DECARBONIZING THE SHIPPING INDUSTRY: ONE OPPORTUNITY NO COMPANY CAN AFFORD TO MISS.


2021 has offered plenty of evidence which can be viewed as early warning signs of the onset of a ‘decarbonisation tsunami’ which will change the competitive landscape and disrupt business models of maritime transport as we know them today. The future success or failures of shipping companies and cargo clients alike will be shaped by how they respond to these signs today.


SHIPS ARE NOT ALWAYS SAFEST IN THE HARBOUR Concluding a recent panel on navigating change in shipping markets, I played a clip of a poem by Drew Dellinger, “What did you do once you knew.” The poem, an imaginary conversation with future generations, exploring the moral dimension of inaction in the face of climate change, offers an opportunity to reflect on the consequences of failing to embrace the impending change in the business context too. Paraphrasing Gandhi’s motto, the future of your business depends on what you do TODAY, I submit a business case for acting in the interest of decarbonization and point to the urgency of the one investment no shipping company or cargo client alike can afford to miss!


Connecting to my early sailing experience and my entrepreneurial journey in the years which followed, as I coached and encouraged young entrepreneurs to leave the safety of their harbours to fulfil their potential, I found J. Ked’s metaphor highly effective. “Ships are safest in the harbour, but this is not what the ships are built for.” However, I realize that the notion of safety in the harbour in the case of the decarbonization of the shipping industry could be misleading. This is an outside-in, not an inside out change, affecting the entire industry. As such, placed in this context, the concept of safety, or lack thereof, must be viewed differently.


As opposed to an individual who risks missing out on fulfilling his/her potential, remaining in the proverbial harbour as shipping embarks on a journey of decarbonization may bring about far more profound consequences. Indeed, the risk companies face is similar to that faced by ships stuck in the harbour, as a tsunami unfolds. When born in the ocean with an amplitude of a meter, a tsunami poses little danger to ships. However, as it approaches the coast and builds in height, its devastating force tosses the ships in the harbour around like toys.


THE LENS OF FUTURE COMPLIANCE As new technologies and the regulatory framework are still “works in progress,” filled with uncertainty, it is difficult to see a clear path to mitigate risks and measure the economic outcomes of the investments necessary to decarbonize. And, in the year which has seen the most volatile shipping market in more than a decade and the supply chain under unprecedented pressure on the back of post-COVID recovery, it is not difficult to appreciate that, for some companies, decarbonization has taken a back seat. In the end, we tend to attach a greater sense of urgency to problems that seem closer. But, in the past 12 months, decarbonization has taken anything but a back seat on the world stage.


The political, social and business momentums to address climate change have only gained in strength, and 2022 could be considered the most significant year for decarbonizing shipping thus far. The IMO adopted new mandatory measures to cut the carbon intensity of international shipping. The European Union proposed to add shipping to the EU’s Emissions Trading System. 230 industry leaders and organizations representing the maritime value chain signed a call for action to deliver the policies and investments needed to reach critical tipping points in decarbonizing the maritime industry. But, the IMO’s regulations, in their current form, are not aligned with the goal of the Paris Agreement, and the EU’s initiative demonstrates that regional governments are growing impatient. More regional initiatives, most significantly from the US, are likely to follow.


These policy initiatives and the calls to close the price gap between fossil and green fuels leave can be viewed as early warning signs of the onset of a US$ 1.8 to US$2.4 trillion tsunami, on the course to change the competitive landscape and disrupt business models of maritime transport as we know them today. Against this background, waiting to see how the industry standard evolves and viewing decarbonisation through the lens of future compliance, may not be commensurate with the scale of the challenge. Indeed, it may amount to remaining in the proverbial harbour as a tsunami unfolds.


14 | ADMISI - The Ghost In The Machine | Q4 Edition 2021


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