Short-Term Action Opportunities

The shipping industry is facing a major transformation. The industry must work collectively to completely overhaul its fuel mix and fleet to achieve zero emissions by 2050. Zero-emission technologies and fuels are not commercially available at scale today and it is clear that their adoption will increase costs. Cutting down on fuel costs by improving the operational efficiency of a ship will be a prerequisite for the adoption of zero-emission fuels and setting the foundation for green corridors. Improving the operational efficiency of the ship itself will need to go hand in hand with a more efficient supply chain which will require much broader cross-value-chain collaboration.

This insight brief provides an overview of the short-term opportunities and barriers to operational efficiencies and takes a systems view to explore the role of operational efficiency measures as an enabler for long-term shipping decarbonisation. While the savings potential can be upwards of 20%, there are many barriers that challenge the delivery of these savings. Through a series of conversations with industry stakeholders over the past 18 months, many ambitions have been identified, which can be placed into four buckets:

• Identify existing good practices in behaviours, technologies and contracts that can be scaled up and replicated now;
• Align incentives within companies to make efficiency a priority and track emissions alongside profit;
• Engage with the full supply chain to promote transparency and build trust between charterers and shipowners;
• Shift thinking from a bilateral zero-sum game to new business models and multilateral solutions in which all parties can gain through benefit sharing.

If we look at how these ambitions can be achieved, we find four major enablers: data & transparency, pilot voyages and demonstrations, changes in legal contracts and clauses, and enabling policies and regulations. The table below summarises the opportunities provided if we cross reference the ambitions to link them with these enablers.

Table 1: Linkages between operational efficiency ambitions and specific enabling actions.

Shifting from interest to action

In a recent workshop, participants mapped out how specific commitments between now and 2025 can accelerate uptake of operational efficiencies through the four enablers identified: better transparency and standardisation of performance data; scaling up pilots and best practices; contractual changes to encourage virtual arrival practices when there is a delay at the discharge port; and policies and regulations to enable new business models. With further input, these levers for action will be refined, and rallying industry leaders around them will bring awareness and momentum to cashing in on the operational efficiency opportunity.

Now, as much of the shipping world dissects the outcomes of the intersessional working group (ISGW GHG-14) and anxiously watches the preparations for MEPC 80, this event is likely to be a slingshot that accelerates operational efficiencies. While the jury is hung about which outcomes can be expected, in the case of either low ambition and high ambition, the need for short term operational efficiencies will be underscored. If ambitions are low, there will be a need to move quickly and independently of the IMO to reduce emissions, and operational efficiencies are one of the most apolitical means we have. If ambitions are high, this just highlights the need to reduce emissions from every source possible, and the real first movers will do this through their operations.

While being a first mover in a competitive industry is a challenge for any company looking to drive change, working with peers in a pre-competitive setting can bring assurance and confidence to act together. Currently, the industry faces challenges to get beyond isolated examples of speed optimisation to scale up from isolated pilots to fleet-level changes. For speed operational efficiencies, collective action requires a mix of ship-owners, charters, and terminals to send a strong signal to both industry and regulators. There is thus an opportunity to start catalysing the broader structural changes needed to introduce speed optimisation at scale.

Download the full insight brief here.