Reflections from Shipping 2030 - technology and cultural change

By Graham Libaert - April 04, 2018

Shippers must adopt recent regulatory requirements to ensure their industry remains environmentally sustainable (ballast water treatment and low sulphur regulations by 2020). At the same time, the industry must also continue to strive to meet consumer supply and demand, ensure crew welfare and turn a profit all at the same time. Herein lies the challenge...

Ton per mile carbon emissions for shipping is much lower than road, rail or air. Currently, the estimated contribution of the shipping industry to environmental pollution is 4% but, the sheer volume of shipping and the ongoing increase in demand will see this number grow to 17% by 2030 (1,200 million tonnes of carbon per year). This would be twice the emission limit level set out in the Paris Agreement if/when shipping is brought inline with these targets.

Terrifyingly, the planet could well will run out of breathable air before we deplete our fossil fuels.

In order to make ships compliant with the new regulations, multi billion dollar investments need to be made into the ships and their supporting infrastructure, the cost of which  will be borne by the individual shippers. That is unless they can move together as an industry to raise prices or reduce costs at a market level, traditionally challenging for a commercially competitive industry  where the normal behaviour is to drive down cost and competition through consolidation.

This all spells change and perhaps transformation for the industry in order to adopt new technologies and business practices;  topical buzzwords throughout the event were ‘transparency’, ‘collaboration’ and ‘optimisation’, but what remained elusive was the ‘how’, other than small, incremental and discrete steps - now, where have I heard this before?

Drawing parallels with Insurance

The challenges and barriers to adoption faced by the shipping industry are not dissimilar to those that we see in insurance and, whilst there is general acceptance that technology already exists today that can improve business performance, technology always moves ahead of regulation and there is no silver bullet evident.

To realise benefits from technology in anything other than an evolutionary fashion, the highest hurdle to overcome for both industries, in my perspective, is cultural change and successful adoption. Although, unless the stimulus exists to be more revolutionary, one can't help but think that many companies will suffer as those companies that can afford and have the impetus to challenge the norm will continue to do so and thrive, the others will at best follow, find a niche, become acquisition targets or simply decline.

Wartsila is a good example of a company with the budget and impetus to change. In the shipping industry, Wartsila is  deploying a similar smart 'eco-system' strategy as we see companies like EY establishing in the insurance industry.In the last 12 months Wärtsilä have aggressively shifted their business from engineering to services (both digital and traditional) which has resulted in an almost doubling of their share value since 2016. The strategy includes the acquisition of a number of businesses to accomplish their ecosystem vision including Concirrus’ partner Eniram, and  more recently Transas - a global leader in navigation solutions who they acquired for 140m EUR this month.

When looking at technology strategy, insurers can take inspiration from Wärtsilä’s strategic turnaround and resulting success. The trends in the shipping industry also point to opportunities for technology collaboration between insurers and shippers. With multi-billion dollar investments in on board technology, shippers will have swathes of data that will be invaluable to insurers. A more transparent data relationship between the two industries will have pay offs for both.


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