Retail giants look to greener cargo ships to meet climate goals
04.12.2021
Pressure from some of their biggest customers is pushing companies like global shipping giant Maersk to pollute less when they transport goods. It’s a sign that individual companies’ commitments to tackling climate change can influence others along the entire supply chain.

ONE OF THE LATEST TRENDS IN RETAIL

One of the latest trends in retail has been for companies to pledge to essentially eliminate their greenhouse gas emissions. In order for them to have any chance of meeting those goals, they’ll need to work with the companies that move their products. That means cleaning up the global shipping industry, which is responsible for close to 3 percent of the world’s total emissions.

Maersk said last month that it’s significantly speeding up its timeline to develop what it says will be the world’s first cargo ship to run on fuels that don’t add more carbon dioxide to the atmosphere. It pledged to complete the vessel by 2023 — seven years ahead of its original schedule. In the announcement, the company pointed out that about half of its 200 largest customers had either set or were about to set targets to slash supply chain emissions.

«Customer demand is a big factor in saying, ‘Yes, we have to do this, and we have to do it now,’» says Lee Kindberg, head of environment and sustainability for Maersk in North America. Maersk works closely with some of its biggest customers to cut down on pollution, Kindberg says. Its customers’ supply chain emissions, after all, are Maersk’s primary emissions.

«CUSTOMER DEMAND IS A BIG FACTOR IN SAYING, ‘YES, WE HAVE TO DO THIS’»

Early in the climate commitment craze, companies made promises to slash emissions that come directly from their operations and electricity use. That might include the pollution from its factories or from keeping the lights on at their offices. Those commitments frequently excluded indirect emissions that come from things like the raw materials used to make products or from vessels hired to transport goods. Some companies argued that they had no control over those «indirect» emissions. But that’s changing.

Maersk has partnered with its customers BMW, H&M, and Levi Strauss & Co., to develop more sustainable fuels for ships. Each of those companies has set goals for emissions cuts. Huge retailers like Amazon and Walmart, which sell items that might be transported via Maersk’s container ships, have also pledged to get rid of nearly all their planet-heating pollution by 2040.

There’s been a push from environmental groups to make companies cut all emissions that come from their supply chains and the end use of their products — together referred to as emissions from the «value chain

«For many companies, the majority of their emissions are in their value chain. So they can’t credibly demonstrate their leadership on climate without addressing those emissions, as well as the emissions in their operations,» says Cynthia Cummis, director of private sector climate mitigation at the nonprofit World Resources Institute, who also co-founded a United Nations-backed initiative to help companies develop science-based emissions-reduction targets.

«THEY CAN’T CREDIBLY DEMONSTRATE THEIR LEADERSHIP ON CLIMATE WITHOUT ADDRESSING THOSE EMISSIONS»

An added benefit to tackling indirect emissions from the supply chain is that it can force retailers to have conversations with their suppliers and carriers about the pollution they’re generating together. «This may be part of what is spurring Maersk to take action and provide carbon neutral transport to respond to the needs of their customers,» says Cummis.

Another likely impetus for Maersk’s climate goals is international policies that are driving deeper emissions cuts across the entire maritime transport industry. The United Nations’ International Maritime Organization set a goal of cutting emissions from international shipping by 50 percent compared to 2008 levels by the year 2050. However, that might need to be a floor rather than a ceiling for the industry. Climate scientists have found that all emissions need to drop to essentially zero by the middle of the century to avoid the worst effects of climate change.

Moving forward, all of Maersk’s newly constructed vessels will have dual-fuel technology that allows them to run on more traditional fuels or alternative carbon-neutral fuels. The company is also trying to make its vessels more energy efficient. The goal is to have a «carbon neutral fleet» by 2050.

For the vessel it plans to launch in 2023, Maersk has put its money on alternative fuels — specifically, so-called «green» methanol that is made with renewable energy or agricultural waste instead of coal or gas. While less polluting than conventional fuels, green methanol still has problems. For methanol made with agricultural waste, there are concerns that biofuels could compete with agriculture for land to grow feedstock, driving up food and water scarcity. Methanol also still releases some CO2 when burned, although proponents say this is offset by the carbon that’s captured from the process of making the fuel.

In the future, some of those problems could be solved with a switch to fuels made from liquid hydrogen or ammonia (which Maersk says it’s also looking into) — although those technologies are still a little further out.

«Maersk is a really important player in this space,» says Dan Rutherford, who directs aviation and marine programs for the International Council on Clean Transportation. «There’s definitely a lot of interest in what technologies they put their money on.» As the company operating the most container ships in the world, Maersk can influence the entire shipping industry.

MAERSK CAN STILL DO MORE TO ADDRESS ITS OWN INDIRECT EMISSIONS

Maersk can still do more to address its own value-chain emissions. Committing to cutting those emissions would exert pressure on its own suppliers. So far, the company hasn’t done that. That means there are likely still emissions generated from the process of building its next-generation ships.

Addressing those emissions could be in Maersk’s future, according to Kindberg. «Clearly, we’d like to be able to make the full commitment, but you need to be sure you’ve checked all the boxes before you expand it,» she says. She adds that Maersk is «evaluating» how it might be able to work with shipyards to cut down their pollution. In the meantime, Kindberg says, Maersk is focusing on its «controllable operations.»

Figuring out how to clean up ships, ports, and shipyards is a tall order. Shipping is considered one of the hardest sectors to get running on clean energy. Batteries aren’t advanced enough yet to electrify large ships making long journeys, which is why there’s a lot of focus on developing more sustainable fuels. And ships have a lifetime that can be decades longer than land-locked vehicles, which also puts the transition to less polluting vessels on a longer timeline. Designing and building a single ship can take years, too, which is another reason why Maersk says it had to move fast.

Ninety percent of global trade moves by sea. So nearly any retailer that wants to cut down its carbon footprint will need to look seaward. And even if it takes time, cleaning up global shipping lanes will have a tremendous impact on the planet and the people these trade routes connect. That makes it all the more important to start working on carbon-cutting solutions as soon as possible.

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Source: McKinsey