In the race to combat climate change, the maritime industry stands at a pivotal crossroads. As one of the most energy-efficient modes of transport, maritime shipping is crucial to the global economy, yet it remains a significant and growing source of greenhouse gas (GHG) emissions.
With the EU's ambitious goal of achieving climate neutrality by 2050 and the pressing objectives of the Paris Agreement, the spotlight is now on Scope 3 emissions management. For maritime industry leaders, this represents not just a regulatory requirement but a vital necessity.
The Maritime Industry’s Decarbonization Challenge
The European Union has set its sights on climate neutrality by 2050, aligning with the Paris Agreement’s objective to limit global warming to well below 2°C. Despite its efficiency, maritime transport’s growing GHG emissions pose a serious risk to these goals.
The EU Commission’s strategy outlines a clear path towards reducing these emissions through monitoring, reporting, and verification (MRV) of CO₂ emissions from large ships, setting GHG reduction targets, and implementing further measures, including market-based mechanisms. However, achieving these targets necessitates a comprehensive approach to managing emissions beyond direct operations—this is where Scope 3 emissions come into play.
Understanding Scope 3 Emissions
Scope 3 emissions encompass all indirect emissions that occur in a company’s value chain, covering 15 categories such as purchased goods and services, capital goods, fuel- and energy-related activities, and waste generated in operations. For the maritime industry, these emissions include those from the production and distribution of vessel equipment, spare parts, and well-to-tank fuel emissions.
The complexity of accurately capturing and managing Scope 3 emissions presents a significant challenge, particularly given the maritime sector's intricate value web of leased, chartered, and owner-operated vessels.
Regulatory and Market Drivers affecting Shipping Companies
By 2025, under the EU's Corporate Sustainability Reporting Directive (CSRD), large shipping companies operating in the EU will be required to disclose their Scope 3 emissions as part of their sustainability reporting. The United States are following with Scope 3 disclosure being part of the Climate Corporate Data Accountability Act (also known as SB 253). Other regions that are setting timelines for Scope 3 emissions disclosure include New Zealand (2024), Singapore (2025), and India (2027).
This regulatory push is part of a broader strategy to ensure industries contribute to national and global climate goals. Shipping companies with a global value chain will be required to disclose the GHG emissions of their suppliers and customers to multiple different regulators quite soon.
Additionally, financial institutions and investors are increasingly scrutinizing companies' environmental impacts, making Scope 3 emissions management a critical factor in securing investment and financing. Investors are seeking transparency and accountability, often linking favorable capital conditions to demonstrable sustainability efforts.
The Operational Complexity for Ship Owners
Managing Scope 3 emissions is particularly complex for ship owners due to the distributed nature of the maritime value chain. The reliance on external ship managers, the dynamic nature of leasing agreements, and the need to account for emissions from both operational and supply chain activities make data collection and reporting a tremendous task. Ensuring data transparency and collaboration across all parties involved in the value chain is essential, yet challenging.
Strategic Benefits of Effective Scope 3 Emissions Management for Ship Owners
Proactively managing Scope 3 emissions offers significant strategic advantages for ship owners:
- Regulatory compliance and risk reduction: Early compliance with upcoming regulations mitigates risks and avoids potential penalties.
- Enhanced investor confidence: Transparency in emissions reporting builds trust with investors, potentially lowering the cost of capital through sustainability-linked loans.
- Improved supplier relationships: Collaborative emissions management strengthens partnerships along the value chain.
- Stronger brand reputation: Demonstrating a commitment to sustainability enhances brand image and public perception.
Preparing the Shipping Industry for the Future of Scope 3 Emissions
To navigate the complexities of Scope 3 emissions reporting, ship owners should:
- Build internal capabilities: Invest in training and resources to manage emissions data effectively.
- Engage with suppliers: Foster partnerships to ensure accurate data collection and reporting across the value chain.
- Leverage technology solutions: Utilize specialized tools to streamline and enhance the emissions management process.
CarbonPath: Effectively Managing Scope 3 Emissions in the Maritime Industry
Recognizing these unique challenges, Arundo Analytics has developed CarbonPath, a software-as-a-service solution specifically designed for the maritime industry. Developed in collaboration with major ship owners and guided by a leading global auditor, CarbonPath addresses the sector’s distinctive needs:
- Streamlined collaboration: Facilitates seamless communication in one application between ship owners, managers, suppliers, and charterers reducing reliance on inefficient email exchanges and spreadsheets.
- Leasing/chartering management: Built-in, intuitive fixture schedule ensures emissions are accurately allocated according to leasing agreements.
- Vessel location awareness: By keeping track of the location of vessels, CarbonPath can automate the selection of emission factors to match the region of where the vessel is operating and improve the precision of the emission estimate
- Management dashboards and reports: Customizable, graphical dashboards enable self-service reports, accelerating the time from insight to action and reducing human labor.
- Calculation method compliance: Supports all GHG Protocol-endorsed calculation methods (spend-based, average-data, and supplier-specific), with integrations to leading emission factor providers, out-of-the-box support for data quality assessment, and tools for validating supplier-provided emission factors.
- Seamless integrations: Allows for data import and export from other systems in CarbonPath, and to integrate information created in CarbonPath in third-party applications and business intelligence platforms.
- Automation: A highly flexible “rules engine” allows users to set up rules that automatically categorize and calculate the Scope 3 emissions of activities that occur in the company’s value chain.
- Traceability: Comprehensive, configurable change logging ensures full traceability for internal compliance controls and external audits.
These features and tools have been integrated as a cloud-native software-as-a-service with high priority given to creating a great user experience, and with zero compromises in assuring data security and integrity.
Conclusion
For maritime industry leaders, managing Scope 3 emissions goes beyond pure compliance, it also creates the path to a more sustainable future. By embracing solutions like CarbonPath, ship owners can navigate the complexities of emissions reporting, drive sustainable practices, and position themselves as leaders in addressing climate change.
Let us support you on this journey towards a more sustainable future! Learn more about CarbonPath and how it can help you manage your Scope 3 emissions effectively. Together, we can ensure the maritime industry meets its regulatory obligations, satisfies investor demands, and contributes to global climate goals.
Contact us today to see how CarbonPath makes a difference and let us shape the future of emissions management in the maritime industry together!
