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Saturday 17 June 2017

Sustainability and operational costs of shipping

The question of sustainability is one that is often in conflict with the profitability goals of the organisation. With a world economy that has just emerged from a recession, the costs of operation have become the centre of focus for players in the global shipping industry. Grama (2012) explains how the global recession has had on the liner shipping industry starting with an evaluation of the impact it has on freight charges and the profitability of the organisations. This article places the question of costs at the centre of the considerations made by the organisation. It reiterates the position of Dinwoodie (2012) which is that industry players only consider the question of sustainability after profitability and the need to cut costs. This is also the view taken by Wang (2010) whose article highlight the cost of reduction of Greenhouse gas emissions.

Wang (2010) discusses the cost of sustainability and the tools embraced by the governments and industry players to help in reducing the level of carbon emissions. Among the tools mentioned are Emission Levy, Energy Efficiency Operational Index, and Emission Trading System (ETS). He points out that these tools increase the cost of conservation and observes the fact that by the time the industry is able to cut down emissions by 25%, the efforts will not be economically sustainable (Wang, 2010).  Tzannatos (2010) on the other hand adopts a balanced view where he analyses the costs and benefits of cutting carbon emissions. He emphasises the need for players in the industry to embrace measures to reduce carbon emissions holding that the industry is among the major contributors to environmental degradation. He draws reference from international convention for the reduction of pollution by ships and cites the fact that sustainability is imperative if the industry is to play its part in conserving the environment. Citing Greece as an example, Tzannatos (2010) emphasises the fact that conservation is imperative as it is the only way through which quality of life can be assured for the 98% of the population that lives within 100km distance from the water bodies.
Fuel consumption is among the considerations made by Dinwoodie (2012). He observes the fact that conservation and cost cutting goals can be achieved concurrently as ships can reduce fuel consumption by regulating the speed of the ships while in transit. While acknowledging its importance, Dinwoodie appreciates the fact that conservation is not the main consideration made by industry practitioners and that they tend to adopt it as one of the minor strategies. On the opposite side of the argument, Tsioumani (2008) showcases the grave importance of the sustainability agenda by explaining the initiatives taken to push for conservation at the global level. This importance is reiterated by Nast (2013) who acknowledges that global climate change is a threatening phenomenon that needs to be tackled by all players including the shipping industry. He proposes a raft of solutions which include enhanced controls on emissions and improved engine manufacturing technology.

In conclusion, it is clear that there are mixed views on the prioritisation of the conservation agenda. This implies that the challenge of conservation could be related to lack of interest in the industry. The research issue is therefore to diagnose the level of interest in conservation and measures that can be taken to improve it.

The research question should be: how can the level of interest in conservation be improved within the shipping industry? An analysis of the issue above indicates that the shipping industry players tend to ignore the need for conservation and only engage in it as a means to cut costs. This attitude could hamper efforts to achieve greater conservation as there may be times when meaningful conservation calls for the industry players to be willing to sacrifice some of their profits for the good of the society. Relegating conservation to a rank behind saving costs and saving fuel means that it can always be foregone when the higher priorities are not achieved.

The objective would be to establish measures that can be taken to improve the levels of interest in conservation. It is important to appreciate that there are many legal provisions and laws that compel organisations to be responsible in their operations to conserve the environment. However, the law only stipulates the minimum measures realisable. Generating high levels of interest in conservation is likely to lead to creative solutions being generated that would ensure that carbon emissions are maintained at their minimum. It will also explore the perceptions of shippers on what more needs to be done by government and other agencies in facilitating conservation.

On the use of CILT to acquire materials for study, the main ethical issue is on refraining from distributing the material downloaded illegally. Access to the materials is restricted for use by the authorised users of the site. Unauthorised distribution would not only be illegal but also unethical. The administrators of the site expect to be the ones to distribute the material where they can dictate when certain materials could be accessed. More importantly, the site is restricted to subscribers. It is important that access to the materials is obtained through the authorised subscription method. While it may be possible to use software and applications that can override the subscription process, these alternative approaches are unethical. Only access granted by the administrators of the site can be considered legal and ethical. In the subscription process, it is also expected that information provided is accurate. This aspect is important as it could be used by the organisation to develop a profile of its users. The other important consideration is the need to acknowledge the source accordingly. Failure to do so would be unethical and would amount to plagiarism and this would be unethical.

In seeking to demystify the attitudes towards conservation, it is important to appreciate the fact that business organisations exist primarily for purposes of making profits and creating wealth for the shareholders (Wang, 2010). It is also important to note that businesses are in competition with each other for customers, employees and investors. This means that the organisation that has a higher profitability is likely to remain competitive due to its ability to attract talented employees and investors. In many cases, conservation comes as a cost. For instance, trading in carbon credits is a direct cost. The benefits are on the other hand not obvious as they benefit the entire society almost equally. It is even more difficult where it emerges that only few are willing to make the sacrifice while their efforts to conserve the environment are reversed by players who may not have much regard for the environment (Tzannatos, 2010). These considerations lead to the need for business to transform the conservation agenda into a source of advantage for the organisation.

The agenda to reduce the level of carbon emissions ought to motivate the organisations to review their approaches to operations very significantly. Even though it may be desirable that the organisation is willing to forfeit some of its profits to advance the conservation agenda, this sacrifice may not always be necessary (Nast, 2013). The organisation may only need to be proactive in managing its operation approaches and also seek for technological solutions. One of the ways that have been proposed in efforts to reduce emissions is through the adoption of appropriate technologies. Making use of better engine combustion systems can greatly enhance the efficiency of fuel consumption. Other measures could include consolidation of vessel business to ensure that shipments are large and that smaller ships that make numerous unnecessary trips are removed from the seas.

There is also need to link conservation efforts to customer perceptions. Customers are believed to strongly value conservation especially in light of the emerging threat to global climate (Nast, 2013). They are therefore likely to perceive organisations that are keen to conserve the environment very positively. Where this is undertaken as a supply chain, the organisations within the supply chain can claim to be part of an initiative and use the synergy to be more appealing to the market. Objective measures could also be established by independent bodies to rank organisations according to their level of achievement in conserving the environment. The market can then be sensitized to purchase more from the organisations under the group.

The conceptual framework for the research can therefore be summarised as in the table below:
Independent variables
Dependent variable
Overall reduction of cost
Effective contribution to the reduction of carbon emissions

Improvement of technology and equipment quality
Generation of good brand image as green company
Greater cooperation along the supply chain
 
Grama, I.G., 2012. The Influence of the Global Economic Crisis on the Evolution of Liner Shipping Market. Economics, Management and Financial Markets 7(4), pp. 632-641
Kjeldsen, K.H., 2009. Classification of Ship Routing and Scheduling Problems in Liner Shipping. INFOR, suppl. Special Issue in "Maritime Transportation" 49(2), pp. 139-152
Nast, T., 2013. The Response of the International Shipping Industry to Global Climate Change. Journal of Maritime Law and Commerce 44(1), pp. 29-45
Panayides, P.M., Cullinane, K., 2002. Competitive Advantage in Liner Shipping: A Review and Research Agenda. International Journal of Maritime Economics 4, pp. 189–209
Tsioumani, E., 2008. Marine Environment: Review of Recent Developments. Environmental Policy and Law 38(6), pp. 308,310-311
Tzannatos, E., 2010. Costs and benefits of reducing SO2 emissions from shipping in the Greek seas. Maritime Economics & Logistics 12(3), pp. 280-294

Wang, H., 2010. Reducing GHG mitigation costs in the shipping industry using the clean development mechanism. Management of Environmental Quality 21(4), pp. 452-463

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