DNV: How can DNV support customers in ensuring ship recycling processes meet the above- mentioned stakeholder expectations and are ESG-compliant?
Jannicke Eide-Fredriksen: DNV has created a guidance paper to support shipowners’ recycling decisions, in particular for yards that are not featured on the European list. We cannot see that any of the present assurance services in the market can replace a proper, individual case-by-case assessment of yards that are not on the European list. The HKC has not entered into force, and the Statement of Compliance is not anchored in national law. Shipowners should be aware of two areas in particular. The first is related to scope. Although the HKC requires authorization of the downstream waste management facilities by national authorities, there is no assessment of their actual operation. This might be satisfactory from a strict regulatory perspective. However, if a wider CSR and ESG perspective is taken, it might merit a more coherent discussion. The second is related to the verification methodology of the ship recycling facilities. To our knowledge, there are no defined, established or internationally accepted certification schemes in place. There are also no clearly defined, transparent and available methodologies for the verification itself, whether it’s a document review or a site inspection. Furthermore, there are no consistent, transparent requirements for the adherence to the resulting Statement of Compliance during its validity period. So, the standards of the certified recycling facilities can still vary quite significantly. DNV offers consultancy services to shipowners for evaluating ship recycling yards to make sure acceptable standards are met. DNV may assist in the evaluation of the ship recycling facility plan, the ship recycling plan and other relevant documentation. DNV can also be a consulting partner for shipowners seeking to avoid possible pitfalls, based on our experience with evaluating ship recycling applications in connection with the EU list.
DNV: What data or proof points are needed for final ESG reporting?
Jannicke Eide-Fredriksen: Ship recycling is an industry which touches on all aspects of ESG. On the environmental side, this includes the possible negative impacts of ship recycling. The vast majority of commercial ships are demolished on mudflats or by the landing method. The reporting should cover the mitigating actions taken to avoid or significantly reduce the negative environmental impact of ship recycling, such as collecting hazardous liquids, handling spills, collecting slag from flame-cutting, avoiding chemical contamination from anti-fouling compounds, and avoiding the transfer of invasive species through ballast water or biofouling. From an ESG perspective, specific considerations must be made regarding the adequacy of the downstream waste management facilities.
DNV: What about the social and governance aspects?
Jannicke Eide-Fredriksen: On the social side, the main concern is worker health and safety, particularly the industry’s high accident and fatality rates. Reporting should cover health and safety practices related to ship recycling. Shipowners should be aware that many recycling countries have only partially implemented International Labour Organization (ILO) conventions and that workers’ rights are not necessarily adhered to. From an ESG perspective, minimum wage, working hours, overtime payment, injury insurance and housing/dormitory standards must be considered. With regards to governance, shipowners should consider that the countries recycling their ships may have different levels of corruption and transparency compared to where they primarily operate. It is important that shipowners identify such differences and take suitable mitigating actions in line with corporate policy and the interests of their stakeholders and the global community.
The Report • June 2023 • Issue 104 | 65
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