SSI - Case for Action

The Sustainable Shipping Initiative brings

together some of the industry’s biggest

names to plan out how shipping can

contribute to – and thrive in – a

sustainable future

SSI objective

Our goal is to transform the global

shipping industry and the wider maritime

sector, establishing a new, sustainable

approach as normal

© BP Shipping

Integrated: bringing

together shipping

companies and key

stakeholders like customers

and financiers.

Strategic:

the Initiative looks beyond

immediate regulatory

concerns to the key

challenges and trends, and

frames an ambitious

opportunity agenda for the

industry.

Global: a multinational

membership to address

global concerns.

Balanced: while recognising

climate change, the SSI will also

address wider sustainability

issues such as biodiversity,

transparency and economic

development.

Independent: while

most members will have

legitimate commercial

interests, the

involvement of Forum for

the Future and WWF

ensures that it acts as an

independent force for

sustainable

development, reinforcing

constructive interaction

with policy-makers.

Key phases of the SSI

We’re just concluding Phase 1: The Case for Action and are about to

start Phase 2: Vision 2040

the case for action

the case

for action

Aim:

Identify the

strategic trends

which will affect

shipping over

the next 30

years

Outputs:

Case for Action

report

Download the

report here

http://www.forumforthefuture.org/files/SSI _fullreport.pdf

The Case for Action suggests three major challenges for shipping

The 3 key challenges

Challenge 1: Navigating a changing economic context Challenge 2: Increased scrutiny, higher expectations Challenge 3: The future of energy and climate change

Challenge 1

navigating a changing economic context

from here to 2040

• significant changes in the

direction of trade and the type of

goods transported

• Global expansion is not the only

possibility – there are reasons

why trade might decline:

- economic growth vulnerable

to resource crunch,

protectionism, health &

terrorism issues

Challenge 1

navigating a changing economic context

opportunities

• A tighter market will favour the most

efficient operators

• A coordinated group of leaders could

develop progressive measures that

address future challenges.

• Shipping logistics at the centre of

more closed-loop economies.

• new routes and markets provide new

opportunities

risks

• Not ready for rapid change in routes and markets.

• A patchwork of regulation that makes shipping overly complex and reduces margins.

• Protectionism or contraction in trade

• Workers’ rising expectations in developing economies make it harder and more

expensive to recruit.

Expect:

• Customers focus on wider

performance factors such as working

conditions, vessel efficiency,

emissions, biodiversity and

environmental/labour rights

• remote monitoring technology enables unprecedented transparency

• rapid proliferation of voluntary standards and codes of conduct for shipping

• raised expectations from ports, financiers, insurers and others.

• increasingly stringent international, national, regional and city-based regulations.

Challenge 2

increased scrutiny, higher expectations

from here to 2040

In a highly networked world, shipping is

likely to come under increased scrutiny.

Greater transparency will encourage /

enable customers and other stakeholders

to favour strong performers.

risks

• complex patchwork of standards creates

compliance burden.

• social media campaigns focus on poor performers tarnish the whole industry.

• Poor performers are exposed and excluded from more demanding markets

• Technology enabled enforcement forces expensive, reactive improvements at the

bottom of the market.

• Lack of co-operation on standards leads to overly expensive or bureaucratic standards

Challenge 2

increased scrutiny, higher expectations

opportunities

• Transparently good performers gain

preferential access to finance,

insurance and markets.

• Improved transparency reduces

opportunities for poor performers to

undercut the market.

• Collaborating with others in the

supply chain allows the shaping of

new standards

Challenge 3

the future of energy & climate change

from here to 2040

• The age of cheap oil is over. Volatile

prices and insecure supply present a

significant challenge to shipping and

the wider economy.

• As climate change gathers pace,

increasing pressure for shipping to be

included in regional and global

regimes to reduce greenhouse gas

emissions.

• Price and regulatory uncertainty

undermine investment decision

making .

• Strong leadership required to prevent

uncertainty leading to inaction.

Challenge 3

the future of energy & climate change

opportunities

• Shipping remains the most energy

efficient transport mode

• Rising oil prices give advantage to

more efficient operators

• Retrofit opportunities for yards

• Potential fiscal support for

technology shifting measures

risks

• Rising fuel prices accelerate

obsolescence of inefficient vessels

• Innovation stifled by glut of available tonnage

• Technological advance frustrated by split incentives, separating investors and

beneficiaries of energy efficiency investments, or by short investment horizons so new

entrants can outmanoeuvre incumbents

the challenges are made up of 7 Global Megatrends in shipping

What challenges will shipping face in the next 30 years?

1. The Global Economy: Emerging Giants?

2. Freedom vs level playing field: Ocean Governance

3: No secrets: demand for transparency

5. Demanding higher standards: sustainability regulation

6. Advancing technology – making it pay

7. Adapting to a changing climate

4. Moving on from oil – the future of energy

what’s happening now

• Phenomenal growth of BRIC & other

nations

• Multipolar world with more evenly

distributed power

• Relative decline of ageing Europe/North

America

• Economic growth vulnerable to

resource crunch, protectionism, health

& terrorism issues

global trends:

the global economy: emerging giants

© ric

ard

oazo

ury

/ isto

ck

BRIC blooms:

• China becomes the

world’s top economy,

and the heavyweight

in global trade policy

negotiations

• Continued strong

trade growth

Protectionist or local

• Resource, energy or

climate constraints

provoke protectionist

responses.

• Corporate supply

chains regionalise.

• Economy fragments

with bilateral

agreements and trade

restrictions

Globally connected,

locally focussed

• Resource pressures

provoke more

regionalism.

• Closed loop

manufacturing, and

virtualisation

approaches help

maintain trade and

co-operation, while

moderating raw

material demand.

global trends:

the global economy: emerging giants

possible futures

http://www.ponoko.com/

implications for shipping

• Consolidation and reform: an ambitious IMO would benefit the industry, providing

long term certainty, planning and investment.

• Regionalisation implies a patchwork of governance. A 2-tier industry could develop,

with strong performers navigating complexity to access all markets, while poor

performers confined to weakly governed areas.

• Collapse: the industry could face piecemeal militarisation or

no-go areas and increasing security costs.

global trends:

the global economy: emerging giants questions

• How can we get a co-ordinated

voice for leadership that

influences the future of global

governance and policy in a

progressive way?

© Pgiam / istock


• International governance from UN,

WTO and similar bodies has been a

fundamental influence on global trade

• Progress can often be slow (at the

speed of the slowest)

• Emerging economies are playing their

part and supporting global institutions.

global trends:

freedom vs the level playing field: ocean governance

© Hanquan Chen / istock

Consolidation & reform

• A more even,

multipolar world

helps international

institutions flourish.

• Approaches may

change to reflect

increasing Asian

power and

governance styles.

Regionalisation of

governance

• Changing rivalries

and coalitions

undermine

international

governance

frameworks leading

to a patchwork

world.

• Frustration with slow

progress eg at IMO

or UNFCCC results

in more unilateral

regional action.

Collapse of global

governance

• Erosion of

international

frameworks in the

face of major

economic

difficulties, resource

pressures or war.

• Characterised by

protectionism ,

patchwork

regulation and

increased potential

for conflict.

global trends:


possible futures


• Consolidation and reform: an ambitious IMO would benefit the industry, providing

long term certainty, planning and investment.

• Regionalisation implies a patchwork of governance. A 2-tier industry could develop,

with strong performers navigating complexity to access all markets, while poor

performers confined to weakly governed areas.

• Collapse: the industry could face piecemeal militarisation or

no-go areas and increasing security costs.

• How can we get a co-ordinated

voice for leadership that

influences the future of global

governance and policy in a

progressive way?

global trends:



• Technology now allows radical

transparency – eg Wikileaks

• Demand for ethical business practice

through the whole supply chain now

mainstream

• Business can facilitate transparency by

making real time monitoring data

available – or have it imposed on them

by crowd-sourced revelations

global trends:

no secrets: demand for transparency

© CreativeFire / istock

Ubiquitous transparency

• Big institutions

accept that

transparency is

unavoidable and

work with the grain

of people power.

• Enhancing ethical

practice in business,

though the risk of

misinformation

remains.

Paranoid information

wars

• Misinformation

becomes a weapon

as entities seek to

confuse and obscure

to maintain obscurity

or secrecy

Draconion secrecy

• Some regimes limit

access to

information, as with

Google in China and

Twitter in Libya.

• Information access

becomes polarised

between the

connected informed

and the isolated

global trends:


possible futures

http://www.wikileaks.ch/

http://www.barcoo.com/


• Consumers will expect shipping to collaborate in achieving corporate responsibility

goals, and may result in a proliferation of voluntary standards

• Varying demands could create divergence between markets and sectors –

containers associated with brands may need higher standards than bulk carriers.

• Key tools such as EEDI will enable customers to select shipping lines on the basis

of fuel/emissions efficiency

• Technology makes complete transparency of performance

possible, even on the open ocean.

• What changes would the

industry need to make if its

emissions, pollution incidents,

working conditions were completely

open to scrutiny?

• Who would the winners and losers be?

• How can voluntary standards be made

uniform?

global trends:


© Nicholas Monu / istock


• The age of easy oil is over. Crude

prices have shifted fundamentally, with

increasing volatility and uncertainty.

• The view that there could be a

production peak or even decline as

early as 2020 is entering the

mainstream.

• There are many efficiency technologies

and alternative propulsion means

throughout transport, but none have

yet become mainstream.

global trends:

beyond oil – the future of energy

© istock

Planned transition

• Global transport

systems invest in

new propulsion

technologies well

before any supply

crisis.

• Orderly transition in

20-50 year

timeframe.

Strained stagnation

• Weak policy allows

an oil supply plateau

to result in

confusing, volatile

price signals.

• Growth constrained

and market

confidence in low-

carbon alternatives

undermined.

• Prices ratchet

higher, with the least

efficient companies

going to the wall.

Peak oil crisis

• Real decline in oil

production as early

as 2020, faster than

transport systems

adapt and destroying

market confidence.

• Possible scramble

for dirty alternatives

“at any cost”

• Diplomatic, trade or

military conflict over

remaining resources

global trends:


possible futures


• Shipping faces the combination of oil crunch, climate action and new sulphur

regulations, which combine to challenge continued bunker fuel use.

• The winners will be those who manage a planned transition to an efficient, non- or

low-fossil fleet. Slow moving competitors risk strained stagnation.

• Possible special circumstances for the industry – as the lowest energy freight

mode, shipping becomes a privileged “residual user of oil, while prices

actually decline due to reduced land based demand.

But it is risky to bank on this outcome.

• How is the industry prepared for the

combined impact of oil crunch,

sulphur limits and climate action in the

2020s?

• What are the opportunities if oil prices

spiral upwards?

global trends:


© Mayumi Terao / istock


• As countries develop, they demand

higher standards of environmental care

and worker welfare, and awareness

and concern increases.

• Well established legal and

technological approaches have

enabled and enforced cuts in key

pollutants and wastes and

improvements in working conditions.

global trends:

demanding higher standards: sustainability regulation

© Alfredo Tisi / istock

Clean is the new dream

• Globalised business face a more

stringent but more even

regulatory framework, and

extend clean “developed” world

practices worldwide.

• When combined with resource

constraints this could support

more closed loop production.

Divided and dirty

• Populations are divided, with the

least well off forced to live with

the waste and pollution of the

better off.

• Legislative standards vary

globally, but resource issues

could still support more closed

loop/reuse processes.

global trends:


possible futures

© David Cannings-Bushell / istock


• Regulatory pressure is likely to increase for both existing and new issues,

following trends in land based legislation.

• Moves to closed loop systems will affect volumes of trade and shipbuilding

practices.

• In a divided and dirty future, a patchwork of local and regional

regulations is likely, with standards high in some areas, low or

non-existent in others. Shipping faces a two-tier regulatory

landscape making it hard to plan ahead effectively.

• What level of investment and rate of

change would be required to meet

regulations with emissions levels

equivalent to land-based transport by

2040?

global trends:


© Island Effects / istock


• Phenomenal growth in ICT based

technologies

• More sustainable technologies such as

cleaner production and renewable

energy now common, but not yet

mainstream.

• The key difficulty with clean

technologies is uptake, rather than

technical barriers.

global trends:

advancing technology – making it pay

© DNV/Nina E. Rangøy

global trends:


possible futures

Stagnating

vulnerability

• Minimal change

making poor

use of new

approaches.

• Vulnerable to

competition or

external

change e.g US

car industry

Tipping point

• Incremental

change on a

piecemeal

basis, until the

approach as

critical mass

and becomes

the way to do

things e.g.

containerisation

Forced change

• Much faster

change driven

by regulation or

market change

e.g catalytic

converters,

double hull

tankers

Dreadnought

moment

• a leader puts a

package of

technologies

together that

defines a new

standard e.g.

Dreadnought

battleship,

Apple Ipod

© ricardoazoury / istock © Nicholas Monu / istock © istock © istock


• technology is both a trend-driving change in its own right and a solution to the

other challenges

• Key technology areas include energy/carbon efficiency, ICT-based operational

efficiency measures, and environmental emissions treatment.

• Stagnating vulnerability is arguably the default position of a

conservative industry, leaving large parts of the industry

vulnerable to the other megatrends.

• Will shipping be subject to the kind

of step change in sustainable

technology that has been seen in

the automotive and aviation sectors?

Who would lead this step change?

• How can the industry realise the

benefits of new, sustainable tech?

• How do we future proof today’s new

ships?

global trends:


© Cargill SkySails


• Measured climate change is already

equal or more than the worst case

IPCC projections

• Impacts assessed as likely include

• drought,

• agricultural yield falls,

• more frequent extreme weather,

• sea level rise,

• major areas of biodiversity loss eg

in rainforests, coral reefs;

• ice-free arctic in summer.

global trends:

adapting to a changing climate

© DNV/Nina E. Rangøy

Efficiency first

• Planned innovation in energy

efficiency and renewables

• Little need for changes in lifestyle

or reduction in trade

Tough measures

• Global economy struggles to

cope with the scale of

environmental change

• Globalisation retreats, countries

focus on security and

protectionism to access

resources at any cost

global trends:


possible futures


• Trade growth could be curtailed as protectionism affect the global economy

• New cargo movements - water could become a major new cargo. Increasing

migration/environmental refugees could present security challenges for the

industry.

• Weather and climate challenges likely to change shipping routes. Potential

adverse insurance implications.

• Tough CO2 emissions controls: Compulsory carbon taxes and trading now

underway in the EU, California and China.

• How will shipping play its part in

achieving a global CO2 emissions

reduction of 50% while halving impact

would require a 75% cut in emissions

intensity?

• What are the financial implications of

the opening of the arctic vs. increased

storm risk and a changing navigational

environment?

global trends:


Find out more:

www.forumforthefuture.org/projects/sustainable-

shipping-initiative

To sign up to the SSI mailing list send an email

to [email protected]

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