What does ESG mean to your organisation?
At West, ESG is not just a tick-box exercise. Running our business on a sustainable basis and helping our members to do likewise is an imperative, as we see ESG as something which must underpin everything we do.
Corporations have a crucial role to play in leading this agenda and at West we aim to lead by example and ensure our members have a strong voice in shaping the sustainable maritime industries of tomorrow. To strengthen our efforts in this respect, West has enhanced the Corporate Department with a designated ESG function, drawing upon expertise in this area to build upon the function of the existing ESG Committee and formulate alongside the Board an ESG & Sustainability Strategy which is aligned with all aspects of our business strategy.
Why is ESG particularly important to the maritime industry?
According to the World Economic Forum, International trade is vital to economic development, it has lifted 1 billion people out of poverty in recent decades. Around 90% of global trade moves by sea, with shipping being the least environmentally damaging form of commercial transport, but the sector still accounts for 2.9% of global emissions.
TheInternational Maritime Organization (IMO) has adopted an initial strategy on the reduction of GHG emissions from vessels, with key strategic objectives including (i) the reduction of carbon intensity of international shipping by 40% by 2030, pursuing efforts towards 70% by 2050 and (ii) the reduction of total annual GHG emissions by 50% by the year 2050. Since 1 January 2023, all vessels are required to calculate their attained Energy Efficiency Existing Ship (EEXI) to measure their energy efficiency and to initiate the collection of data for the reporting of their carbon intensity indicator (CII) and CII rating. Furthermore, in accordance with the latest European Union (EU) proposal, the shipping sector will be included in the Emissions Trading Scheme (ETS) by 2024. The measures have an extra-territorial reach and will also affect the movement of cargo outside of the EU’s borders.
Furthermore, the increasing number of ESG related regulations in shipping, are a reflection of the emphasis that clients, investors and other stakeholders are placing on the maritime sustainability agenda. As the least environmentally damaging from of commercial transport, we have a duty to sustain it sustainably and such duty can only be facilitated by successful sustainability and ESG strategies.
What are the benefits of an ESG strategy?
Sustainability & ESG is not only a moral case, but also a powerful business case. Without doubt the maritime industry is now faced with numerous challenges, from decarbonizing operations on the forefront and crew wellbeing in heightened focus, the process involves testing new fuel and energy solutions, new technologies, new vessel designs, embracing innovation and enhancing processes which ensure the mental wellbeing of their crew.
If companies fail to comply and to successfully illustrate how they are managing increasing regulatory risks, they will be subject to fines, reputational damage and less attractive to both talent and financiers – all of which are key components in running a successful business.
A clear indicator of why it makes business sense to embrace ESG strategies as an opportunity to create more resilient and future-proof businesses.
Is there a particular ESG focus for 2023?
It would be a risky exercise to pin-point focus areas as ESG needs to be approached with all elements in mind for it to work and for both businesses – and the world – to reap the benefits of it. Having said that, it should be mentioned that there is not a one-size fits all with ESG and every company needs to formulate an individualised strategy that is aligned with their own business plan, stakeholder interests and scope of influence.
With climate action having the most pressing deadline, it is safe to say that the environmental targets remain a primary focus. However, to reach these goals we need to be invested in diversity, creativity, innovation and transformational leadership, all of which fall under the other pillars of ESG. Looking ahead, if there had to be one focal point – and again I cannot stress enough the importance of bringing them all together – it would have to be governance structures and compliance, with a spotlight on the composition of company boards and heightened reporting standards across various jurisdictions.
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