Facing Mounting Pressure the Maritime Industry is Slowly Cleaning Up Their Act

June 6, 2023

One Economist article claimed in 2017 that 15 of the worlds’ biggest ships can emit more Sulphur and Nitrogen Oxide than all the world cars’ combined emissions output. The maritime industry has been slow to reduce their emissions. But, given the increase regulatory pressure, the industry is slowly showing positive signs of change.

In September 2022 the European Commission reported that while global marine shipping currently accounts for only 3% of greenhouse gas (GHG) emissions, the continued demand for global goods could see that share reach 10%-15% if proper action is not taken. The International Maritime Organisation, the United Nations agency responsible for regulating global shipping is planning to half those emissions by 2050.

The cruise industry outlook is not doing any better. A Marine Pollution Bulletin study has found that a large cruise ship can produce as many CO2 emissions as 12,000 cars, with waste levels amounting to over a ton a day. Their impact on coastal communities and ecosystems is believed to be extremely damaging, particularly when allowed to travel to some of the most remote areas on the planet such as Antarctica.

Responding to increasing pressures from regulators and consumers alike, some players in the maritime industry are looking to do their part. Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH), a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands, published its 2022 Environmental, Social and Governance (ESG) report and Sustainability Accounting Standards Board (SASB) index as part of its global sustainability program, Sail & Sustain. The report highlights the progress on NCLH’s ESG strategy and goals, including its efforts across the five pillars of Sail & Sustain: Reducing Environmental Impact, Sailing Safely, Strengthening our Communities, Empowering People and Operating with Integrity and Accountability.

“We recognise the need for corporations to take action to help address global challenges, including climate change and sustainability, and at Norwegian Cruise Line Holdings, we are committed to doing our part by operating in a way that is socially responsible, respectful of the environment, and drives a positive impact on society,” said Harry Sommer, president and chief executive officer-elect of Norwegian Cruise Line Holdings Ltd. “Our Sail & Sustain program is key to moving our business forward– it goes hand-in-hand with delivering long-term value for the company and its stakeholders.”

“Over the past year, we continued to make great progress with new goals and initiatives across our Sail & Sustain focus areas as we help chart a path to a more sustainable future,” said Jessica John, vice president of ESG, Investor Relations, and Corporate Communications of Norwegian Cruise Line Holdings Ltd. “This year’s report highlights not only these advancements but also our commitment to increase and strengthen our disclosures each year to provide our stakeholders with critical transparency.”

John continued, “Whether it’s through our plan to pursue net zero by 2050 or our efforts to support the communities we live in or visit worldwide, we’re set on finding innovative ways to Sail & Sustain.

Among the many ESG initiatives covered in the report, key highlights from the past year include:

Reducing Environmental Impact

  • Ambitious climate action strategy and targets to reduce greenhouse gas (“GHG”) emissions: NCLH recently announced its revamped climate action strategy focused on efficiency, innovation and collaboration, along with ambitious short- and near-term emissions reduction targets that support the Company’s pursuit of net zero by 2050. The Company is now targeting a reduction in GHG intensity of 10% by 2026 and 25% by 2030, compared to a 2019 baseline with intensity measured on a per Capacity Day basis[1].
  • Methanol-Ready newbuilds on order: Modified the final two Prima Class ships, expected to be delivered in 2027 and 2028, to accommodate the use of green methanol as an alternative fuel source in the future. While additional modifications will be needed in the future to fully enable the use of methanol in addition to traditional marine fuel on these ships, this reinforces the NCLH’s commitment to decarbonisation.
  • Focus on water stewardship: NCLH continues to improve water production rates while at the same time focusing on efforts to decrease consumption. Across its fleet, 90% of the freshwater used in 2022 was produced on board.
  • Testing biodiesel fuels: Successfully tested small quantities of biodiesel blend B30, which is 70% marine gas oil and 30% biodiesel, in four of its ships to date. By the end of 2023, NCLH anticipates that more than 20% of its fleet will have tested and operated on biodiesel blends.
  • Investing in shore power: NCLH currently has 12 ships equipped with shore power capabilities which allows these ships to connect to onshore electrical power grids to supply much of the power needed while docked when available. The Company continues to invest in expanding this technology and expects to have approximately 60% of its fleet shore-power enabled by year-end 2023 and approximately 70% by year-end 2025.

Sailing Safely

  • Robust public health program to protect guests, crew and communities we visit: NCLH operates a comprehensive 24/7/365 public health and safety program, working closely with health authorities around the world to implement and continuously improve policies and procedures that meet and, in many cases, exceed regulations. Crew members are also highly trained in the Company’s Outbreak Prevention and Response Plan, designed to mitigate and help prevent the spread of communicable diseases.
  • Continuous public health training and education: In partnership with representatives from various government agencies and suppliers, NCLH continues to host public health training through monthly online collaborations as well as annual in-person summits.
  • Prioritised safety and security efforts: Utmost importance placed on safety and security at sea, with third-party audits conducted regularly to verify compliance. Each ship also has a resident Safety Officer, with experience ranging between 10 and 15 years in various roles at sea, and ship crews participate in regular safety training, exercises and drills on board and shoreside.

Empowering People

  • Enhanced employee benefits demonstrate commitment to team members: NCLH expanded its suite of employee benefits by adding new Family Care Benefits, which provides fully paid maternity, paternity and adoption leave and family planning assistance for full-time U.S shoreside team members.
  • Fostering inclusive workforce where diverse backgrounds are represented and empowered: Across NCLH’s global shoreside workforce, 61% of team members are female, including 47% of managers and above. In addition, across the U.S. shoreside workforce, 67% of team members were under-represented minorities, including 54% of managers and above. In 2023, the Company also appointed three new Presidents to lead its brands, all three of whom were internal and ethnically or gender-diverse candidates, including the appointment of NCLH’s first female brand President, Andrea DeMarco, to lead Regent Seven Seas Cruises.
  • Provided training and development opportunities across workforce: NCLH team members logged more than 800,000 hours of training and development across various roles and responsibilities, cementing the corporate philosophy to empower top talent and foster robust career development.

Strengthening Our Communities

  • Ongoing corporate efforts to philanthropic contributions: NCLH contributed more than $2 million in monetary and in-kind donations to nonprofit organisations around the world. This included over $300,000 donated to aid in disaster and crisis relief, including Hurricane Ian recovery efforts in Southwest Florida.
  • Honouring the connection between travel and education: Each year, Norwegian Cruise Line’s Giving Joy program recognises top educators for their unwavering commitment to inspiring students every day. In 2022, the Giving Joy program awarded 100 teachers across North America a free week-long cruise for two, valued at over $750,000 collectively, along with thousands of dollars in contributions from NCL and its partners to the schools of the top three grand prize winners.
  • Offsetting Emissions and Supporting Communities through Carbon Offsets: NCLH has purchased 1.6 million carbon offsets to date, contributing to 14 projects globally, including in South Korea, Brazil and Turkey. The offsets purchased not only support the Company’s decarbonisation journey but also invested in cleaner energy sources and local job creation in these communities.

Operating with Integrity and Accountability

  • Tied ESG metric to compensation: The Board of Directors’ Compensation Committee approved the inclusion of an ESG metric for the first time as part of the 2022 short-term incentive (“STI”) and once again approved the inclusion of an ESG metric in 2023. This metric is tried to the progress made on NCLH’s GHG reduction goals and builds greater accountability across the Company to accelerate the progress on ESG goals.
  • Fostering a culture of ethical conduct: NCLH continuously emphasises the importance of ethical business practices and upholds all team members to a Code of Ethical Business Conduct, which team members are required to review and certify on an annual basis.
  • Committed to maintaining a strong board with diverse experiences and backgrounds: NCLH welcomed a new board member in 2022, Zillah Byng-Thorne. Zillah brings her extensive technology sector, digital media and e-commerce experience to the board. Currently, the board is approximately 50% diverse, including 37.5% female and 12.5% under-represented minorities, with an average tenure of 6.6 years.

With Europe vying for the title of world’s first continent to become carbon neutral, an ambitious goal detailed in the European Green Deal, many more shipping and cruise giants are exploring green alternatives to reach their net-zero ambitions, such as testing transitional fuels (Liquefied Natural Gas or Ammonia) or evaluating engines that remove diesel exhaust fumes. If there is a race between continents to achieve these technological advances that can benefit the entire planet, so much the better. A race, at this stage, can only result in more innovation, which we drastically need as our global CO2 emissions in the short-term seem to still be rising rather than decreasing.

Ed.  Photo by Chris Pagan on Unsplash.


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