Sustainability principles and plannimg

Sustainability principles and marine spatial planning tools for casualty management

There can be no doubt that sustainability is now firmly front and centre of the maritime industry’s agenda. The widening adoption of voluntary sustainability reporting initiatives, as well as ongoing regulatory developments such as the EU’s recent adoption of the Corporate Sustainability Reporting Directive (CSRD) demonstrate this. But does this transition in corporate governance have any implications for how we respond to and manage maritime casualties and should it? Nicky Cariglia, Environmental Consultant, Marittima reports on the result of a survey of industry professionals to discuss these important questions

For decades, prevention, preparedness and response to marine incidents has been regulated by a suite of IMO instruments. These have been effective in reducing the frequency of maritime casualties and driving development of advanced insurance mechanisms to pay when these situations occur.

As a result, considerable multisectoral experience, partnerships and knowledge to respond to salvage, pollution and wreck removal situations have been built. In light of this, it is important to understand whether developments in sustainability science could apply to casualty management and result in better outcomes for people and environment.

S E TT I N G T H E S C E N E

Planned marine development projects, driven by regulatory requirements have long had environmental and socio-cultural risk and impact management processes embedded into their design. Systematic frameworks and data driven tools identify and reduce the impacts of such projects or seek to implement compensatory mitigation measures if required. The growing importance of corporate accountability where environmental, social and governance (ESG) factors has enhanced the importance of this.

Do the mounting expectations of corporate ESG performance and well established environmental and sociocultural management processes offer any opportunities and lessons when it comes to the management of casualties?

My own observations from salvage, pollution incidents and wreck removals suggest there may be a case for this.

In many of these cases however, a less costly approach would have likely resulted in an overall reduction of impact or net benefit but currently, there is no systematic framework or process against which to evaluate and measure the ESG costs and benefits. Without this, it is not possible to effectively evaluate whether all risk factors have been considered and therefore difficult to forecast overall costs.

It is interesting to note the most recent Allianz Shipping Safety Review which stated that “the ESG effect on casualties is beginning to have a serious impact on claims,” according to Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS. “In the past, a wreck might be left in-situ if it posed no danger to navigation. Now, authorities want to see wrecks removed and the marine environment restored, irrespective of the cost. The environmental responsibilities for owners and insurers will push up the cost of these events exponentially.”

What is not covered by this article is whether ever more

complex wreck removal plans or pollution responses (at much greater expense), undertaken with an aim to reduce ESG related impacts actually achieve these aims. Or does a more complex response result in the use of ever more resources with more waste to be managed, a bigger physical footprint and longer time frame without achieving any net benefits?

The answer to this will vary on a case-by-case basis and are nuanced. But developing a technical framework to identify and manage ESG factors to complement financial related decision-making is surely warranted.

Against this backdrop, the growing momentum behind ESG related discussions in casualty management and the wider marine insurance sector, it is important to understand the opinions of the wider industry on this. What follows are the outputs of a recent survey and an attempt to contextualise these findings.

THE SURVEY

Delegates at the Marine Claims International conference held in Dublin, September 2022 were provided with a link to a questionnaire composed of 12 questions. These were a combination of multiple choice and scaled response. Questions were selected based on personal experience attending salvage, pollution and wreck removal cases, as well as discussions with colleagues and articles in industry publications.

In all, 50 respondents participated from a wide spectrum of the industry (Figure 1).

Of these respondents, 90% had direct experience of casualty management. (Figure 2) 84% considered that ESG related factors were only part of a number of factors in driving up the costs and uncertainties associated with casualty management and 12% considered ESG issues to be the main driver. This warrants further investigation of the factors considered by respondents to be at play.

DRIVERS OF ESG RELATED COSTS

Historically, the legislative framework applicable in the response to casualties, pollution events and wreck removals was relatively simple – with specific instruments to address liability and criteria for admissible response and claims that could be applied globally. As public expectations have heightened, environmental and socioeconomic concerns have also become more complex.

Marine casualties have also become technically more complex in terms of potential pollutants on board, the carriage of containerised cargo and wastes associated with fires. Simultaneously, a greater number of environmental protection instruments governing all types of routine industrial activities have been adopted. This has resulted in a rise in applicability of a patchwork of other international, regional or national environmental protection legisltation when it comes to managing a casualty.

Requirements under MARPOL, the Basel Convention, EU Ship Recycling Regulations and the Water Framework Directive may all come into play, despite the fact these instruments were designed to manage long term, planned activities rather than unplanned, short-term events.

Although exceptions exist in the event of emergencies under some of these instruments, once the emergency phase is terminated, in many jurisdictions where a regulator may not have the experience or confidence to apply discretion regarding exceptions, the response will be driven to comply with their provisions. This can limit options in what is

usually an entirely unique circumstance. Excluding creative problem-solving towards finding waste management solutions or potentially the dismantling of a wreck due to provisions not designed to accommodate unplanned events, costs, time and the overall negative impact on people and environment is increased. Attempting to tease out the most important drivers is important as this provides information on where the industry can focus any attention to ESGrelated changes we adopt in how casualties are managed.

Survey respondents reported that the least important issue driving up ESG related costs were rising technical complexity and associated delays. The driver with the highest overall score was higher public expectations followed by costs of environmental claims and an ever evolving complexity of environmental legislation. The latter was given the highest rating (5) the most often (Figure 3). DECISION-MAKING AND MANAGEMENT TOOLS

Environmental and social risk management and impact mitigation processes and methods are well defined in the planned marine development sector. Similarly, in corporate governance, frameworks such as the Global Reporting Initiative (GRI) standards have been around since 1997 and offer a well-defined process to identify, map, document and measure an organisation’s performance with regards to its ESG material risks.

More recently, life cycle assessments methods have improved the understanding of the broader impact of a project or product on people and environment and are used in identifying where resource use efficiencies and impact mitigation strategies can be implemented.

The survey found that 76% of respondents considered that the industry should define its own methodology for

BEST PRACTICE FRAMEWORK

In consideration of ESG factors in marine casualties, it will be significant to consider these two phases or aspects separately: 1. Emergency response: salvage operations or at-sea response/immediate recovery of bulk oil and pollution from a coastline. 2. Project phase: tendering and wreck removal or secondary/enhanced response to pollution

During emergency response, particularly in salvage, decision-making is frequently timebound where no option available is particularly desirable. Nonetheless, experienced personnel involved will still have to make critical decisions based on the need to protect lives, the environment and minimise disruption to local communities.

Regarding wreck removals, or the more advanced stages of response to a pollution incident, there is usually a pause while information is compiled, authorities are engaged and a tendering and bidding process takes place. The inherently different nature of these phases will require distinct approaches when considering the integration of ESG factors into management best practice.

When asked whether it was necessary for the industry to develop a bespoke best practice framework with regards to managing ESG risks and impacts, 100% of respondents answered yes or not sure (88% and 12% respectively). (Figure 4)

This suggests that the wider industry considers a need for this but the how remains to be decided. A best practice framework could outline general principles but also underpin the requirements of any methods and tools to manage ESG factors relating to marine casualties.

Development of a guiding principles or best practice framework would ideally be based on industry-wide collaboration and consensus, potentially driven by a central industry body.

managing ESG risks in casualty management, whereas 18% were unsure (the remainder did not consider this necessary). Borrowing from established practices in other sectors provides the opportunity to develop scientifically robust, but scalable tools to facilitate decision-making and dissemination of relevant and pertinent facts.

Tools and methods that could be better embedded into casualty management include:

>Emergency phase: development of a rapid risk assessment (RRA) tool to document ESG risk factors and concerns, and the rationale when difficult decisions are required. A rapid tool to document the potential impacts when having to choose between a bad option and a worse option. RRA tools are already widely used in other sectors of disaster management and public health.

>Project phase: o Modelled on marine spatial planning embed a standard process into casualty management for the identification, description, management and mitigation of relevant ESG risk factors. Factors include components that have the potential to impact the progress or costs of the project, but also those which the project may have an impact upon (either negative or positive). There may be scope in future to develop a quantitative risk assessment (QRA) process and management plans, much like is already done for oil and gas and renewables projects. Indeed, the survey found that (Figure 5) 25% of respondents considered that their organisation already systematically considered and included ESG factors when managing wreck removal projects so sharing these approaches could provide valuable information to the wider industry. Some 53% responded that they did but that this could improve whereas 21% did not yet consider ESG issues in the tender phase of a wreck removal. It should be noted that in a separate question, only 20% of respondents were familiar with environmental and social risk management and assessment methodologies. o Evaluation of wreck removal/pollution clean-up project footprint developing a modified approach life-cycle assessment. This can help better understand the overall net benefit of one methodology versus another or indeed assess the justification for the need to remove a wreck or undertake further clean-up. As an example, in cases where a deep wreck does not contain any pollutants and does not meet removal criteria under the Nairobi Convention, would funds be better used elsewhere on projects aligned with a state’s blue economy initiatives?

> Entire casualty life cycle: o Throughout a response, those involved already adhere to multiple statutory instruments and best practice frameworks. The extent of this is rarely captured and could be - in a format that aligns with and feeds up into, corporate sustainabiltiy reporting templates and indicators (eg GRI).

Part and parcel of many responses is the recycling of material, responding to the need to benefit communities affected by an incident (beyond compensation) as well as environmental monitoring, restoration and other measures that go above and beyond the admissible criteria under the international regime. These measures often are in direct alignment with an insurer or shipowner’s stated sustainability strategy and a better tool for documenting ESG considerations also document the degree of recycling or reuse of materials, environmental and community initiatives related to a casualty.

PUTTING IT ALL TOGETHER

Some recommendations and longer term objectives:

1.A fundamentals training course to ensure a common understanding of the basics.

2.Central entity to drive and house related activities and progress and commence engagement with ESG standard setters, intergovernmental agencies, NGOs and Coastal States.

3.Development of a consensus-based best practice framework. Consultation process with broad cross-section of industry,

4. Development and use of technically robust management tools.

To be meaningful, further progress in this area would require dedicated effort and be based on multi-sectoral buy-in. The results of this survey have highlighted that in theory, the will to take work forward is there.