Customer Pressure to Make Shipping More Environmentally Friendly

In the 1970s tankers spilled up to 600,000 tonnes of crude oil in the world’s oceans annually. Today that figure has fallen to almost nothing due to the efforts of shipping companies to improve safety, which means ship collisions, groundings and poor maintenance no longer lead to the same amount of massive oil slicks.

The explanation for this lies with the large oil companies that use shipping companies. Oil companies were unable to live with the media attention created by pictures of oily sea birds and beaches covered with thick sticky oil. As a result they gave shipping companies an ultimatum: Comply with safety requirements or we will choose another provider.

The shipping companies saw no alternative but to abide by the oil companies’ demands, which means that large oil spills resulting from the poor safety standards of shipping companies are pretty much a thing of the past.

Mandatory ecolabeling
This is an example of how shipping customers have managed to push through environmental initiatives, and now three researchers say that greater pressure from shipping customers and increased global regulation are needed to propel shipping in a more environmentally friendly direction.

 “What we see is that shippers, in other words the shipping companies’ customers, have become more and more aware how much shipping companies pollute, especially with container outfits. This is because the shippers are at risk of placing themselves in the media spotlight if pollution issues arise, which is attention they would like to avoid. Consequently, shippers are putting increasing environmental demands on shipping companies,” states Taudal Poulsen.

The article “Buyer-driven greening? Cargo-owners and environmental upgrading in maritime shipping”, written by René Taudal Poulsen, along with Stefano Ponte and Jane Lister, presents results based on interviews with 45 people from dry bulk, container and tanker shipping companies and shippers.

Taudal Poulsen mentions the ecolabel Clean Cargo Working Group as an example of this development. Large shippers like Walmart now require shipping companies to adhere to the label; if they fail, it affects their order book. So far, this announcement has got 18 out of 20 of the largest container shipping lines to support Clean Cargo Working Group.

Visibility issue
The researchers’ study, however, points out a snag. The container sector is the object of a media and consumer-driven focus on environmental improvements in shipping companies, but the situation is different for shipping companies operating with dry bulk.

Transport of dry bulk, such as iron ore, coal and grain, criss-crosses the ocean but remains outside the scrutiny of the media and consumers. Because the risk of ending up as a newspaper headline is low, cargo owners are not pushing for environmental upgrades of dry bulk carriers. They instead focus on factors such as cost and timeliness when booking dry-bulk ships.

 “It’s a question of visibility. Problems with invasive species, the emission of harmful particles, scrapping vessels and CO2 emissions are of less interest because they fly under the radar; they’re simply not as visible to the media and consumers. As a result it is important to point out that pressuring shippers can lead to environmental improvements, but that this is far from always the case,” explains Taudal Poulsen.

Global regulation a necessity
The researchers also mentions regulation as a way to force shipping in a greener direction. Regulation, however, is also complicated due to the exceedingly low environmental standards of some nations, which is why it is essential that regulations are as comprehensive as possible to create a level playing field.

Taudal Poulsen notes that the conditions necessary for environmental initiatives to succeed are in fact already in place because all maritime stakeholders have actually already accepted the International Maritime Organization (IMO), an organ of the United Nations.

“Regardless of which carrier you ask, they’ll say that global regulations must come from IMO. Environmental improvements in shipping are a complex issue in every regard, but IMO is a powerful body that has a chance to make real improvements, especially if the IMO manages to cooperate with private initiatives like Clean Cargo Working Group,” believes Taudal Poulsen.

“In this context IMO's role is to orchestrate and manage private initiatives while launching new ones that harmonise with the private ones so the various parties only have to deal with one set of rules. This can help get shipping on the ball so it can live up to its reputation as an environmentally friendly mode of transport.”

René Taudal Poulsen, Stefano Ponte and Jane Lister are also the authors behind the blogpost “Maritime shipping must come to grips with its CO2 emissions”.

 “Buyer-driven greening? Cargo-owners and environmental upgrading in maritime shipping” is published in the journal Geoforum (doi:10.1016/j.geoforum.2015.11.018).

Contact René Taudal Poulsen for more information on the subject.

René Taudal Poulsen is an associate professor at Department of Innovation and Organizational Economis at CBS. Stefano Ponte is a professor at Department of Business and Politics - also CBS.