Climate change has become an unassailable fact of life. That’s certainly the case when it comes to global industries like maritime shipping, with its complex routings that can be easily thrown out of kilter by localized weather events.
Take the example of the Rhine River in Germany, Europe’s most important commercial waterway. In February 2021, extreme rainfall caused the river banks to burst, halting shipping for several days. Then, in April 2022, an unprecedented drought struck parts of Germany, causing water levels to fall so low that vessels were forced to halve their capacity in order to avoid being grounded.
There are many more examples of extreme weather events that affect maritime supply chains around the world, and the trend will only continue. Rising sea levels and extreme drought pose a serious risk to coastal infrastructure, such as ports and shipyards. The shipping industry must engage in a collective effort to address the crisis, in order to reduce the stress on the market going forward.
Authorities in the maritime sector are responding to the threat posed by global warming. In late 2022, the International Maritime Organisation (IMO) announced that, as of January 1, 2023, new rules would come into place to make it mandatory for all ships to measure their energy efficiency and initiate the collection of data for reporting their carbon emissions. The impact of these rules is yet to be fully realized within the shipping industry, but one can certainly forecast the effect they’ll have on the many older vessels still in service.
One of the key metrics IMO will be collecting from ship operators is their carbon intensity indicator (CII), with a rating assigned between A and E, where A is the best. Any ship rated D for three consecutive years, or E for one year, will have to submit a corrective action plan to demonstrate how the required index of C or above will be achieved. The path to meeting these requirements will demand various changes and concessions from operators, which will require significant investment. Options include reduced ship speed to lower emissions, hull cleaning to reduce drag, installation of low-energy light bulbs, and reliance on solar or wind auxiliary power for onboard accommodation services. In the short term, these regulations are sure to incur higher costs for older ships that weren’t designed for the modern era of carbon compliance.
Expect to see more of these laws introduced over the coming decade. Supply chain professionals, and the businesses they represent, must be ready to prioritize flexibility in their methodologies, actions that will pay dividends further down the line. This shift toward a more sustainable future in shipping is already tangible, in the form of more dual-fuel ships on the water, a trend that we can expect to see gain momentum.
Another pertinent issue is the question of the impact on the consumer. Businesses will be eager to avoid major price hikes for customers necessitated by expensive upgrades to their fleets. And while the use of alternative fuels should be encouraged, there’s speculation that in the short term, the scramble for change in the industry could result in supply shortages and subsequent delays.
Adaption and adoption are two keywords that must be kept in mind by supply chain professionals as we head into 2023. Stricter sustainability regulations in shipping have been a long time coming, and carriers will be keeping a close eye on which ships are compliant with regulations, as well as which older ships could be scrapped if there’s no clear return on costly compliance investment. Sweeping measures such as these will always bring a level of uncertainty to an industry as historical and complex as maritime shipping, and fears that these changes could reduce market capacity in the next couple of years are not unfounded. However, with the excess capacity that our current market already has due to recent protracted periods of disruption, the short-term revamp for carriers must be embraced, or else it will invite further headaches in the future.
Anne-Sophie Fribourg is vice president, ocean procurement at Zencargo.
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