means I get to attend a lot of conferences. I often hear senior shipping industry representatives arguing that as the sector is ‘the most efficient form of freight transport’ there is no need to change, costs incurred in improving efficiency or adopting renewable energy would have to be passed to cargo owners and they would baulk at the extra financial burden.

I’ve repeatedly heard it said that ‘shipping is the servant of global trade’ and the market seeks low cost freight solutions above all else.

Certainly customers aren’t volunteering to carry extra cost, but we, as an industry, need to be aware that things are changing in the wider global economic world.

Global firms are not waiting for protracted government processes to play out to address the risks of climate change and many international corporations have already implemented internal carbon pricing. M&S, Microsoft, SAP, Walmart, IKEA, Infosys for example – aim to be 100% renewable by 2020. Carbon accounting is a means of driving emissions out of the entire business process to mitigate the risks of dependency on factors outside their control – volatility in fuel costs high among them. It monetises the cost of carbon and in turn means that there is improved financial value in deploying clean energy.

Increasingly firms are aware that “100%” renewable must include supply chains and that by not addressing this essential global business facilitator they expose themselves to the risk of ‘green-washing’. There is a huge brand risk in claiming to be 100% renewable when supply chains aren't, add to that the financial risk of uncertainty in freight costs.

Increasingly global trade seeks commercially attractive low carbon solutions and the shipping sector can’t deliver.

At those same industry conferences I’ve sometimes heard it suggested - publicly by senior leaders - that the inability to police maritime emissions controls might make it financially worthwhile to flout the regulations. The automotive industry had the same idea. But VW’s emission detecting algorithm has been discovered and the impact across the entire automotive sector has been catastrophic. Estimates suggest that the indiscretion has cost VW more than €30bn in fines and the big hit on its share price is coupled with anecdotal evidence suggesting VW are not alone in trying to cheat the system. Consequently the whole automotive sector is reeling. Shipping should take note.

The industry’s customers know that events outside their control are driving their bottom line, and that represents a serious risk to their profitability, and they need to do something about it.

As the servant of global trade shipping needs to urgently respond.