Energy Transition

How companies can decarbonize shipping supply chains and protect human rights

decarbonizing shipping industry supply chains

Non-state actors are calling for policy frameworks to make decarbonizing shipping industry commercially viable and investable. Image: Unsplash.

Katharine Palmer
Shipping Lead, UNFCCC High Level Climate Champions
Sturla Henriksen
Special Advisor, Ocean, United Nations Global Compact
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  • Global shipping must decarbonize by 2050 to meet Paris Agreement goals and ensure human and labour rights are protected throughout the supply chain.
  • Non-state actors are calling for policy frameworks to make decarbonizing shipping industry commercially viable and investable.
  • Businesses engaging with the shipping industry can demand zero-emission logistics, creating the opportunity for decent jobs and social inclusion.

The shipping industry is responsible for the movement of 90% of all global trade. Supported by two million seafarers, the industry is the backbone of logistic supply chains, but it’s facing urgent environmental and social pressures.

Currently accounting for about 3% of global greenhouse gas (GHG) emissions and emitting around 15% of some of the world’s major air pollutants annually, it is imperative that the shipping industry decarbonizes by 2050 to meet the Paris Agreement’s 1.5°C target and avoid irreversible global warming damage.

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Business community calls for urgent political action for decarbonizing shipping

More than 150 industry leaders and organizations representing the entire maritime value chain – including shipping, cargo, and finance – are calling on world leaders ahead of COP26 for ambitious, urgent policy actions to fully decarbonize international shipping by 2050, and make zero-emission shipping the default choice by 2030.

Leading companies are already taking action to support the decarbonization of shipping, from R&D and pilot projects, to ordering and building zero-emission ready vessels, to signalling demand for zero-emission shipping services, investing in the production of zero-emission fuels, and investing in the port and bunkering infrastructure needed to service zero-emission vessels.

However, decarbonization of shipping can only accelerate with the urgency and scale needed if international regulators and national governments establish policy frameworks that make zero carbon shipping and fuel production commercially viable and investable.

More demand and investment signals for green shipping

The responsibility to decarbonize and meet climate goals spans across the shipping ecosystem, including cargo owners and financiers. Many cargo owners, retailers, brands and cargo owner initiatives are increasingly demanding greener supply chains and making commitments to reduce (scope 3) emissions across their operations. As zero-emission logistics becomes increasingly sought after – and increasingly demanded by consumers – this in turn strengthens the business case for investing in zero-emission shipping.

For fully decarbonizing shipping industry, the 2030 targets for zero emission fuels should be 5% for international shipping, 15% for domestic
For fully decarbonizing shipping industry, the 2030 targets for zero emission fuels should be 5% for international shipping, 15% for domestic Image: High Level Champions, 2020.

Technological advancements for decarbonizing shipping are also progressing but must be further financed and brought to scale. BCG and Global Financial Markets Association have estimated that shipping decarbonization will require about $2.4 trillion, indicating a significant magnitude of funding to be mobilized and the critical role shipping financiers play in enabling this economic transition. Both financiers and cargo owners are being encouraged to sign the recent call to action for shipping decarbonization.

Human rights no longer a blind-spot for brands

At the same time, COVID-19 has highlighted working conditions in the sector. Due to border closures and travel restrictions, routine crew changes have been prevented, stranding hundreds of thousands of seafarers both on ships and on land. Those stranded on ships are still being denied basic human rights, including access to medical care, and are often forced to work beyond the 11-month maximum period of service on board. Not only has this raised concerns on the workforce’s mental health, it has reduced the attractiveness of a career at sea.

Under the UN Guiding Principles on Business and Human Rights (UNGPs), businesses have a responsibility to respect seafarers’ rights as workers along their supply chains. Cargo owners are now strongly urged by the UN to undertake due diligence to identify, prevent, mitigate and address adverse human rights impacts on seafarers. This involves engaging with their suppliers around seafarer’s rights and welfare, working with key stakeholders, such as the International Transport Workers’ Federation, and using their significant leverage. Several cargo owners, including Unilever and Consumer Goods Forum companies, have already called for seafarers to be designated as key workers.

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Opportunity for social sustainability

The decarbonization of the shipping industry offers an opportunity to bridge environmentally and socially sustainable activities. The concept of a “just transition” is gaining increased policy, business and civil society profile as a tool for balancing decarbonization of shipping with robust social standards, in turn, accelerating climate action and gaining societal approval for changes taking place, as recognized by world leaders at COP24.

The transition to zero-emission shipping will only be possible if the industry draws on and develops the expertise of seafarers and the broader maritime workforce. New opportunities for decent work could be created across the value chain, such as the production of zero-emission fuels, including in developing countries. Only through a just transition approach will these benefits be equitably shared and accessible. Reskilling, upskilling, and skills transfer must be incorporated into transition plans to ensure the sustainability of the sector as it moves to new fuel sources.

With the corporate responsibility to respect human rights as outlined in the UNGPs at the core of a just transition, shipping companies will need to increase their worker participation through social dialogue and stakeholder engagement with trade unions and communities, enable greater diversity and inclusion, mitigate job losses through skills development, while creating new green and decent jobs and advocating for government policies supporting a just transition.

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The value chain can demand a just transition for decarbonizing shipping

With decarbonizing shipping firmly on the agenda and seafarers’ rights an increasing focal point, cargo owners and financiers across the shipping value chain have a vital opportunity to support a safe and just transition for maritime transport and its workers.

This includes adopting policies that integrate robust labour and environmental standards and intensifying the implementation of ambitious ESG frameworks, such as the 10 Principles of the UN Global Compact. It also involves engaging in the implementation of the ILO just transition guidelines, including by developing standards and indicators on just transition, and driving initiatives that address the social challenges of the transition.

Today, many companies, including those most influential to the Sustainable Development Goals (SDGs), have been, and will continue to be assessed by World Benchmarking Alliance on their contribution to a just transition to the decarbonization of the global economy. While global shipping is not yet included in this initial benchmark, the same lessons apply.

UN Global Compact, together with UNFCCC Marrakesh Partnership and UN DESA, will be hosting a virtual panel discussion on 13 October at 13:00-14:00 GMT, as part of the second UN Global Sustainable Transport Conference in which a diverse representation from shipping ecosystem will elaborate on the need for a supercharged, equitable net-zero transition. Register to hear how organizations can secure a sustainable and responsible shipping industry. You can also get involved by signing the call to action here.

Thanks to the Boston Consulting Group for their inputs and assistance.

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Energy TransitionSupply Chains and Transportation
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