Three steps to make shipping more sustainable

How the shipping industry can calculate its CO₂ emissions to start reducing them.

This article is the outcome of our work experience with one of the largest Roll-on/Roll-off (RORO) shipping companies. The shipping industry is an irreplaceable backbone of global supply chains. In fact, 8 out of 10 goods used in daily life are transported by the shipping industry. However, the sector is also a growing source of greenhouse gas (GHG) emissions:

·         Per IMO’s 4th GHG Report (2020), global shipping emissions represented 1 billion tons of CO₂, which is ~3% of GHG emissions caused by human activities.

·         Shipping emissions are projected to grow from ~3% to ~17 % of all human-made carbon pollution by 2050.

Greenhouse Gas reduction strategy in place

In 2018, the shipping regulatory body IMO (The International Maritime Organisation), set a GHG reduction strategy:

·         One of its goals is to reduce carbon intensity by 40% by 2030 (and 70% by 2050) compared to the 2008 level.

·         IMO also sets targets for overall annual GHG emissions from international shipping, stipulating a 50% reduction by 2050.

Three steps to success

Despite all the regulatory groundwork, the shipping industry is still confused about how CO₂ emissions are calculated. Based on our experience, we have outlined three vital steps to get started with “carbon footprinting”:

1.       Foundation. Understanding the terminology and concepts of GHG measurement.

2.       Data strategy. Operationalizing data collection, converting activities to emissions and consuming the insights.

3.       Feedback loop. Drive operational changes, measure improvements and re-iterate.

1. Foundation: GHG terminology and measuring shipping emissions

Greenhouse gas emissions are categorized into three groups, scopes, by the most widely used carbon accounting standard Greenhouse Gas Protocol:

Breaking down emissions

By breaking down emissions into sources, you can find the areas where emissions reductions need to be focused. The IMO guidelines refer to the tank-to-wake (TtW) approach, meaning the emissions resulting from fuel combustion. However, it is essential to consider emissions from the entire fuel cycle to capture the full climate impact of fuel use. This calls for the adoption of the well-to-wake (WtW) approach.

Measuring shipping emissions

While there are many ways to measure shipping emissions, current practices converge on the following four methods:

2. Setting a data strategy for emission control

A data strategy provides a long-term, guiding plan that defines the people, processes, and technology necessary to solve data challenges. Collecting data and building key measurements require a data insights approach as part of the data strategy.

Most shipping companies store information related to a trip (“voyage”) and transactional data for various cargo onboard the vessel during the voyage (“bill of lading” or “manifest”). Typically, a customer request to move cargo from one location to another is tagged as a “voyage” by the operator, thus linking the two systems.

Once the raw data is available, key attributes are calculated such as

o   Fuel consumed at sea and berth (for each fuel type/grade)

o   Travel time between port calls

o   Distance traveled (in each voyage leg/segment)

o   Details of cargo onboard (units/volume/weight)

There are several ways to measure distance traveled by the vessel (using AIS/IoT/standard tables), which can have a bearing on the accuracy of the calculations. Once the actual fuel consumption data is available, it can be scaled with the appropriate emission factor to get the actual CO2 emission values.

Based on the requirement (operational or technical), companies can choose to implement and calculate various metrics that reflect the carbon footprint such as Energy Efficiency Operational Index (EEOI), Annual Efficiency Ratio (AER) and Carbon Intensity Indicator (CII). Ballast voyages (empty voyages) and vessel load/utilization affect the calculations and should be considered while calculating such indices.

Once the metrics are calculated at the lowest level (cargo or voyage), these emission figures can be summarized for a period, a customer, or a geography to get an operational overview.

3.      Feedback loop: Driving continuous improvement.

To reduce emissions, business users can pilot various vessel operating approaches to determine what works. It could be initiatives such as slow seaming, route optimization, or physical modifications. The effectiveness of such initiatives can be quantified by the emissions measurement framework.

Benefits from an emissions monitoring program

Beyond facilitating the industry’s transition to zero emissions, a shipping company will also benefit in several other ways from an emissions monitoring program:

·         A competitive advantage as customers/OEMs prefer to engage with logistics providers with a lower footprint.

·         Possibilities to collaborate with other stakeholders to initiate emission reduction or offsetting programs.

·         Getting investor ESG ratings; emissions reporting is increasingly considered.

·         Ensuring compliance with emissions reporting and reduction standards such as EU Fit For 55.

·         Aligning with Poseidon Principles, a framework for assessing and disclosing the climate alignment of ship finance portfolios.

Our final recommendations

To reduce emissions, start with a data strategy approach for emission controls. A strategy that, in a practical approach, provides complete details on a roadmap and the next steps. It will also help with a common reference of methods, services, architectures, and procedures for managing the whole lifecycle of data across your organization, something that can be delivered within 8–12 weeks of a consulting engagement.

To learn more, visit our Transportation & Logistics section.