Creating a new norm for responsible ship recycling

Click here to see the original article published in Maritime Risk International.

Andrew Stephens and Nicole Rencoret, at SSI, outline the issues facing the ship recycling sector and reflect voices from the industry

In May 2018 Maritime Risk International published a story, “A call for clarity”, on the newly launched Ship Recycling Transparency Initiative (SRTI). Since then, the SRTI’s online platform – shiprecyclingtransparency.org – has gone live, with 14 sustainable shipping leaders in the industry signing up to the initiative. Shipowners are now demonstrating their commitment to transparency and sharing information on their respective approaches to ship recycling. 

The social and environmental risks of recycling ships are well known across and beyond the maritime sector. Shipbreaking carries significant occupational health and safety risks, as well as community health and safety exposure, not to mention risks related to a lack of access to health care, wages, working hours, collective bargaining and freedom of association.

Little traction in global ship recycling regulation 
In the past year, little headway has been made in the way of global regulation beyond the Basel Convention, IMO guidelines for the development of the ship recycling plan and ILO guidelines on health and safety in shipbreaking. This year marks 10 years passing since the adoption of the Hong Kong Convention, yet it still is not yet in force. (The Convention was adopted on 15 May 2009, with its entry into force expected 24 months after ratification by 15 states, representing 40 per cent of world merchant shipping by gross tonnage.)

“For too long, EU vessels have been dismantled in poor environmental and social conditions. This is not acceptable any longer. The full entry into force of the EU Regulation on ship recycling is a milestone for this sector, as it provides for the first time clear and specific rules on how EU-flagged vessels should be recycled. Like other recycling activities, ship recycling can be carried out sustainably, in a way which is good for workers, the environment and the economy.”

Karmenu Vella, EU Commissioner for Environment, Maritime Affairs and Fisheries

At the regional level however, we are seeing progress in the form of the EU Ship Recycling Regulation – the only legally binding and comprehensive instrument on ship recycling in force in the world today, in effect from 31 December 2018. The recycling of all large sea-going vessels sailing under an EU flag can only take place in yards included in a list of ship recycling facilities, comprising 26 yards in the EU, Turkey and the US. (The most recent list was issued on 6 December 2018. Drawn up by the European Commission in close cooperation with the EU member states, the list is regularly updated to include yards complying with strict safety and environmental standards. The Commission is currently assessing applications to join the EU list from more than 20 additional yards, located mostly in India and Turkey.)

The lack of a consistently-applied, legally binding framework means that shipowners, ship recyclers and other stakeholders in the ship recycling value chain continue using different approaches. The current industry narrative does not offer many business incentives for responsible ship recycling: good practice does not always get rewarded and bad practice can often go unchecked. The result is uneven playing field for many shipowners.

Creating fair competition through transparency
With transparency comes accountability; it is impossible to be held accountable without being transparent. We have seen how transparency has moved the goal posts and significantly accelerated progress in other industries. Demanding shipowners’ transparency as a minimum is key to demonstrate progress on how far the industry has come in ship recycling, supporting improvements in performance and increasing overall trust.

"Most ship recycling still happens under unacceptable standards. In the absence of effective regulation the market must act to raise the standards and to enable a level playing field.”

Søren Toft, Chief Operating Officer, A.P. Moeller-Maersk

Being transparent about their ship recycling policies and practices will create fair competition, raise the bar for current practice and enable the shipping industry to be held to account. If shipowners are forthcoming and disclose information on their ship recycling policies and practices, investors and lenders, cargo owners and customers are more likely to choose their services over their non-transparent peers. For many, it comes down to making strategic choices as a matter of risk management.

“The Ship Recycling Transparency Initiative empowers those who invest in or buy services from shipping companies to make informed decisions on vessel recycling. With the SRTI they can demand transparency, helping them ensure they do business with companies that recycle responsibly, rather than those which continue with practices that have horrifying human and environmental consequences. It is unthinkable that change won’t be driven with such knowledge. It also sends a clear signal to tonnage providers on the new normal.”

Craig Jasienski, President and CEO, Wallenius Wilhelmsen

Ship recycling is a complex issue and it’s easy to throw one’s hands in the air and give up. But there issomething that can be done, and the onus remains on the shipping industry to be proactive in changing the existing industry narrative. Shipowners need to take responsibility for their vessels; financial stakeholders and cargo owners need to also play their part, by demanding shipowners’ transparency and using this knowledge for their decisions on the business partners with whom they engage.

“CNCo [The China Navigation Company] believes that if more stakeholders in the shipping value chain share their practices transparently then it will be clear what best practices are possible, and at what level of commitment, and thus how standards can be raised globally for the benefit of all. This Ship Recycling Transparency Initiative does not seek to set any standards, but does provide concrete evidence of what is possible, what is practically being done, and thus allows other stakeholders to select those that are aligned with their own positions and aspirations to be responsible and sustainable.”

James Woodrow, Managing Director, The China Navigation Company 

Knowledge is power, and with knowledge comes responsibility
The SRTI is a one-stop-shop online platform to share information on ship recycling based on key disclosure criteria developed jointly by key industry stakeholders. It aims to accelerate a voluntary market driven approach to responsible ship recycling practices through transparency; and subsequently to influence and improve the decision making about ship recycling, creating an industry-wide level playing field. Shipowners voluntarily disclose their approach to ship recycling, while cargo owners and investors can access this information to better inform their decision-making.

“As a service provider for responsible investments, we see that it is important for our institutional investor clients to ensure that investee companies address both environmental and social risks in ship recycling. This platform facilitates making informed investment decision and is at the same time a good driver for companies within the ship recycling industry to improve performance and transparency, making it beneficial for all parties.”

Hanna Roberts, CEO, GES International/Sustainalytics

The SRTI is nota performance standard nor rating exercise; rather, the online platform serves as a tool that allows ship owners to voluntarily disclose their approach to ship recycling. The data shared through the online platform is allowed to tell its own story.

Cargo owners such as retailers and manufacturers, and financial stakeholders such as investors, banks and lenders can use the SRTI online platform to access this information and inform their sourcing- and investment-related decisions. They can reduce brand risk, align their investments with the views of their customers and be accountable for their supply chain. The SRTI can be built into existing supplier codes of conduct and sustainability strategies and can be used as required criteria for consideration in procurement decision-making processes.

Industry leaders join in demanding transparency across the shipping value chainThe SRTI is an independent initiative hosted by the Sustainable Shipping Initiative, reflecting a collective effort that brings together the shipping industry, investors, cargo owners and broader stakeholders in an effort to improve all aspects of ship recycling policy, practice and performance. It already has the support of a number of leaders from across the shipping value chain including A P Moeller-Maersk, The China Navigation Company, GES International, Hapag Lloyd, Lloyd’s Register, NORDEN, Nykredit, Standard Chartered Bank, Stolt Tankers and Wallenius Wilhelmsen.

“Ship recycling is a complex issue. Lloyd’s Register has worked with a number of responsible vessel owners who want to take action and improve their own responsible recycling practices. To make this the new norm, it requires wider collaboration across the value chain.”

Nick Brown,Mmarine and Offshore Director, Lloyd’s Register

2019 Informa plc. This article first appeared in Maritime Risk International, February 2019, pp12-13.