The international shipping industry comprises approximately 90,000 ships. This tonnage accounts for roughly 90% of global trade—and 3% of the world’s emissions. The largest players in the arena include long-established Norwegian shipowners, Norwegian insurance companies and Norwegian financial institutions—though many of them do the bulk of their business outside Norway.
In the days ahead of the Nor-Shipping 2019 conference and exhibition, leaders of the shipping community and other ocean industries convened in Oslo to discuss the “Havet” project, an initiative aimed at promoting interdisciplinary partnerships that drive sustainable ocean development.
There, a roundtable led by Elin Sandnes, a partner at McKinsey & Company, set the stage for Nor-Shipping. The timing of the meeting and calibre of attendee reflects a shared belief that the expo represents a valuable opportunity to drive real, meaningful change on a global scale.
“We see that many in the industry are thinking about sustainability as one of their strategic pillars now, and we want to help them give this a higher profile,” says Martin Tanggaard, the director of Nor-Shipping.
Fuel of the future
While the ocean industries are grappling with a number of complex challenges, combating emissions is among the most pressing—particularly for the shipping sector, where emissions are projected to double or even triple by 2050 as international trade expands. While insiders are taking action some of the best solutions, such as viable alternatives to highly energy-intensive diesel fuel, simply don’t exist.
This topic took centre stage during the roundtable, where Marius Holm of Zero, an environmental NGO, asked: “How are we going to finance the development and production of the first sustainable cargo ships?”
“This will require a complete change—which the industry’s been through twice before, having moved from sails to steam and then steam to oil. Still, we need to figure out which buttons to press so we can make this change happen.”
Anyone familiar with the history of the Norwegian maritime industry knows that the transition from sails to steam prompted the demise of many conventional domestic owners, particularly in the south. No one wants to see the industry falter for lack of innovation again, which is why promoting collaboration in pursuit of innovation is so important.
The electric slide
Today, on a global basis, Norway has emerged as an early leader in the race to adopt renewable fuel: the world’s first fully electric ferry has been in service here since 2015.
“When we and our business partners launched the first electric ferry and proved over the course of a year that it worked and that it was highly profitable, we thought that things would change,” explains Anne-Marit Panengstuen, acting CEO of Siemens in Norway.
“But they didn’t. The market needed a push. Now the license terms for ferry operations have changed and 70 electric ferries will be entering the market in the years ahead.”
There are several Norwegian players involved in this market now and Panengstuen hopes that their technologies will become an international export.
“I’m very impressed with what has been achieved in the world of ferries,” adds Odfjell COO Harald Fotland.
While this praise is well deserved, uncertainty about how to encourage adoption abroad remains. On one hand, competition drives the market. On the other, there is a need to share technological advancements with those who may lack the same interests or resources.
“This is a global industry. What we have achieved in Norway should be transferable to other regions,” says Bente Pretlove, a programme director at DNV GL.
“As an insurance company with 90% of our business outside Norway, we have a unique opportunity to influence others, and we must use this in our contacts with the market," adds Skuld CEO Stale Hansen. "Norway has come further than many other countries in terms of sustainability. With the right approach, we can help boost an entire industry.”
More must share the risk
Kristin Holth, the head of DNB’s ocean industries division, receives recognition from everyone at the roundtable for imposing increasingly stringent environmental requirements on clients in the shipping, energy and seafood sectors.
While the industry veteran would like to raise the bar even further, she’s also realistic.
“It’s not possible to bring about rapid change in an enormous fleet,” Holth explains. “But it will come about as the ship owners’ heavy hitters work with innovation and efficiency enhancements. I believe that capital can be a part of the answer, anyway. Those who take innovation seriously are the ones that receive capital and financing.”
Attempts to develop innovative fuel solutions for longer distances and heavier loads are already underway. Ship designs and operating procedures are being optimised to reduce fuel consumption. But innovation costs money, and it’s tough to predict whether you’re on the right track when pursing a new idea.
“Odfjell is about to embark on a project to test fuel cells and LNG along with Lundin, Wartsila, Prototech and Gassnova,” Fotland notes. “The ship will produce hydrogen and will be emissions-free at sea. The first phase of the project costs NOK 40m ($4.6m). But it could turn out to be part of the solution.”
Siemens, too, is working on a number of its own innovative projects.
“I believe the technology exists to get a ship across the Atlantic on renewable energy,” Panengstuen continues. “But first, it needs to be demonstrated. And there needs to be a return on risk for those who dare to take that first step. New technology is a risk that no player dares to take alone, and I see this as a major barrier in our case.”
In shipping, Panengstuen emphasises that it will not be one operator acting alone, but rather a combination of many that work together in pursuit of solutions for long-haul transport. Some solutions might involve a battery charged by a combination of wind and solar power, hydrogen or a less familiar fuel source such as ammonia.
Dollars and cents
The good news is that nobody has to go it alone. The United Nations Sustainable Development Goals (SDGs) help set targets for everyone. Skuld believes this may be the key to greater collaboration, cooperation and candor about challenges that lack existing, viable solutions.
“Obviously a solution will be capital-intensive,” Hansen adds. “If all the companies adopted the Sustainable Development Goals like a rudder and jointly recognised that the solution for achieving the cut in emissions does not exist in a part of the industry, a fund could be created that could finance the development of this technology. This would also require an extreme degree of openness and sharing of information in order to build on each other’s innovations.”
Holm agrees that cooperation is the ingredient needed to facilitate such a transition. “Part of being a sustainable company is to shout loudly about the things you can’t achieve on your own,” he says.
“You can’t hide behind the fact that you’ve always asked for global price on CO2. because that would be the same as asking everyone to lay down their weapons to bring about world peace; it won’t change anything.”
Where can we make an impact?
There is much more to the SDGs than emissions and environmental protection. Others with ties to the ocean industries include gender equality, cooperation and workers’ rights.
Skuld has explored other areas where they, as an insurance company, could make a significant difference. Of the many SDGs that they considered, the organisation opted to prioritise good health and well being. The decision reflects a strong belief that advancements in this area will have a ripple effect that, ultimately, improves worker safety at sea.
Nor-Shipping: Biannual conference in Oslo and Lillestrom. This year, the organisers anticipate over 30,000 participants.
UN Global Compact: a non-binding United Nations pact to encourage businesses worldwide to adopt sustainable and socially responsible practices and policies.
UN Global Compact Action Platform for Sustainable Ocean Business: Working closely with ocean industries.
IMO: International Maritime Organisation, the United Nations agency that regulates the shipping and offshore sectors.
“Our goal is to safeguard values by protecting ships and personnel,” Hansen explains. “We recognise that ships and the environment can be damaged if all is not well with the crew—which can mean anything from diet and mental health to skills and understanding the social aspects of a team. Teamwork is extremely important on a ship—especially in critical situations.”
Odfjell’s COO agrees that working conditions remain challenging in some parts of the international shipping industry.
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“Still, I find that Norwegian shipowners have high standards, with a historical emphasis on equality, equal treatment and decent working conditions,” he says. “Being Norwegian is an advantage when it comes to recruiting crews in international hubs—like India, China and the Philippines, for example.”
When choosing which SDG to support, Holm urges organisations not to ignore all the others. Pretlove, who is closely involved with the UN Global Compact’s Action Platform for Sustainable Ocean Business, and responsible for the new Global Goals, Ocean Opportunities report, agrees.
“You have to see these goals in context,” she concludes. “They’re interdependent, too.”