One might reasonably have thought that the decarbonisation regulations and IMO goals, together their impending deadlines would have started to make an impact. In fact, gross carbon emissions are rising – they rose by 4.9% just last year. 

It is clear, therefore, that decarbonisation goals alone are not working and so there is an increasing move towards mandatory reporting in the hope that this will lead to the industry becoming more compliant. Transparency regulations including the EU / UK (Monitoring, Reporting and Verifying) (“MRV”) regime attempt to aid compliance with decarbonisation goals, with enforcement action under the UK legislation starting next year.

New EU reporting requirements

Further, the EU (with the US and Singapore not far behind), is set to roll out a new set of Environment, Social and Governance (ESG) standards (the Corporate Sustainability Reporting Directive) as early as October 2022. The Directive will require companies listed on the EU stock exchanges (except for listed “micro companies”) and other “large undertakings” that are EU companies or EU subsidiaries of non-EU companies, to provide comprehensive data on their indirect ‘Scope 3’ greenhouse gas emissions – those emanating from their commodities’ supply chains, i.e. the shipping industry that transports over 80% of their trade. This, along with pressure from customers, who increasingly view the lifecycle-emissions of the commodities they purchase, has seen companies boost investment in supply chain emissions reporting. 

All about finance

The finance sector has also joined the cause to put similar pressures on the shipping industry. Banking and trade finance organisations are increasingly deploying AI and data analytics to obtain faster and more verifiable data relating to greenhouse gas emissions of the main participants of the transaction. With major financial institutions committing to cut greenhouse gas emitters from their portfolios (for instance, the Net-Zero Banking Alliance), the shipping industry will be bound to decarbonise due to its reporting requirements.

Leading the way

The shipping industry has so far been receptive to these regulatory and commercial pressures on carbon transparency – companies such as Eagle Bulk and Genco have publicly reported their emission levels. It is worth noting that in the UK, certain companies have mandatory obligations on disclosure of climate-related financial information. According to the 2022 Webber Research & Advisory ESG Scorecard, 79% of the 52 shipping companies surveyed did some public reporting. It has been noted that there is significant overlap between those failing to report and those listed toward the bottom of Webber's overall ESG rankings – transparency and compliance with decarbonisation regulations seem to go hand-in-hand.

Industry players are also investing significantly in the carbon-tracking, monitoring and reporting space. Zodiac Maritime’s new technology, aimed at simplifying reporting under the MRV, automates data capture and emissions calculations allowing it easily to track carbon output. Recently, a coalition of shipping majors, led by Shell and MSC, launched a tech accelerator for the maritime industry to measure and manage methane emissions. Bernhard Schulte Shipmanagement has invested in a state-of-the-art Fleet Monitoring Centre to enable crew on board to monitor real-time emissions and then make data driven decisions to achieve the most efficient vessel operations .

Such a focus on monitoring and transparency facilitates compliance with both the operational and technical aspects of IMO’s decarbonisation regulations, and this will only increase as more companies feel compelled to report ‘compliant’ emission levels.