Achieving sustainable means of doing business through circular economic thinking in the maritime industry

By finding new ways to leverage its role and impact in the ecosystem of trade, the maritime industry can have a long-term impact on the broader sustainability agenda. Line Fryd Hofmansen, one of three winners of the Future Maritime Leaders essay competition, envisions how the maritime industry can become an enabler of the circular economy in global supply chains.

October 10 2019

Traditionally, business systems of production, trade and consumption have followed a linear model of resource flow where resources are extracted, manufactured, distributed, consumed, and disposed of. Development in emerging markets and growing wealth in the West have boosted the growth in global consumer markets and contributed to steady growth in global trade and consumption of consumer goods, putting pressure on the world’s resources. Emerging markets comprise more than 40% of the world’s population, and their leapfrogging in economic development has caused exponential growth in consumption, which implies a need for new consumption patterns and a circular flow of resources.

As a vital integrator of global trade, the maritime industry enables countries to produce and sell goods based on comparative advantages, which is an important contributor to global economic and societal development. This role suggests a unique opportunity for the industry to become the enabler of circular economy in global supply chains. So far, the sustainability agenda in the maritime industry has focused on finding solutions that will enable the industry to reduce its carbon footprint and move towards the IMO goal of reducing carbon emissions by at least 50% in 2050. However, the negative environmental impact of trade and modern consumption patterns is not resolved by reducing the carbon footprint of the ship alone. Hence, this essay concentrates on how the maritime industry can achieve long-term impact on the sustainability agenda by finding ways to leverage its role and impact in the ecosystem of trade to become an enabler of circular economy in global supply chains.

The shipping industry is currently suffering from the structural challenge of overcapacity. This is both an economic and an environmental challenge for the industry, as large ships are operating below their full capacity. In addition, shipping mostly takes part in linear trade models, i.e. shipping goods from the producer to the consumer. This is a lost opportunity to create profit from alternative income streams such as waste streams. The demand for circulation and recapturing of waste in global supply chains is growing as a result of increasing consumer consciousness about sustainability and an increasing willingness to pay for sustainable products. The demand is particularly present in the apparel industry where falling production costs and growing consumer spending have led to an increase in garment production and purchasing. The consumption patterns are fuelled by a fast-fashion culture that launches new collections four times a year implying a short lifetime for clothing in general, which comes at a high cost for the environment. Each year, the greenhouse gas emissions from textile production amount to 1.2 billion tonnes. Hence, more circular thinking across the full supply chain from production to consumption is needed!

A premise for enabling circular thinking across an industry with multiple independent stakeholders such as the apparel industry requires strong economic incentive structures for all stakeholders. The first step towards creating such an incentive system is to ensure that the system is accessible and transparent to make it easy for all stakeholders to tap into circular means of production, retailing and consumption. By nature, the shipping industry functions as a link between the production and consumption sites in global supply chains. Moreover, consolidation in the shipping industry has meant that the industry to an increasing extent is controlled by large players with the capacity to own or partner with all links in the supply chain. Hence, the size and role of the shipping industry suggest that the industry has the potential to lead global supply chains towards more circular means of production and consumption by offering an integrated system that can turn waste into new resources. This way of thinking is not new to the shipping industry that has made ship breaking and scrapping an integral part of their business model. However, the industry now has a unique opportunity to become the driver of circular economy in global supply chains. More concretely, the shipping industry should use this opportunity to establish new business models for collecting and distributing waste for reuse in global supply chains.

This will require two things. First, partnerships with retail companies must be established to ensure that waste collected from consumers is recaptured and distributed for new purposes. I.e. when H&M offers a 10% discount on your next purchase if you return a bag of clothes, then partnerships between the logistic companies and the retailers must ensure that the shipping industry can buy the “waste” at a favourable price with the intention of reselling and distributing it for reuse. Second, once the waste returns to the supply chain, the shipping industry will need a platform from which they can sell and redistribute their newly acquired resources. The benefit of such a system is that the industry can use its trade pattern insights from knowing all the stakeholders in the ecosystem of global trade to create new income streams from selling and distributing waste as resources across the globe. This would be the case with shipping used clothes from the US to Africa or shipping plastic from the EU to manufacturing sites in China.

Examples of partnerships with the shipping industry as the facilitator of more sustainable trade have already been exhibited by A.P. Moller-Maersk and H&M’s partnership to invest in biofuel and reduce the carbon footprint of logistics. Hence, the building blocks for creating more sustainable global supply chains are already there and should be extended to include tracking and recycling of resources through integrated logistics systems, making it easy and transparent for the consumers to understand the impact of their actions throughout the supply chain. Only in this way can circular economy become relevant to the consumer, who ultimately holds the key to making it relevant for retailers, logistic providers and producers.

Line Fryd Hofmansen is a 26-year-old Management Consultant at PA Consulting Group, Denmark.

 


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