Sustainability

Walking the walk

Mark Church, Director (FD&D) and Head of Sustainability at North, explains that sustainability is central to the future of the P&I and wider insurance and maritime sector. But sharper definitions and a broader common understanding of what it really means is needed

As reflected in the January 2022 edition of The Marine Insurer, sustainability is at the top of the maritime agenda as we move through 2022. Indeed, the focus on sustainability is inevitably only going to increase as shipowners and operators look to navigate through the upcoming patchwork of legislative measures and initiatives designed to aid the decarbonisation of shipping.

There is a danger, however, of using the terms “sustainability” and “decarbonisation” interchangeably when evaluating the challenges that face insurers.

WORKING DEFINITION

Without a properly working definition of sustainability there is a risk that the focus becomes too narrow, and that both the positive work already undertaken by P&I Clubs and the challenges that we face are underestimated.

WHAT DOES SUSTAINABILITY MEAN?

Sustainability of course is the concept of ensuring a rich natural environment and strong society for future generations.

Both a rich natural environment and a strong society are critical to the ability of North, all P&I Clubs and the entire maritime sector to thrive. It is therefore business critical for us to try to address the environmental and societal risks that threaten our success.

The principal environmental risk is undoubtedly climate change and we are already seeing the impact of extreme weather events on claims type and quantum. If the world is 2C warmer by 2050, is that a world to which the mutual P&I system could adapt? Hopefully that will remain a question to which we never need find out the answer.

Putting sustainability at the heart of P&I is not, however, only about climate change and the consequential need to decarbonise. It is also about meeting head on other critical environmental and societal challenges such as pollution, development, health and wellbeing and diversity.

Defining sustainability broadly also helps to emphasize that much of the core work of a P&I Club is inherently supportive of a sustainability agenda – preventing and responding to maritime incidents, managing pollution, damage and loss of life.

RANGE OF IMPACTS

A more explicit focus on sustainability helps us understand the range of impacts we are having and how we can improve our impacts by embedding sustainability even more deeply

It is also in P&I Clubs interests, and obviously of critical importance in and of itself, to do more to support seafarer physical and mental health and wellbeing.

into our everyday activities.

Progress will be accelerated only when sustainability is integrated sufficiently within an organisation and everyone is engaged in trying to improve performance.

A broad approach to sustainability also means appreciating the dual role that insurers can play.

Firstly, we can take steps to improve our own internal performance by reducing our carbon footprint and doing more in the communities in which we are based. For example, North’s headline target in respect of carbon emissions is to reach ‘net zero’ by 2030.

Secondly, we can use our in-house expertise to act as a facilitator of sustainability more generally. P&I clubs can guide their members and clients through their decarbonisation journeys while also getting the benefit of their clients’ knowledge of developing technologies and alternative fuels; helping insurers to understand the risks that they will be asked to cover.

It is also in P&I Clubs interests, and obviously of critical importance in and of itself, to do more to support seafarer physical and mental health and wellbeing.

POTENTIAL CONFLICTS

Taking a broad approach to sustainability also helps to highlight some of the potential conflicts that insurers will need to consider and address.

Environmental and societal interests are not always neatly aligned. Carbon intensive industries with a poor environmental impact may also be those which are driving societal progress in emerging markets. It is important to be honest about these trade-offs and also consider the negative impacts of actions that are taken under a sustainability remit.

As insurers increase their focus on sustainability and seek to demonstrate the value of the work they are doing, a challenge for clients will be to identify those insurers whose actions back up their public statements on the importance of sustainability.

While some P&I clubs such as North are now publishing annual sustainability or impact reports, the lack of any industry standard reporting reduces the ability of clients to make a qualitative judgment on the efforts of insurers.

However, the spectre of ESG scoring and ranking does not only loom for shipowners but also for insurers themselves. Until, and unless, a common reporting framework emerges ultimately it will be for each member and client to decide whether an insurer is walking the walk, as well as talking the talk.

“Progress will be accelerated only when sustainability is integrated sufficiently within an organisation and everyone is engaged in trying to improve performance.’’

Mark Church, North of England P&I Association