Including decarbonisation in ocean bids and procurement decisions: 5 key changes
It is no longer “just talk”. Europe’s new Emission Trading Scheme carbon taxes on shipping will begin in less than 4 months’ time. The International Maritime Organisation’s ’Carbon Intensity Indicator’ policy – monitoring a ship’s energy efficiency – began in January, and is already impacting both the speed at which containerships are sailing and the type of ships carriers are ordering.
But as a shipper or BCO, are you ready for these challenges? If you are not sure, or want to know how others are tackling these, then we hope this Drewry insight will help.
Drewry has been closely monitoring the market and developed the first set of sustainability best practices which shippers and BCOs can implement within their existing procurement processes. Our solutions range from costing tools to practical workshops with client teams on “how to be a sustainable shipper”.
So, based on what our global team of consultants – who have already implemented ocean sustainability programs – have seen or provided advice on, what are the key questions and changes related to sustainability which are happening in ocean bids and procurement today?
1. Include CO2 emissions and/or ETS charges in bid sheets
Some BCOs are already asking bidders to specify in their bids the CO2 emissions for the services/loop which they offer.
The change now is that some shippers are actually making decisions based on these CO2 emissions. Drewry has developed best practises on volume allocation including sustainability to assist our clients in the award process.
Some shippers are currently pushing back against carrier requests to charge separate ETS charges on the routes to/from/within Europe; others are asking the carriers to break these out as part of the bid – Drewry recommends the latter (see next point).
2. Question and validate the 2024 Emission Trading Scheme charges
Back in 2022, Maersk estimated that, based on various assumptions, the ETS cost would be Euro170 ($186) for a 40-foot container shipped from the Far East to North Europe.
However, as of early September, major ocean carriers had not publicised new ‘ETS surcharges’ by trade route from January 2024. They have not, to our knowledge, announced how to pass on the extra compliance costs, nor have they disclosed the calculation of these costs.
To clear the fog and validate any carrier claims for surcharges which may come, Drewry has launched a ‘Carbon Tax and New Fuel’ bespoke cost tool, which is available to shippers on any major route.
3. Start measuring CO2 emissions
Some shippers are now receiving CO2 emission reports from some of their providers (ocean carriers or forwarders/NVOs).
But these reports do not all use a standardised method of measuring CO2 emissions and are hard to use to make decisions or to monitor sustainability results. Drewry has signed a partnership agreement with Smart Freight Centre, an international non-profit organization focused on reducing greenhouse gas emission from freight transportation, and recommends the use of its standardised ‘GLEC’ framework on emission measurement.
Drewry’s new Comparison Guide of Green House Gas (GHG) Emissions Measurement Providers to act as an independent guide to support shippers selecting one of these providers.
4. Start a transport focused sustainability programme
More BCOs are now defining a transport sustainability programme. More people are involved in trying to set up practical operational and strategic measures related to sustainability in shipping, despite the complexities and uncertainties.
In our ‘sustainable shipper workshops’ organised for individual shippers, Drewry sustainability experts have supported shippers in organising themselves to create a robust ocean transportation sustainability programme. Many aspects exist including supplier relationship management, realising supplier-driven sustainability programmes and relevant Key Performance Indicators.
5. Review your ocean carrier and / or forwarder-NVO contract language
Expect ocean carriers and forwarder-NVOs to request changes to their 2024 contract because of new emissions regulations. Some have already sent new contract language to shippers – language which is favourable to the ocean carrier and forwarder-NVO. Drewry recommended several alternatives, including more clearly defined contract clauses intended to provide transparency and fairness surrounding compliance charges.