The case for promoting Green Marine branding to build consumer support
Scientifically speakingInternational maritime regulations take years, even decades, to be established and then ratified by treaty. Historically, they have been developed in response to an accident or incident.1 For example, the SS Torrey Canyon’s disastrous spill occurred in March 1967, but the United Nations (UN) Marine Pollution codes (MARPOL Annex 1) addressing oil discharges in international waters didn’t enter into force until 1983.2
According to the World Resources Institute, transportation globally contributed 16.2% of all greenhouse gases in 20163. The UN’s International Maritime Organization (IMO) is working to address CO2 emissions. Until viable alternative energy sources are established, however, the world’s fleet will mostly run on traditional fuels that emit high levels of carbon dioxide. Improving transportation efficiency in terms of carbon emissions per deadweight tonne-mile is what the MARPOL Annex VI Carbon Intensity Indicator (CII regulation) addresses. The CII regulation, which took effect January 1, 2023, sets out the obligations for ships of 5,000 gross tonnage or greater for certain vessel types, including tankers, bulkers and containerships.
Meeting these new standards will cost the maritime industry billions of dollars but will still not be sustainable in terms of CO2 emissions.
The CII regulation is a great legal step forward, but complying with existing laws doesn’t in and of itself make a vessel’s operations sustainable.
A sustainability dilemma
Ship owners who want to be environmental advocates face a dilemma. Carriers operate in a highly competitive and often volatile marketplace4. Assuming all other factors are equal, shippers (cargo owners) will nearly always select the lowest cost marine carrier. This is especially true for low-value bulk cargo that constitutes most of the world’s maritime trade by tonnage and volume.
IMO requirements establish the minimum standards a flag state must enforce. International carriers can operate their vessels under the flag of a country adhering to the bare minimum IMO standards. This option conveniently allows the carrier to legally operate at the lowest possible standards (and costs) in terms of environmental compliance. Vessels can be flagged with relative ease, creating open market entry, assuming cargo and capital are available. Nations requiring their vessels to operate beyond the minimal safety, labour and IMO environmental standards adhered to by “flag of convenience” carriers place their nation’s vessels at a short-term marketplace disadvantage.
Shippers, especially in the bulk spot market, will generally not pay more for a vessel that operates beyond the minimum legal levels of sustainability. In the maritime industry the contracts that enable the carriage of goods can be bills of lading for individual items or charter parties for entire ships. Both of these require that vessels are compliant with all relevant laws.
Historically, charter parties haven’t required sustainable operations or even addressed the concept of sustainable operations.
By contrast, some clauses, such as “utmost dispatch,” required vessels to maintain their speed except for emergencies. The carrier was incentivized to sail at full steam to collect demurrage upon arrival if the dock was unavailable5. This could penalize a ship owner whose crew was aware a berth would be unavailable and slowed down to save fuel and/or reduce emissions6.
Uniform charter party clauses promoting sustainability could help level the playing field. BIMCO is a non-governmental organization established in 1905 that represents about 60% of the world’s fleet7. Its charter parties are widely used. A decade after IMO’s Energy Efficiency Design Index went into force, BIMCO will release a new clause this year to help owners and charterers comply with IMO standards. The clause sets a new goal for charter party agreements that shifts the focus away from “utmost dispatch in reaching a port” to allow carriers to optimize speeds in the interest of reducing emissions and fulfiling its new EEXI AND CII obligations.
These long-needed changes will greatly help vessel owners in complying with new regulations but aren’t designed to support going beyond legal requirements.
Moving beyond compliance
Early adopters of technology, safety measures or environmental advocacy not required by law are frequently penalized by a loss of business as shippers opt for the lowest cost carrier. To remain competitive, proactive carriers typically have to transport cargo at rates that prevent them from passing on the costs of moving beyond compliance.
To work towards an environmentally proactive maritime industry, stakeholders created and have supported the voluntary Green Marine environmental certification program to encourage maritime transportation to go beyond regulatory compliance.
Since its 2007 founding, it has attracted more than 175 participants (ship owners, ports, terminals, shipyards and Seaway corporations) and continues to expand. It also derives unique insight and backing from more than 90 supporters consisting of governments, academic research institutes, environmental organizations and community groups whose influence helps to shape the program’s evolution.
In 2004, the U.S. Environmental Protection Agency (EPA) created the voluntary Smartway Partnership as a public-private fuel-reduction program which has since expanded into Canada. With more than 3,700 members (including carriers, shippers and third-party providers, such as freight forwarders), it has achieved impressive fuel savings. However, Smartway only has three barge lines as vessel members. A more extensive application of Smartway to maritime transportation is complicated by the fact that U.S. flagged vessels make up a tiny fraction of the world’s fleet.
The laudable activities of Smartway partners are made visible in vehicle branding.
However, most consumers may be unaware of what the Smartway logo represents in that most citizens don’t consider a product’s transportation mode when making a purchasing selection.
Engaging the consumer
How important is it to make consumers aware of the carriers moving beyond regulatory compliance in terms of sustainability? Consumers influence the production of the goods that vessels transport. They have shamed and/or boycotted companies with unsustainable operations or unfair labour practices. They have also brought about change by demonstrating a willingness to pay higher prices for sustainable farming and/or fair-trade practices.
Companies that have moved beyond minimum compliance would like to be rewarded by consumer behaviour. These proactive businesses demonstrate that they meet the rigorous standards of non-governmental certifying agencies with approved labels – a branding that directly informs consumers of these achievements. This “on the shelf” recognition connects and empowers consumers regarding the processes involved in making a product.
Example of labeling that indicates a product was made in accordance with Fair Trade and USDA organic requirements.
A customer influences a production process by demonstrating a willingness to purchase labeled products and even pay a higher unit cost than charged for uncertified brands.
Branding that certifies a producer is adhering to the triple bottom line (TBL) business process. TBL should include metrics recognizing contributions to environmental health, social well-being, and a just economy.
The market share increase and revenues in turn reward early adopters for going beyond mere legal compliance. The system’s beauty is that a customer can do comparison shopping and make informed decisions even though the production process may be taking place on another continent. A 2021 study found that customers were willing to pay up to 35% more for a Fairtrade labeled product.
The Fairtrade Mark has a very positive impact on brand perception among U.S. consumers – 80% of U.S. shoppers aware of Fairtrade would look at a brand that carried its certification label more favorably (versus 76% in 2019) 8.
However, public opinion still varies widely on certification programs. Part of the reason is “label fatigue” with consumers somewhat bewildered by the more than 460 other “sustainability” labels created since Fairtrade was founded in 1988. To have public sway, a certification program and its value must be made clear along with its credibility.
On the corporate side, there have been concerns about a lack of documentation on how the premiums that are paid by companies for Fairtrade branded products are producing sustainability results. Companies are under mounting pressure from customers, governments, financial institutions and investors to develop and document sustainable operations.
Sustainability certification is still in the developmental stage to a large extent when it comes to branding goods.
Certified maritime sustainability
The reality is that most consumers are unaware of how their goods are delivered. The transportation system remains behind the scenes for nearly all end-users. The consumer’s lack of awareness, education and concern has created a disconnect among people from the essential role transportation plays in the supply chain. Some of this disengagement is understandable given that end-users typically having no influence over the selection of transportation services. While it would be unreasonable to expect that end-users would directly be involved in the decision-making, sustainable branding can give consumers some influence over the transportation choices made.
The maritime industry might consider branding consumer packaging with logos that indicate when goods are transported by a sustainability-focused carrier that takes environmental steps beyond the minimal legal compliance. Marketing a maritime sustainability logo would provide consumers with the option of selecting a product in part because if its shipment by greener transportation. This empowers consumers by influencing the type of transportation used to move the products they want.
The branding would also permit shippers to identify and select carriers that have been evaluated on their commitment to sustainable operations.
Given Fairtrade’s history, some key considerations should be embraced by the maritime certifying body (CB). The goals of the CB must be clear, achievable, and updated to reflect new technology and scientific findings. The goals need to be aspirational as viewed by companies, investors, and consumers. A CB with easily attainable goals that do not move the maritime industry forward in terms of sustainability will not be valued or endure.
Standards must be uniformly applied. The actions of the members in attaining or moving toward goals must be measurable with the results conveyed on a regular basis in easily understandable terms.
Third-party audits to ensure credibility and integrity are essential as is already required by the Green Marine certification process.
Certification should be recognized by all parties as a valued achievement that must be renewed on a regular basis.
If Green Marine seeks consumer support through branding, it will no doubt be a considerable undertaking. Shippers must be convinced of the advantages of carrying the brand. Marketing campaigns will be required to inform consumers. Awareness-building could be scaled back after the initial rollout but will need to be ongoing. Ideally, Green Marine would have governments, shippers, NGOs and advocacy groups support this clear branding of companies that are moving beyond mere compliance with environmental regulations.
Dr. Richard D. Stewart is Professor Emeritus, Transportation & Logistics at the University of Wisconsin Superior.
Along with his extensive teaching experience in the United States and abroad, he has been the principal investigator for more than $10 million in multi-university transportation research projects. He has sailed merchant ships, serving through ranks to command multiple oceangoing vessels. His industry experience ashore includes being a fleet manager, cargo surveyor and port captain. Dr. Stewart is certified in Transportation and Logistics. He also has served 30 years in the U.S. Naval Reserve, earning the rank of captain. His column looks at the reasons to make Green Marine’s certification process and its logo more familiar with public consumers.
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References:
1. Stewart, Richard, “Chapter VII-Maritime Safety and Environmental Regulations”, The World Market and US Shipping Policies, Quorum Books, New York, April 1996.
2. International Maritime Organization, “MARPOL Annex I – Prevention of Pollution by Oil”, https://www.imo.org/en/OurWork/Environment/Pages/OilPollution-Default.aspx Accessed November 18, 2022.
3. Ritchie, Hanna, “Sector by sector: where do global greenhouse gas emissions come?’. https://ourworldindata.org/ghg-emissions-by-sector Accessed November 30, 2022.
4. Citation and example
5. Collins Dictionary of Law © W.J. Stewart, 2006, Demurrage is a sum of damages agreed in the contract of charterparty in the event of the charterer delaying, to be paid to the ship owner
6. Kenny, Mathew, “Can reforming charter party agreements lead to greener shipping?”, Thetius, April 2021, https://thetius.com/greening-the-charter-party/ , Accessed December 15, 2022.
7. BIMCO, “https://www.bimco.org/about-us-and-our-members: Accessed November 12, 2022
8. Fairtrade America, “New study reveals Fairtrade America is gaining awareness and trust in the U.S.”, July 27, 2021, https://www.fairtradeamerica.org/news-insights/new-study-reveals-fairtrade-america-is-gaining-awareness-and-trust-in-the-u-s/#:~:text=The%20Fairtrade%20Mark%20has%20a,versus%2076%25%20in%202019).