SSI - Case for Action

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SSI - Case for Action

  1. 1. The Sustainable Shipping Initiative bringstogether some of the industry’s biggestnames to plan out how shipping cancontribute to – and thrive in – asustainable future
  2. 2. 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
  3. 3. Strategic: the Initiative looks beyond immediate regulatory Balanced: while recognising concerns to the key climate change, the SSI will also challenges and trends, and address wider sustainability frames an ambitious issues such as biodiversity, opportunity agenda for the transparency and economic industry. 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 sustainableIntegrated: bringing Global: a multinational development, reinforcingtogether shipping membership to address constructive interactioncompanies and key global concerns. with policy-makers.stakeholders like customersand financiers.
  4. 4. Key phases of the SSIWe’re just concluding Phase 1: The Case for Action and are about tostart Phase 2: Vision 2040
  5. 5. the case for actionthe case for action Aim: Identify the strategic trends which will affect Outputs: shipping over Case for Action the next 30 report years Download the report here
  6. 6. The Case for Action suggeststhree major challenges for shipping
  7. 7. 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
  8. 8. Challenge 1 navigating a changing economic contextfrom 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
  9. 9. Challenge 1 navigating a changing economic contextopportunities• 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 opportunitiesrisks• 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.
  10. 10. Challenge 2 increased scrutiny, higher expectationsfrom here to 2040In a highly networked world, shipping islikely to come under increased scrutiny.Greater transparency will encourage /enable customers and other stakeholdersto favour strong performers.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.
  11. 11. Challenge 2 increased scrutiny, higher expectationsopportunities• 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 standardsrisks• 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
  12. 12. Challenge 3 the future of energy & climate changefrom 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.
  13. 13. Challenge 3 the future of energy & climate changeopportunities• 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 measuresrisks• 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
  14. 14. the challenges are made up of 7 Global Megatrends in shipping
  15. 15. What challenges will shippingface in the next 30 years? 4. Moving on from oil – the future of energy 1. The Global Economy: Emerging Giants? 5. Demanding higher standards: sustainability 2. Freedom vs level playing regulation field: Ocean Governance 6. Advancing technology – making it pay 3: No secrets: demand for transparency 7. Adapting to a changing climate
  16. 16. global trends: the global economy: emerging giantswhat’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 © ricardoazoury / istock resource crunch, protectionism, health & terrorism issues
  17. 17. global trends: the global economy: emerging giants possible futuresBRIC blooms: Protectionist or local Globally connected,• China becomes the • Resource, energy or locally focussed world’s top economy, climate constraints • Resource pressures and the heavyweight provoke protectionist provoke more in global trade policy responses. regionalism. negotiations • Corporate supply • Closed loop• Continued strong chains regionalise. manufacturing, and trade growth • Economy fragments virtualisation with bilateral approaches help agreements and trade maintain trade and restrictions co-operation, while moderating raw material demand.
  18. 18. global trends: the global economy: emerging giantsimplications 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.• 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
  19. 19. global trends: freedom vs the level playing field: ocean governancewhat’s happening now• 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. © Hanquan Chen / istock
  20. 20. global trends: freedom vs the level playing field: ocean governance possible futuresConsolidation & reform Regionalisation of Collapse of global• A more even, governance governance multipolar world • Changing rivalries • Erosion of helps international and coalitions international institutions flourish. undermine frameworks in the• Approaches may international face of major change to reflect governance economic increasing Asian frameworks leading difficulties, resource power and to a patchwork pressures or war. governance styles. world. • Characterised by • Frustration with slow protectionism , progress eg at IMO patchwork or UNFCCC results regulation and in more unilateral increased potential regional action. for conflict.
  21. 21. global trends: freedom vs the level playing field: ocean governanceimplications 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.• How can we get a co-ordinated voice for leadership that influences the future of global governance and policy in a progressive way?
  22. 22. global trends: no secrets: demand for transparencywhat’s happening now• 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 © CreativeFire / istock
  23. 23. global trends: no secrets: demand for transparency possible futuresUbiquitous transparency Paranoid information Draconion secrecy• Big institutions wars • Some regimes limit accept that • Misinformation access to transparency is becomes a weapon information, as with unavoidable and as entities seek to Google in China and work with the grain confuse and obscure Twitter in Libya. of people power. to maintain obscurity • Information access• Enhancing ethical or secrecy becomes polarised practice in business, between the though the risk of connected informed misinformation and the isolated remains.
  24. 24. global trends: no secrets: demand for transparencyimplications for shipping• 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? © Nicholas Monu / istock
  25. 25. global trends: beyond oil – the future of energywhat’s happening now• 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. © istock
  26. 26. global trends: beyond oil – the future of energy possible futuresPlanned transition Strained stagnation Peak oil crisis• Global transport • Weak policy allows • Real decline in oil systems invest in an oil supply plateau production as early new propulsion to result in as 2020, faster than technologies well confusing, volatile transport systems before any supply price signals. adapt and destroying crisis. • Growth constrained market confidence.• Orderly transition in and market • Possible scramble 20-50 year confidence in low- for dirty alternatives timeframe. carbon alternatives “at any cost” undermined. • Diplomatic, trade or • Prices ratchet military conflict over higher, with the least remaining resources efficient companies going to the wall.
  27. 27. global trends: beyond oil – the future of energyimplications for shipping• 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? © Mayumi Terao / istock
  28. 28. global trends: demanding higher standards: sustainability regulationwhat’s happening now• 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. © Alfredo Tisi / istock
  29. 29. global trends: demanding higher standards: sustainability regulation possible futuresClean is the new dream Divided and dirty• Globalised business face a more • Populations are divided, with the stringent but more even least well off forced to live with regulatory framework, and the waste and pollution of the extend clean “developed” world better off. practices worldwide. • Legislative standards vary• When combined with resource globally, but resource issues constraints this could support could still support more closed more closed loop production. loop/reuse processes. © David Cannings-Bushell / istock
  30. 30. global trends: demanding higher standards: sustainability regulationimplications for shipping• 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? © Island Effects / istock
  31. 31. global trends: advancing technology – making it paywhat’s happening now• 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. © DNV/Nina E. Rangøy
  32. 32. global trends: advancing technology – making it pay possible futuresStagnating Tipping point Dreadnought Forced change vulnerability • Incremental moment • Much faster• Minimal change change on a • a leader puts a change driven making poor piecemeal package of by regulation or use of new basis, until the technologies market change approaches. approach as together that e.g catalytic• Vulnerable to critical mass defines a new converters, competition or and becomes standard e.g. double hull external the way to do Dreadnought tankers change e.g US things e.g. battleship, car industry containerisation Apple Ipod © istock © Nicholas Monu / istock © istock © ricardoazoury / istock
  33. 33. global trends: advancing technology – making it payimplications for shipping• 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? © Cargill SkySails
  34. 34. global trends: adapting to a changing climatewhat’s happening now• 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. © DNV/Nina E. Rangøy
  35. 35. global trends: adapting to a changing climate possible futuresEfficiency first Tough measures• Planned innovation in energy • Global economy struggles to efficiency and renewables cope with the scale of• Little need for changes in lifestyle environmental change or reduction in trade • Globalisation retreats, countries focus on security and protectionism to access resources at any cost
  36. 36. global trends: adapting to a changing climateimplications for shipping• 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?
  37. 37. Find out more:www.forumforthefuture.org/projects/sustainable- shipping-initiative To sign up to the SSI mailing list send an email to ssi@forumforthefuture.org Follow us on twitter @SustShipping...........

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