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How Environmental Action Can Drive Data Transparency in Shipping

How Environmental Action Can Drive Data Transparency in Shipping

When the Carbon Intensity Indicator (CII) comes into effect in January next year, it will represent a step change for climate action in shipping. While its explicit aim is to reduce emissions from global shipping, it will also have a far wider impact. The required reporting and subsequent rating of vessels will forever change how the industry approaches data transparency, prompting a shift in mindset, which could help the shipping industry grapple with other long-standing challenges, including driving up maritime safety standards.

The International Maritime Organization’s (IMO) CII will require shipowners to collect and report data on ships’ operational efficiency according to a formula that will show CO2 emissions against cargo carrying capacity and distance sailed. That element is no revolution; operators already report similar data to both the IMO’s Data Collection System (DCS) and the European Union’s Monitoring, Reporting and Verification (MRV) regulation. In most cases there will be no need to change what data they collect. The difference lies in how that data is used to publicly rate vessels along with data transparency.

After the first year of data collection, vessels will be assigned an A to E rating based on how much they have been able to reduce emissions. Those with the lowest ratings, labelled D or E, for three consecutive years will have to submit improvement measures appended to their ship energy efficiency management plan (SEEMP). While the details of enforcement have yet to be finalized, for example, the consequences of failing to deliver on an improvement plan, the fact that the rating will be easily accessible publicly means that the market itself is likely to become an important enforcer.

Similar data has been available previously for those prepared to investigate. The EU publishes the data collected through MRV reports annually, for example. But working out the emissions performance of individual vessels in this way, let alone comparing them across years, is a time-consuming task. CII’s simplified rating scheme will make vessels’ environmental performance immediately visible and intuitive even to non-experts.

Alongside any enforcement consequences, the impact of a highly visible environmental performance indicator will drive up expectations from customers (cargo owners or passengers), charterers and investors. In the cruise sector for example, where operators already compete vigorously on environmental grounds and are closely monitored by many non-governmental organisations, there will be direct commercial pressure to maintain a high rating.

In the bulk sector, where signatories to the Sea Cargo Charter have agreed in principle to use only efficient vessels, the CII will become a simple factor for selecting vessels for charter. In addition, the Poseidon Principles, under which banks representing more than half of total ship finance have agreed to align their portfolios with IMO’s climate ambitions, use the same formula as CII to help direct investment decisions.

The ability of all stakeholders to see a vessel’s environmental performance will fundamentally alter how vessels are chosen, chartered and invested in. That commercial pressure will mean that ship operators will focus more closely on maintaining the emissions reductions needed to ensure a good rating. While the CII remains to a certain extent a work in progress (as an ‘experience building’ phase with no enforcement that will run until the end of 2026), the scheme is an exceptional example of how improving data collection and transparency can improve standards across an industry.

Ship at sea full of containers

At ORBCOMM, we have long been committed to driving up standards of data collection, reporting and transparency in shipping as we believe that this shift in operations will benefit the industry as a whole. We are vocal supporters of the Digital Container Shipping Association (DCSA), whose aims to standardise data collection and use across the container shipping sector align with our own vision for the wider shipping and logistics markets.

Our vessel and container tracking solutions enable operators to share crucial information with multiple stakeholders in real time, helping to assure the safety of assets and cargoes as well as improving the efficiency of the logistics chain. Examples include our collaboration with Unseen Labs to track ‘dark vessels’ that turn off AIS systems (sometimes to engage in illicit activities such as unregulated fishing) and also our industry-leading ReeferConnect platform that offers real-time monitoring and visibility of the cold chain. In fact, our newest offering for the dry container market will facilitate tracking and monitoring of the entire supply chain irrespective of whether the container is on a truck, train or ship.

Data is the key to improving safety, increasing logistics efficiency and cutting shipping’s environmental impact across a disparate and fragmented global fleet. We believe that harmonising the process of collecting, sharing and making available relevant data is a crucial first step in tackling these issues. It is not hard to imagine how safety standards on vessels might improve if a global reporting and labelling scheme similar to CII was introduced.

The CII is a welcome addition to shipping’s regulatory framework, and we look forward to its contribution to the greening of maritime – and to the wider cause of driving the industry’s commitment to data transparency.

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