Sustainable procurement: more than box-ticking

Businesses with strong sustainability performance benefit from lower capital costs, higher valuations, higher profitability, and lower exposure to risk.

For older vessels, he says, the choice will be to switch to cleaner and more expensive biofuels “or to simply slow down”, to cut down on fuel consumption.

“With new capacity entering the market, many carriers might choose to retire older vessels rather than maintain inefficient operations,” says Hersham.

He also points out that the IMO is not forcing vessels to comply until 2024, and that it will not prevent non-compliant vessels from sailing until 2025.

“This means any scrapping or idling of ships for the next two years is at the carriers’ discretion,” he says.

Sustainable sea shipping ‘will cost more’

In terms of what the new regulations will mean for sea freight prices, Hersham feels that shipping companies “might eventually increase the cost of sea freight to help pay for new energy efficient technologies and fuels that comply with new IMO requirements”.

Having endured some of the highest ever sea shipping rates over the past three years, it remains to be seen how customers will react to such a price hike, especially as they have only recently begun benefitting from a return to pre-pandemic shipping rates.

SARAH BARRETT, HEAD OF PRODUCT INSIGHTS, WÄRTSILÄ VOYAGE

The pace of change in sustainable sea freight is encouraging, says Hersham.

“We’re already seeing a shift to more-sustainable shipping,” he says. “This is reflected in the carriers’ order books for more dual-fuel ships, which are beginning to make up a greater proportion of new vessels.”

He also points out the Chinese State Shipbuilding Corporation reported recently that 31.6% of vessels completed in 2022 were dual-fuel ships. Although sea cargo businesses have a couple of years’ grace, Hersham says the regulations determining acceptable levels of emissions will grow tougher year-onyear, “meaning that the pressure on less efficient vessels will continue to grow”.

Biofuels require no ship engine modifications

Hersham feels that there is great potential for investment in biofuels.

“Some biofuels, such as dimethyl ether, require no extensive modifications to engines, and are the most ready lowemissions fuel option,” he says. But, he adds, these are also “substantially more expensive than traditional fuels”, and that there are doubts such fuel “can be consistently produced in the required quantities”.

However sustainable shipping plays out over the coming years, Hersham says that supply chain executives must prepare for change by “speaking to their partners in order to understand how the new regulations will affect capacity, lead times and schedule reliability”.

Yet net zero sea freight is not just a question of fuel choice; it will also be driven

A McKinsey report urges the global sea shipping industry to introduce green shipping lanes.

The report – called The Next Wave: Green Corridors – is a joint effort by The Getting to Zero Coalition – a partnership between the Global Maritime Forum, the Friends of Ocean action, and the World Economic Forum. The report says that the technology to help shipping reach net zero by 2050 already exists, but that it needs to be deployed not only at far greater scale and speed, but also at lower cost.

It adds that one way to accelerate decarbonisation is to introduce ‘green corridors’ – specific trade routes between major port hubs where zero-emission solutions are supported.

Green corridors, says the report, would allow policy makers to create an “enabling ecosystem with targeted regulatory measures, financial incentives, and safety regulations”.

It adds that policy makers should also encourage the production of lower cost green-fuel, to help mobilise demand for green shipping.

It continues: “Green corridors could create secondary effects that reduce shipping emissions on other routes.

“These corridors would ideally be large enough to include all relevant value-chain actors, such as fuel producers, cargo owners, and regulatory authorities. They would send strong signals to vessel operators, shipyards, and engine manufacturers to ramp up investment in zero-emission shipping, making the risks more acceptable for all involved.”

Alex Hersham

TITLE: CEO

COMPANY: ZENCARGO

INDUSTRY: FREIGHT FORWARDING

LOCATION: LONDON

Zencargo helps businesses in Europe and the Americas to make supply chain a competitive advantage, says CEO Alex Hersham. The company is headquartered in London and has a global team that provide digital freight forwarding services, “helping clients reduce costs, ship smarter and stay on top of inventory”, he says.

Sarah Barrett

TITLE: HEAD OF PRODUCT INSIGHTS

COMPANY: WÄRTSILÄ VOYAGE

INDUSTRY: MARITIME DIGITALISATION

LOCATION: HAMBURG, GERMANY by businesses leveraging, and sharing, maritime data across the vessel ecosystem.

Hamburg-based marketing expert Sarah Barrett says she is "passionate about the digital transformation taking place in the maritime industry". She previous worked for SKF Marine.

Sarah Barrett is Head of Product Insights at maritime digitalisation company, Wärtsilä Voyage. Barrett says digital solutions “need to span from the engine room to the bridge, to the board room, and from ship to shore”.

The past few years have seen the maritime sector’s digital transformation accelerate, she says, “as ship managers, owners and operators face an evolving regulatory landscape and rising fuel costs”. Data, she says, allows organisations “to make betterinformed decisions that are aligned with business and commercial objectives”.

Such as decisions around fuel efficiency. Part of the IMO’s remit is that it regulates fuel efficiency levels. From January 2023 it introduced a new measure called Energy Efficiency Existing Ship Index (EEXI). The EEXI is a measure related to the technical design of a ship. Ships have to attain EEXI approval once in a lifetime, but by the end of 2023 at the latest.

Barratt says: “Given the new CII and EEXI regulations, monitoring and altering environmental performance within the global fleet will become more urgent.

“Data-based decision making will play a crucial role in future-proofing maritime organisations and ensuring they continue to run safe, sustainable, efficient, compliant and profitable businesses.

“Making decisions based on gut or instinct is no longer viable. Without datadriven insights, companies will stay stuck in reactive mode, at the mercy of market change rather than adapting to it.”

AROUND

11bn Tons

OF GOODS ARE TRANSPORTED BY SHIPS EACH YEAR – FROM RAW MATERIALS TO FINISHED PRODUCTS

31.6%

CHINESE STATE SHIPBUILDING CORPORATION REPORTS THAT 31.6% OF VESSELS COMPLETED IN 2022 WERE DUAL-FUEL SHIPS

GLOBAL SEA SHIPPING ACCOUNTS FOR ROUGHLY

3% OF TOTAL GLOBAL CARBON EMISSIONS

CLEAN FUELS COULD INCREASE THE TOTAL COST OF VESSEL OWNERSHIP BY BETWEEN

DEPENDING ON ROUTE 40-60%

Coal power plant in the morning mist, Mae Moh, Lampang, Thailand. Such emissions are common in many supply chains, and can account for as much as 80% of a company’s carbon footprint