12 Apr 2022
The maritime world has been the backbone of international trade since the first major trade routes were established between modern-day India and Pakistan along the Arabian Sea. Almost 5000 years later and the industry has been thrust into the era of digital and eco-conscious transformation.
Transparency is one of the major benefits that come with digitalisation and sustainable operations. The interconnectedness that it brings ensures that corruption is stamped out, customer service is improved, decisions are made quicker, vessels save money, processes are optimised and the goal of achieving sustainability is boosted.
Even with the countless benefits that comes with a more transparent industry, it has remained apprehensive and guarded. It is an issue that the industry has grappled with for decades, a point that was highlighted by author Rose George in her book Deep Sea and Foreign Going: Inside shipping, the Invisible Industry that Brings You 90% of Everything: “There are few industries as defiantly opaque as this one.”
Despite being able to operate with some level of discretion, the industry remains somewhat reluctant by choosing to conform out of necessity and not want. But the need to comply with digitalisation and decarbonisation processes can no longer be ignored.
Carbon, transparency and everything in between
The shipping industry is responsible for producing approximately 940 million tonnes of CO2 emissions annually. Maritime organisations such as the International Maritime Organization (IMO) and the World Ocean Council are working toward cutting the sector's overall carbon output by setting a target of reducing emissions by 40% by 2030.
In an effort to decarbonise the maritime sector, shareholders require tougher corporate governance with more detailed reporting for vessel activities and carbon output accountability.
Financial lending to shipping has already started to depend on vessel operators’ ability to comply with the banks’ Environmental, social and governance (ESG) criteria – a set of standards for a company’s operations that socially conscious investors use to screen potential investors.
The implementation of the Poseidon Principles in June 2019 is a prime example of this as it acts as a framework that integrates climate considerations into lending decisions in order to encourage decarbonisation within the industry.
The bottom line is this: shipowners who refuse to step out of the shadows will find access to finances a lot tougher moving forward, making carbon transparency a necessity as we step into the "green age of shipping". Digitalisation ensures transparency in a world that demands companies hold themselves accountable and this requires additional strategies
Why the lack of transparency?
Competition has been pinpointed as one of the main reasons for the lack of transparency within the sector. As operators attempt to maintain a fair and competitive market, the issue of sharing sensitive information is a topic that has come up.
For example, if certain information could easily be distributed and accessed by various parties in the supply chain, many ship operators believe that this could have dire consequences when it comes to competition. What stops the shared information from being utilised by a competitor in order to drive down rates or access more agreeable terms?
It can be argued that these concerns are negated when looking at digital technologies such as blockchain, which enable better visibility and accountability without sharing confidential information. While digitalisation remains at the heart of a shifting industry, the disruption of traditional practices is only accelerated by the growing demands for better corporate governance.
In order to maintain trust, increased transparency is not only seen as a competitive advantage but has become crucial. As the world becomes more interconnected and the global economy opens up, shipowners are likely to be placed under the microscope as transparency becomes associated with reputation and finances.
Transformation is possible and is a necessity for shipowners and operators. While maintaining a certain level of discretion is an inherent feature of an industry that is resistant to change, it can no longer be ignored.