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Sustainability Reporting in the Maritime Container

Shipping Industry

A study of the maturity, barriers and drivers of industry reporting

Masters Thesis

MORRIS Jonathan

June 2013

Jonathan Morris

Master of Science in Sustainable Development 2010-2011

Afshin Mehrpouya, Academic Advisor

Assistant Professor of Accounting and Management Control

Angie Farrag, Professional Advisor

Associate Director, Transportation and Logistics Practice, BSR

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Summary

Executive Summary ..................................................................................................... 5

Acknowledgements ...................................................................................................... 8

Introduction .................................................................................................................. 9

1. Aim and Research Methodology....................................................................... 14 1.1. Aim of the research .............................................................................................. 14 1.2. Choice of Industry and Companies Selected ..................................................... 14 1.3. Methodology ......................................................................................................... 16

2. Literature Review .............................................................................................. 20 2.1. Origins and Current State of Sustainability Reporting .................................... 20 2.2. Motivations For Companies to Report ............................................................... 25 2.3. Factors Influencing the Selection of Reporting Content .................................. 28 2.4. Previous Research on Sector-Specific Reporting .............................................. 34 2.5. Previous Research on Maritime Transportation Sector ................................... 36

3. Current State of Sustainability Reporting ....................................................... 40 3.1. Choice of Indicators ............................................................................................. 41 3.2. Results: A Look at Reporting Maturity ............................................................. 46 3.3. Discussion of Results ............................................................................................ 48

4. Barriers and Drivers to Industry Reporting ................................................... 52 4.1. Background and Overview of the Maritime Shipping Industry ...................... 52 4.2. Maritime Container Transportation .................................................................. 54 4.3. Identifying Industry Barriers and Drivers ........................................................ 63 4.4. Barriers to Reporting ........................................................................................... 65 4.5. Drivers to Reporting ............................................................................................ 73 4.6. Results ................................................................................................................... 78 4.7. Trends in Sustainability Reporting .................................................................... 79

5. Conclusions ......................................................................................................... 81 5.1. General Conclusions ............................................................................................ 81 5.2. Limitations and Further Research ..................................................................... 87

Appendix 1 – Full List of Analyzed Sustainability Reports ................................... 89

Full List of Analyzed Sustainability Reports; Source: Author .............................. 89

Appendix 2 – Full Semi-Structured Interview Questionnaire ............................... 90

Appendix 3 – Factiva Research ................................................................................ 91

Bibliography ............................................................................................................... 99

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Acronyms

3PL Third-Party Logistics Company

AA1000AS AccountAbility 1000 Assurance Standard

ACCA Association of Chartered and Certified Accountants

B2B Business-to-Business

B2C Business-to-Customer

C02 Carbon Dioxide

CCWG Clean Cargo Working Group

CDP Carbon Disclosure Project

CERES The Coalition for Environmentally Responsible Economies

CSI Clean Shipping Initiative

CSR Corporate Social Responsibility

DDT Dichlorodiphenyltrichloroethane (chemical)

DJSI Dow Jones Sustainability Index

DWT Deadweight Tonnage

ESC European Shippers Council

ESG Environmental, Social, Governance

ESI Environmental Ship Index

FOC Flags of Convenience

GRI Global Reporting Initiative

GSF Global Shippers Forum

HSE Health, Safety, and Environment

ICFTU International Confederation of Free Trade Unions

IIRC International Integrated Reporting Council

IMO International Maritime Organization

IR Integrated Reporting

ISO International Organization for Standardization

ITF International Transport Forum

KPI Key Performance Indicator

MARPOL International Convention for the Prevention of Pollution from Ships

NGO Nongovernmental Organization

OECD Organization for Economic Cooperation and Development

SASB Sustainability Accounting Standards Board

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SEC U.S. Securities and Exchange Commission

SIU Seafarers International Union of North America

SSI Sustainable Shipping Initiative

TEU Twenty-Foot Equivalent Unit

UNCED United Nations Conference on Environment and Development

UNCTAD United Nations Conference on Trade and Development

UNEP United Nations Environmental Program

UNGC United Nations Global Compact

WCED United Nations World Commission on Environment and Development

WWF World Wildlife Federation

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Executive Summary

This master’s thesis explores sustainability reporting practices of major container

carriers within the maritime shipping industry. The author was inspired to conduct

this study after finding in his professional work that the level of information available

on industry reporting practices was limited, even superficial. Despite existing

information provided in business reports focused on the number of sustainability

reports issued in the transportation sector, it appeared crucial to dig further to

understand the factors behind industry reporting in order to provide relevant insights

to carriers on how to improve. The goal of this study is therefore to define how

container carriers communicate on sustainability and to clarify the motivations behind

their current reporting efforts, by answering the following research questions:

1. What is the current state of sustainability reporting practices by maritime

container carriers? This question is a starting point to uncovering whether the

industry is leading or lagging in reporting, and whether current sustainability

reports meet the expectations of their users.

2. What industry barriers and drivers exist which help to understand the current

state of sustainability reporting? This question reveals the challenges that

carriers face in reporting as well as possible avenues for improvement.

The study uses a general inductive approach for qualitative data analysis allowing

ideas to be constructed throughout the course of data gathering, rather than starting

with a pre-determined hypothesis.

The author begins measuring sustainability reports by creating indicators to evaluate

at once the level of communication and the robustness of carrier sustainability actions.

To conduct such in-depth research it was deemed necessary to focus on a limited

number of carriers. The maritime shipping industry is highly concentrated among

twenty carriers, who together represent 83.4 percent of market share, which the author

considers as a fair representation of industry performance. Consequently, these twenty

carriers are defined as the scope for this first phase of the research. The author uses

content analysis to review 51 sustainability reports issued by these carriers between

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2002-2012. Each report is coded based on six selected indicators, which together

account for a report’s level of maturity1, and then charted and compared.

In a second phase, the author constructs hypotheses on barriers and drivers to

reporting by analyzing the industry value chain, identifying key stakeholder pressures,

and performing archival research on social and environmental industry shocks

between 2002-2012. Finally, ten stakeholders including carriers, clients, ESG analysts,

consultants and reporting experts are interviewed to provide their perception and

comprehension of the current state of reporting, their opinions on barriers and drivers,

and their expectations for reporting evolution and improvement.

Results are as follows: After the maritime industry’s entrance into reporting in 2002

with only one carrier reporting, and a sustained increase of reports until 2008 with

seven carriers reporting, the data shows a subsequent stagnation in the number of

reporting carriers: between 2008 and 2012, the number of net yearly sustainability

reports remains between seven and nine. Surprisingly enough, 2008 is also begins a

second type of stagnation in industry reporting, as the maturity level of sustainability

reporting (according to the author’s pre-selected indicators) sees no further

improvement after 2008 levels. This is even more surprising as 2008 witnesses the

first report from market leader Maersk Line, an event that could otherwise have been

expected to compel additional carriers to report. Initially, seen from this ‘data-driven’

perspective, it appears that maritime industry reporting reached an insurmountable

reporting plateau in 2008.

Yet the second phase of research uncovers additional dynamics at work behind the

data, providing insight from analysis of the value chain and interviews of industry

specialists, revealing certain barriers that may have caused the plateau in reporting,

and offering drivers as an avenue to understand how to overcome the perceived

current stagnation in reporting maturity.

Results reveal two barriers to reporting: a lack of internal resources to support

sustainability efforts, including reporting, and a negative image of container carriers

1 Reporting maturity is tested through a study of six indicators that, together, define reporting maturity as consistency with reporting standards, quality of communications, and intensity of sustainability practices within an organization.

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portrayed in the media, reinforced by an industry aversion to communication.

Discounted as barriers, complex ship ownership and industry regulatory structures are

identified as limiting factors to reporting.

Results also reveal two drivers to reporting: customer pressure and NGO/

Sustainability Index pressure, which both place requirements on carriers to publish a

range of sustainability information in reports. Discounted as a driver, increasing

regulation was identified as an enabling factor, allowing for carriers to prepare certain

sustainability-related data but not pushing for the publication of a sustainability report.

Peer reporting was identified as both a barrier and a driver, since an existing peer

reporter can either eliminate the competitive advantage of being a first-mover or

encourage competitors to report in order to stay in step with industry leaders.

These results identify industry challenges to be addressed in order to improve

sustainability reporting. In the short term, carriers can improve the content of their

reports to meet stakeholder expectations by doing the following:

- Focusing on priority issues as determined through a materiality analysis;

- Connecting sustainability efforts with the investment community;

- Providing greater levels of transparency on lobbying and public policy efforts;

- Communicating on social benefits beyond philanthropic efforts.

In the long term, barriers reveal an industry culture that does not see the business

value in sustainability and does not actively communicate for fear of media

repercussion. Addressing these challenges may requires more complex solutions, such

as proving the businesses case for sustainability to convince senior management at

carriers to begin allocating additional resources to sustainability efforts, and

invitations by media networks for carriers to share their positive efforts, in order to

reverse the negative media image and carrier resistance to communication.

Ultimately, this study’s findings on industry reporting maturity and underlying

barriers and drivers should be treated as indicative since it is limited by the sample

sizes used in both the reporting content analysis and the series of stakeholder

interviews. Further research could be performed to reinforce or refute these findings

either through using larger samples, testing a broader range of reporting indicators, or

comparing the maritime shipping industry against other industries.

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Acknowledgements

Writing this thesis has been a fulfilling experience. I am grateful to Professor Afshin

Mehrpouya, who supervised my work with kindness and professionalism. Professor

Mehrpouya’s willingness to share his knowledge and experience has been of

tremendous help to both structure my work and raise its quality level. I also thank the

academic team of the HEC MSc in Sustainable Development, in particular Benedicte

Faivre-Tavignot and Fabrice Graff for their continued support and understanding

throughout the academic year and until now.

I am also grateful to Angie Farrag, my manager at BSR, for planting the seeds of my

thesis topic and inspiring me to tackle this relatively unexplored subject area. Her

continued input and support have been priceless during this paper’s development. I

owe a special thanks to the many people that I have read and interviewed during my

research, who enabled me to develop many of the arguments and insights presented

here.

My family and friends contributed to this thesis in several ways. My parents, Patricia

and Robert, gave me much more than financial support. The choices I have made in

my life, including the choice to study and live in France, have been to a great extent

influenced and encouraged by my parents’ love and complete generosity. I also thank

my sister Rebecca, Aunt Trish and Uncle David for their love and support, and for

their tireless help in providing interview transcriptions. Further, I am in debt to my

fellow classmates for their willingness to discuss ideas and provide advice, and to my

friends all over the world who provided copyedits.

And last, but by no means least, I would like to thank my wife, Alix, who has been

ever supportive of this project, picking me up at the most difficult of times, and

inspiring me to move forward at all times. Alix’s help and patience are behind every

part of this research, and it is to her that I dedicate what follows.

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Introduction Over the past decade, the concept of sustainability has become a key priority for

business. Sustainability itself represents a company’s very ability to “survive and

thrive” over the long-term in an increasingly globalized world, and achieving

sustainability requires engagement across a business’s full range of activities and

processes (Carroll, et al., 2012: 23). Today, a clear indicator of an organization’s

commitment to sustainability is its level of accounting and disclosure, most often seen

through the publication of a sustainability report.

According to the Global Reporting Initiative (GRI), the world’s leading voluntary

reporting framework, over 5,200 organizations have now issued a total of 13,540

reports as of April 2013, and the number continues to increase (GRI). However, the

practice of sustainability reporting has not always been as widespread, and in fact, is

intricately linked to today’s corporate acceptance of sustainability as a means to

achieve performance goals. Before discussing the current state of sustainability

reporting and analyzing the maritime shipping industry’s reporting practices, it is

therefore necessary to introduce the origins of the private sector’s engagement with

sustainability, which has emerged slowly over the past few decades, mainly as the

result of environmental and social debates that increasingly called for political action

(and increased political pressure) on national and international levels.

Perhaps most influential in sparking the debate around corporate environmental

sustainability was the publication of the 1962 book “Silent Spring”, written by author

and ecologist Rachel Carson. Her work brought together the disciplines of toxicology

and ecology to illustrate for the first time the potentially harmful relationship between

the private sector and nature, suggesting that use of the pesticide DDT was building to

dangerous levels, and unless otherwise checked, would create an environmental

catastrophe with public health consequences (Carson 2002). Its publication brought

cries of foul from industry and a new level of public awareness concerning mankind’s

impacts on nature, as well as action from the United States government – resulting in

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control and subsequently banning of DDT and the establishment of the US

Environmental Protection Agency (National Resources Defense Council).

At roughly the same time, economist Milton Friedman kicked off the debate around

corporate social responsibility when he published his seminal book “Capitalism and

Freedom” in 1962, in which he defined a theory that would later come to be known as

stockholder theory. His work was solidified in a 1970 New York Times Magazine

article entitled “The Social Responsibility of Business is to Increase its Profits,”

arguing that the core and unique responsibility of business is “to increase its profits so

long as it stays within the rules of the game, which is to say, engages in open and free

competition without deception or fraud" (Friedman 1970). In the article, Friedman

criticized the growing idea of corporate consciousness and claimed that forced “social

responsibility” in fact imposes a unwanted tax on shareholders in order to pay for

social good. Friedman’s work was later challenged by Edward R. Freeman in his 1984

book “Strategic Management: A Stakeholder Approach.” Freeman popularized the

concept that the responsibility of business extended beyond shareholders to diverse

groups known as stakeholders, or those who have “stake” in the operations of a

company and its impacts, and argued that each should be accorded equal regard in the

eyes of the corporation (Freeman 2010). Freeman implied that a good relationship and

responsibility towards stakeholders leads to increased corporate performance.

By the 1980s, these growing debates on the environmental and social responsibilities

of the private sector entered into the national and international policy sphere. The

United Nations mobilized to address these issues specifically through the foundation

of the UN World Commission on Environment and Development (WCED) in 1983

and its final report “Our Common Future” in 1987, as well as during the seminal 1992

UN Conference on Environment and Development (UNCED), or Earth Summit, in

Rio de Janeiro. The term sustainability itself is a derivative of the concept of

sustainable development2, which “Our Common Future” defined as “meeting the 2 The terms sustainability and sustainable development are often used interchangeably, however

sustainability has become broadly accepted as “the goal” whereas sustainable development is “the

process towards this goal” (Schaltegger et al. 2003: 22). This paper defines sustainability as an

organization’s ability to be at once financially sustainable while also fulfilling social and

environmental responsibilities and stewardship.

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needs of the present without compromising the ability of future generations to meet

their own needs” (United Nations 1987: 24). This oft-cited definition of sustainable

development was further elaborated and broadly accepted during the Rio Earth

Summit in 1992 with the publication of the Brundtland Report, which clearly linked

development with environmental protection and broadly raised environmental

awareness among the business community.

In 1999, then UN secretary-general Kofi Annan fundamentally solidified the

relationship between the private sector and the United Nation’s policies on sustainable

development when he announced the creation of the UN Global Compact. This

initiative offered businesses the opportunity to voluntarily align their operations and

strategies with ten principles covering the environment, human rights, labor standards

and anti-corruption (Rasche 2012), and swiftly became the world’s leading corporate

responsibility initiative. The United Nations further engaged the private sector during

the Millennium Summit in September 2000, when member states unanimously

adopted the United Nations Millennium Declaration, a declaration charging the

private sector and civil society organizations to make greater contributions to the

United Nation’s adopted goals (United Nations 2000), later known as the Millennium

Development Goals.

More recent years have seen a refinement of the United Nation’s global policy for

sustainability and a call for greater engagement and accountability from the private

sector. The UN World Summit of 2002 in Johannesburg addressed for the first time

the topic of corporate accountability, and specifically non-financial reporting (United

Nations 2002) by increasing the call for disclosure. New York’s 2005 World Summit

broadened the ambition of sustainable development within the private sector to cover

economic, social and environmental aspects, and pushed for the adoption of policies

that emphasized corporate accountability (United Nations 2005). And most recently,

the Rio de Janeiro Rio+20 Summit in 2012 took stock of sustainability progress over

the past 20 years, and called for renewed private sector engagement on the

commitments they had made toward more responsible business practices through the

Global Compact (United Nations 2012).

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The combination of these debates and resulting international policies have yielded

today’s mainstream understanding and acceptance of sustainability, which for the

private sector involves addressing the economic, environmental and social impacts of

a company’s operations. The economic aspect of sustainability is to secure long-term

financial performance of a company, which is inherent to a company’s existence. The

environmental aspect of sustainability refers to a company’s relationship, influence,

and dependency on the natural environment, covering a wide range of issues such as

resource use, greenhouse gas emissions, waste production, biodiversity loss, and

energy use. The social aspect of sustainability includes human rights issues such as

equality and fair treatment and governance issues such as corruption and bribery, as

well as a company’s consideration and inclusion of their stakeholders.3

As a consequence, sustainability reporting has become a widely adopted means of

communicating the objectives, efforts, and achievements of a company’s

sustainability strategy. Standalone sustainability reports published in addition to

annual reports first emerged as environmental reports towards the end of the 1980s,

mostly in response to public pressure and due to an increasing awareness of industry’s

impacts on the environment. Since then, sustainability reporting has become

widespread, expanding from purely environmental to more comprehensive reports

covering the environmental, social, and economic aspects of sustainability. Along

with reporting, sustainability accounting has developed as both a professional and

academic discipline. Voluntary guidelines such as the Global Reporting Initiative

(GRI) as well as external assurance from independent third parties have led to an

improvement of the quality of this extra-financial reporting. And today, there are

increasing numbers of conversations about the convergence of sustainability reporting

with annual financial reporting in what would become one integrated, comprehensive

report on a company’s activities. The International Integrated Reporting Council

(IIRC), a global coalition of regulators, investors, companies, standard setters, the

accounting profession and NGOs, released its draft guidelines in April 2013 with

ambitions to publish final guidance later in the year.

3 Most often associated with social sustainability is the concept of Corporate Social Responsibility (CSR), which this paper treats as a sub-set of sustainability (financial, social, and environmental responsibility) for simplicity.

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Along with the rise of sustainability reporting came a natural rise in studies on

sustainability reporting, ranging broadly in approach and methodology. These studies

analyze a multitude of factors including company size, stakeholder pressure, and

media exposure (Wegener, et al 2013, Hackstone/Milne 1995, Ho/Tayler 2007,

KPMG 2011), or look specifically at the dependence between country and reporting

practices (Chapple/Moon 2005, Holland/Foo 2003, Kolk 2005). Benchmark studies

have been performed by consulting companies and industry associations to provide a

general examination of current reporting practices (KPMG 2011,

UNEP/SustainAbility 2006). And finally, studies were performed which looked at

practices within a country (Moneva 2000, Hedberg 2003, Vormedal 2006, Daub

2007), or within specific sectors (e.g. Perez 2009, Adams/Kuasirikun 2000, Mak et al.

2007, Van Wijk/Persoon 2006).

Of all studies concerning sector-specific reporting, the only study to broadly address

transportation (incorporating maritime transportation) was the KPMG benchmark

study indicating “transport” as a sector, ranking it 13th out of 16 sectors studied in

terms of availability of sustainability reports (2011). Further, only a handful were

found to focus on transportation industries, such as Mak’s study of Asian and

European Airlines (2007), and only two were found to focus on maritime

transportation (Fet 2003, Deengar 2007). This led the author to confirm the validity in

his choice of conducting a masters thesis to study sustainability reporting practices of

the maritime container transportation industry, since this is a minimally explored

topic within the field of sustainability reporting.

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1. Aim and Research Methodology

This section will present the general aim and research methodology used in this study.

It will also present the research questions that will be developed throughout each

section of this paper.

1.1. Aim of the research This study intends to analyze the current practices in sustainability reporting in the

maritime container transportation industry. More specifically, this study aims to: 1.

Determine the state of the maritime transportation industry in sustainability reporting,

evaluating the maturity of sustainability reports published by companies in the sector

between 2002-2012, and 2. Understand the key industry barriers and drivers to

reporting. In this paper, reporting maturity is tested through a study of six indicators

that, together, define reporting maturity as consistency with reporting standards,

quality of communications, and intensity of sustainability practices within an

organization (see section 3.1 for a more detailed discussion and definition of these

indicators). This research follows an inductive process of data gathering to construct

general ideas about the chosen topic, and as such does not have a formal hypothesis to

test.

This study is structured as follows: First, a literature review is performed on the theme

of sustainability reporting and industry-specific reporting. Second, an analysis of

industry sustainability reporting is conducted over a longitudinal study period from

2002-2012 to understand maturity. And finally, key barriers and drivers to reporting

are identified through industry and stakeholder analysis, archival research, and a

series of semi-structured interviews with industry stakeholder. Conclusions and

recommendations are drawn based on the cross-examination of the results from these

two studies.

1.2. Choice of Industry and Companies Selected The author chose to study the maritime shipping industry to link with his professional

work at BSR, a business network and consultancy specialized in corporate

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responsibility. The author sees the industry as a cornerstone of world trade, with

enormous potential to enable economic growth by creating trade flows and links

between markets, but also a victim of the volatility of international financial markets,

which have resulted in regular periods of boom and bust, and have currently thrown

the industry into deep financial crisis. The author was profoundly curious to

understand how companies are addressing long-term sustainability within such a

volatile environment, but had difficulty finding communication on the subject from

maritime carriers.

Thanks to privileged access to carriers and their customers in BSR’s Clean Cargo

Working Group, an industry initiative focused on environmental performance

improvement among container carriers within the maritime transportation industry,

the author posed questions to participants about sustainability reporting and learned

that the maritime industry has always been resistant to broad communications,

partially explaining the lack of reporting. However, it was apparent that the last few

years had given rise to sustainability reporting from a handful of container carriers.

This contradiction posed interesting questions about why and to what degree this

traditionally opaque industry had begun communicating on sustainability, and the

author saw potential business benefits in learning what the barriers and drivers to

communication would reveal about industry sustainability practices, and how they

could be addressed to improve sustainability reporting.

Further driving the choice of studying the maritime shipping industry, initial desktop

research showed that minimal studies had been performed on the industry’s

sustainability practices and even less on its reporting practices, indicating that the

current study would therefore be adding to the academic literature on the industry.

Maritime container transportation was selected as a sub-sector to narrow the focus of

the study and to provide direct business benefit to the author’s work with the Clean

Cargo Working Group.

The container carrier companies analyzed were selected out of the top 20 container

carriers by volume and equally spread across regions in order to limit the effect of

company size and geography on findings.

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Table 1: Carrier Size and Geography; Source: Elaborated by Author

1.3. Methodology This section describes the research methodology used in this masters thesis. It

presents the research strategy, research method and the approach to data analysis.

1.3.1. Research Strategy When performing academic research, it is possible to choose between two main types

of research strategies: quantitative or qualitative research. These two research

strategies follow fundamentally different approaches, particularly concerning the

collection and analysis of data; quantitative research is focused on numerical values

as a data source, whereas qualitative research relies on words, ethnography or

observation as a data source (Bryman/Bell 2007). It was decided to use a qualitative

approach for this thesis since it allows for a study of written materials published by

companies on their sustainability performance. This is thought to be appropriate to the

aim of the thesis, which involves the analysis of sustainability reports in order to

determine the maturity of industry reporting over the past 10 years, industry value

chain and stakeholder analysis, archival research, and interviews with key

stakeholders.

1.3.2. Research Method The research method of this thesis involves literature review, report analysis, industry

research, and a series of semi-structured interviews. The combination of the four is

deemed adequate to reach the aim of the thesis.

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1.3.2.1. Literature review It is essential that an appropriate level of theoretical study be conducted in the context

of a research problem (Saunders et al, 2009). For this reason, the author conducted a

literature review using sources mainly consisting of articles published in academic

journals within the last 5-10 years. In addition, the author reviewed his own published

business reports on sustainability reporting laws, which helped to frame the topic of

sustainability reporting from a regulatory standpoint. As a model, the author used a

literature review process suggested by Mark Saunders, professor in Business Research

at the School of Management at the University of Surrey (Saunders, et al, 2009),

which consists of determining parameters for the literature search and using keyword

search to narrow the field of literature review.

1.3.2.2. Planning the literature search strategy First, the parameters of the search were defined in the following table.

Parameter Narrow Broader

Language English (US) English (US and UK)

Subject Area Sustainability Reporting

Sustainability Disclosure

Sustainability Accounting

Corporate Sustainability

Business Sector Maritime Container Transport Shipping Industry

Publication Period Last Five Years Last 15 Years

Literature Type Academic Journals Journals and Books

Table 2: Research Parameters; Source: Elaborated by Author

Second, the subject matter was defined and the following keywords were selected

after brainstorming and screening relevant academic journals:

Sustainability reporting / trends, sustainability / social / environmental accounting,

industry-specific reporting, maritime shipping

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1.3.2.3. Conducting the Literature Research The author recognizes that in a reduced timescale the research performed would only

reveal a portion of the relevant literature. A browsing and screening process was used

when reviewing literature with the help of the above keywords to identify articles and

books that were deemed important for the theoretical review.

1.3.2.4. Conducting the Report Analysis The research method chosen for the study of selected container carrier sustainability

reports is qualitative content analysis. Content analysis is considered to be the most

suitable method for the purpose of this study. Its origins date to the 19th century when

it was originally used to analyze newspaper and magazine articles, and it has more

recently been broadly used in corporate social and environmental responsibility

research (Gray, et al. 1995). As a research tool, content analysis has been used to

search for the presence of certain words and concepts within texts. The particular

method used in this thesis is a deductive approach, developing a conceptual

framework of six indicators to test through data gathering (Saunders, et. al 2009).

1.3.2.5. Conducting the Semi-Structured Interviews Given the limited information accessible through publicly available reports, the author

conducted a series of semi-structured interviews with key industry stakeholders to

complement the content analysis, further reveal the state of industry reporting, and

identify barriers and drivers. The author invited over fifty candidates across a range of

industry stakeholder groups to participate in semi-structured interviews, and

eventually secured and conducted a series of ten interviews with a number of

stakeholders including maritime container carriers, customers, NGOs, ESG analysts,

sustainability indices, as well as academics and experts working on sustainability

reporting frameworks.

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Table 3: Interviewed Stakeholders; Source: Author

Semi-structured interviews were selected as the means of data collection because they

are well suited for garnering perceptions from respondents on complex issues, and

enable probing for more information or clarification where necessary (Barriball/While

1994). Semi-structured interviews also allowed the author to keep the exchange

informal and use the questionnaire to guide the conversation. A short interview guide

was built around six general questions with sub questions prepared in order to probe

for more detail. The intention of the interview guide structure was to allow the

interviewee the opportunity to present their unprompted opinions before suggesting

certain factors. Each interview was recorded and transcriptions can be found in the

appendices.

Figure 1: Abbreviated Interview Guide; Source: Author

1. What is your overall opinion about the state of sustainability reporting in the

maritime container transportation industry?

2. In your opinion, what are the factors that contributed to the industry’s relative late

start in sustainability reporting?

a. Barriers tested: Weak regulatory enforcement, Complex ship ownership

structures, Flags of convenience, Distance from Public Eye, Poor media image

3. In your opinion, what external factors pressured carriers to begin reporting on

sustainability?

a. Drivers tested: Maritime accidents, Increasing regulation, Environmental

activism, Customer pressure

4. In more detail, what do you think of the quality of the current sustainability reports

themselves?

5. What possible improvements could be made to sustainability reporting of carriers?

6. What trends or evolutions do you see within the next few years in sustainability

reporting by carriers?

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2. Literature Review

The following sections discuss the existing literature on sustainability reporting by

looking at the evolution and current state of social and environmental disclosure,

company motivations to report, a focus on current reporting frameworks, guidelines,

and standards, and previous research on sector-specific reporting with a focus on the

maritime transport sector.

Related to the research questions, the intention of this section is to provide broader

context for the current sustainability reporting practices of the maritime shipping

industry, and to identify any gaps in existing literature that confirm the necessity of

this study. Further, the review of previous research and sector-specific reporting and

studies performed on the maritime shipping industry are intended to provide insight

into potential barriers and drivers to reporting for the sector.

2.1. Origins and Current State of Sustainability Reporting Sustainability reporting has not always resembled its current state. This first section

addresses the developments that have occurred over the past few decades regarding

the issues included in sustainability reports.

2.1.1. Evolution of Extra-Financial Reporting Today’s mainstream sustainability reporting can trace its roots in the 1970s when

companies in the US began the practice of social accounting and reporting to identify,

measure, monitor and report their social and economic effects on society (Kolk 2005).

This was a minority practice that partially stemmed from the Friedman-Freeman

debate and it is notably the first appearance of such social accounting. In the late

1980s, reporting on extra-financial issues broadly re-appeared due mainly to a rise in

NGO awareness of, and public pressure on, the impacts of globalization and its

associated environmental consequences.

The first standalone “environmental reports” were published in 1989 thanks in part to

the work of the WCED and UNCED, and soon afterwards environmental reporting

became regular practice for larger multinationals, with tack-on effects among smaller

and medium companies (Kolk 2004). Reporting continued to mature in the 1990s with

the publication of sustainability reports that covered social and economic issues along

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with the standard environmental disclosures. Manufacturing sectors with high

environmental impact led the pack in terms of reporting maturity, whereas sectors

with lower environmental impact lagged behind in their reporting (KPMG 2011; Kolk

2004).

2.1.2. Characteristics of Modern Sustainability Reporting This section describes certain characteristics of today’s sustainability reporting as

revealed through recent studies on reporting trends. The intention is to further

contextualize the landscape in which maritime container companies are expected to

report.

It is worth repeating that the quantity of sustainability reports issued today is simply

staggering. In addition to GRI’s declared number of 5,200 organizations reporting

with their framework (GRI), the online database CorporateRegister.com, which tracks

the number of companies that have issued non-financial reports since 1992, has

published an even more impressive figure. According to their records, the number of

non-financial reports has increased from less than 50 in 1992 to over 47,626 across

9,905 companies in 2013 (Palenberg 2006; CorporateRegister). KPMG takes these

numbers as a sign that “corporate responsibility reporting in industrialized countries

has clearly entered the mainstream” (KPMG 2011). Palenberg explains this increase,

saying that nearly all companies in the industrialized world are expected to report on

corporate responsibility due to legal or regulatory requirements (Palenberg 2006).

Nevertheless, UNEP clearly states that reporting remains a dynamic field, with new

entrants from non-OECD countries making up half of their 50 studied reporting

leaders (UNEP/SustainAbility 2006), showing that new reporters are not only coming

from developed, northern economies.

This being said, sustainability reports are most frequently being published by

companies located in OECD countries. The growth in reporting has been strongest in

the UK, the US and Japan (Palenberg 2006). UNEP names the United Kingdom as the

striking leader of all companies analyzed in their 2006 study, and that European

reporters and the Netherlands also appeared in the top five of their report ranking

(UNEP/Sustainability 2006). KPMG reaches similar conclusions, showing that five of

22

the ten countries leading the pack in reporting are European nations (KPMG 2011: 4).

Increasingly, studies have also shown strong emergence from non-OECD reporters as

well, including South Africa and Brazil (Palenberg 2006: 9; UNEP/SustainAbility

2006) and Hong Kong and India (UNEP/SustainAbility 2006).

A broad range of report types are being issued from corporations across these

geographies. As mentioned earlier, the first standalone reports were focused on

environmental information in the US and Western Europe. These reports broke the ice

for the more comprehensive sustainability reporting seen among companies today,

which are often referred to as “sustainability”, “sustainable development”, “corporate

responsibility”, and “corporate social responsibility” reports (KPMG 2011), as well as

“social and environmental responsibility” or “social liability” reports. Standalone

environmental reports are still being issued by certain companies, but KPMG claims

that more comprehensive sustainability reports covering environmental, social, and

economic issues have “come of age in 2011” (KPMG 2011: 6), or in other words, are

now the mainstream.

Sectors play a determining role in whether or not a company issues a sustainability

report. The KPMG study finds that the forestry, pulp and paper industry leads

reporting companies, along with mining, automotive, media, and utilities companies

following close behind. At the other end of the spectrum, trade and retail, transport,

and metals, engineering, and manufacturing are rated as the poorest performing, or

least reporting sectors, which is surprising as these are sectors with high

environmental impact (KPMG 2011). These results vary greatly from those stated in

the dated 2006 UNEP study, which showed transport, banking, and electricity as

leading sectors at the time while beverage, retail, and general utilities sectors were the

least reporting sectors (UNEP/SustainAbility 2006). KPMG provides brief analysis to

note that their own results have drastically changed within the past three years, when

their 2008 results were more in line with the UNEP study. KPMG also notes that

reporting practices are sometimes misleading regarding a sector’s sustainability

performance, singling out transport as a sector that has made great strides in

incorporating low emissions policies whereas only 57 percent of companies in that

sector issue sustainability reports (KPMG 2006).

23

Company size is a key characteristic of sustainability reporting practices. Palenberg

notes that the publication of non-financial reporting remains strongest among

multinationals, and that typically small and medium enterprises have been excluded

from the growth of reporting practices across geographies (Palenberg 2006). He

stresses, “without a doubt, the number of SMEs in the pool of non-financial reporters

is very small” (Palenberg 2006: 13). This phenomenon could possibly be explained by

certain barriers for SMEs to report, such as low public visibility and pressure, lack of

competitive pressure, lack of internal resources to produce a report, and a low return

on investment for reporting. In addition, SMEs do not experience the same first-

mover competitive pressure to report as multinationals do, for which there can be

certain disadvantages for non-reporting (Palenberg 2006) such as being rated as “less

transparent than their peers” (KPMG 2011: 11).

KPMG supports Palenberg’s comments, noting that companies with revenues of more

than $US50 billion are twice as likely as those with revenues under $US1 billion to

issue sustainability reports (KPMG 2011). KPMG also comments on company

ownership as it relates to sustainability reporting, mentioning that of the 100 largest

companies measured across 34 countries, 69 percent of publicly traded companies

issue sustainability reports whereas only 36 percent of private or family-owned

companies issue report (KPMG 2011). This suggests that regulations and financial

market requirements do have an impact on a company’s reporting practices,

regardless of size, but only if they are publicly traded.

According to UNEP the real question to be asked, however, is not on reporting

quantity, type, or geographic distribution, but rather on the quality of those reports.

The report concludes that links are increasing between what is reported and what is

being implemented as core business processes (UNEP/SustainAbility 2006), showing

that reporting is not merely a communications exercise but rather driving internal

change. The KPMG study supports this sentiment, showing that regional leaders are

strong in both the quality of their communications but also the level of sustainability

process maturity within the organization (a crossover which this thesis will further

refer to as reporting “maturity”) (KPMG 2011).

In addition, Palenberg notes that non-financial reporting has moved towards external

assurance of reports, a practice believed to increase quality and reliability of reporting

(Palenberg 2006). He further cites a 2004 Association of Chartered Certified

24

Accountants (ACCA) study, which finds that nearly 40% of all reports included

assurance in 2006 compared to 17% of reports in 1996. Kolk also supports that

verification provides a measure of assurance about the reliability of the report (Kolk

2004). However, both Kolk and Palenberg warn that assurance tools and

methodologies vary greatly and that assurance is generally only conducted on certain

parts of reports (Kolk 2004, Palenberg 2006), so it not always a clear sign of quality.

Despite the potential business benefits arising from increased links between

communications and policies as well as the rise in external assurance, studies

conclude that the overall quality of reports as a function of content and reliability

remains very low (Palenberg: 2006). The previously cited ACCA study notes that

many reports simply fail to address the biggest, most relevant sustainability issues

“such as sector-specific impacts and global issues such as dependence on fossil fuels,

human rights, and labor issues” (Palenberg 2006; ACCA 2004). This lack of

“materiality” or relevance of reported issues was also highlighted by the UNEP study,

which stated that most of even the 50 reporting leaders found it difficult to balance

competing demands from the issues relevant to diverse stakeholder groups

(UNEP/SustainAbility 2006). KPMG adds that data quality continues to be a

significant issue, with over a third of the global 250 reporting leaders restating

information in their sustainability reports without significant updates to the reported

data (KPMG 2011).

Further, quality is hard to assess across the wide variety of reports issued with

substantial differences in length, scope and depth (Kolk 2004). An explanation for

this lack of comparability is that extra-financial reporting remains a mainly voluntary

practice (Palenberg 2006) and there exists no global standing rule or mandatory

reporting law (see section 2.3 Factors Influencing Selection of Reporting Content).

This theoretical review of existing literature on sustainability reporting has provided

key context for the research question on the current state of reporting within the

maritime transportation industry. As demonstrated, sectors vary greatly in their

reporting activities and general adherence to the increasing voluntary reporting

frameworks. The transportation sector in particular is one of the least reporting among

those reviewed by the KPMG survey of top reporting companies, giving an indication

that this may be a lagging sector. In addition, this analysis provided the author with

25

ideas regarding potential corporate barriers and drivers to reporting for consideration

in answering the second research question. Retained from this discussion are the

following elements, which are later considered when analyzing barriers and drivers to

reporting for the maritime shipping industry:

• Potential Barriers: lack of sustainability resources, lack of competitive

pressure

• Potential Drivers: reporting regulated

• Potentially Either: geography, industry sector, OECD-location, ownership,

environmental impact, company size

The following section continues the literature review by looking more specifically at

studies revealing the motivations explain why companies may issue sustainability

reports or not. The author intends to use findings to continue building on the list of

potential barriers and drivers to sustainability reporting.

2.2. Motivations For Companies to Report Companies have various reasons to publish sustainability reports beyond the

occasionally applicable regulatory requirements suggested in the previous section.

Much of the existing research cites legitimacy theory as one of the more probable

explanations for the increase in sustainability reporting over the past decades.

Legitimacy theory is based on the idea that in order to continue operating successfully,

companies must act within the bounds of what society identifies as socially acceptable.

As sustainability reporting has grown in social importance, voluntary disclosure of

information acts to further legitimize a company’s existence. This theory has been

adopted and validated in a long list of previous studies (O’Donovan 2002, Bebbington

et. al 2008, Deegan et. al 2002), and is accepted as the de-facto backdrop for company

voluntary reporting motivations. Nevertheless, Kolk details the following potential

motivations for a company to report, which the author affirms are as valid today as

when they were published almost ten years ago (Kolk 2004):

• enhanced ability to track progress towards specific targets;

• facilitating the implementation of [an] environmental strategy;

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• greater awareness of broad environmental issues throughout the organization;

• ability to clearly convey corporate message internally and externally;

• improved all-round credibility from greater transparency;

• ability to communicate efforts and standards;

• license to operate and campaign;

• reputational benefits, cost savings identification, increased efficiency,

enhanced business;

• development opportunities and enhanced staff morale.

Additionally, the previously cited KPMG survey of companies asked questions on the

business imperative behind sustainability reporting for the past 18 years. The 2011

report finds that reputation or brand considerations top the list of business drivers

globally among 67 percent of surveyed companies, followed by ethical considerations

and employee motivation at 58 percent and 44 percent respectively (KPMG 2011).

Paradoxically, close to half of the top 250 global companies surveyed reported

gaining financial value from reporting, while financial concerns such as market

consideration and cost savings came in last on the list of business drivers with only 22

percent and 10 percent of surveyed companies claiming them as motivations (KPMG

2011).

Palenberg’s 2006 study states that stakeholder pressure remains a key driver to

sustainability reporting, with the important caveat that stakeholder pressures can both

wax and wane and may change in the future (Palenberg 2006). Through further desk

research and an interview series conducted with key stakeholder groups, Palenberg

identified the eight most frequently mentioned factors behind why companies issue

sustainability reports. Most important was strategic management of reputation and

brand, mentioned 51 percent of the time, competitor reporting, 28 percent of the time,

and reacting to NGO pressure, 13 percent of the time (Palenberg 2006). This

underscores the premise that a large number of respondents believe sustainability

reporting is a reactive, rather than proactive measure, and a practice conducted by

companies confronted with significant stakeholder pressure.

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2.2.1. Reasons for Non-Reporting While the case has been made for the motivations behind issuing sustainability reports,

certain companies continue to have reasons for non-reporting. As mentioned earlier,

companies are not concerned with disclosing sustainability information if there are

doubts on the return on investment for the organization, if customers are uninterested

in the information, if the company lacks internal resources, or if there is a lack of

external pressure from stakeholders. Kolk supports a number of these reasons in the

following list of motivations for non-reporting (Kolk 2004):

• doubts about the advantages it would bring to the organization;

• competitors are not publishing reports;

• customers (and the general public) are not interested in it, it will not increase

sales;

• the company already has a good reputation for its environmental performance;

• there are many other ways of communicating about environmental issues;

• it is too expensive;

• it is difficult to gather consistent data from all operations and to select correct

indicators;

• it could damage the reputation of the company, have legal implications or

wake up ‘sleeping dogs’ (such as environmental organizations).

This discussion added the following elements to the previous list of potential barriers

and drivers:

• Potential Barriers: lack of sustainability resources, lack of competitive

pressure, low public visibility, low return on investment, reputation, cost,

consistency

• Potential Drivers: reporting regulated, awareness of issues, clarity of message,

license to operate, employee morale, goal-setting, transparency

• Potentially Either: geography, industry sector, OECD-location, ownership,

environmental impact, company size

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The following section is a brief description of the available voluntary and mandatory

standards, frameworks and guidelines on sustainability reporting, and how they affect

current corporate reporting practices. These guidelines are important to understand

what expectations and pressures are placed on companies when they issue

sustainability reports.

2.3. Factors Influencing the Selection of Reporting Content A 2011 KPMG Survey showed that 95 percent of the 250 largest companies in the

world (G250) now report on their sustainability activities, while 80 percent adhere to

the GRI Reporting Guidelines (KPMG 2011). The remaining 15 percent either adhere

to a different voluntary framework or to some form of national regulation.

2.3.1. Voluntary Standards, Frameworks and Guidelines Global Reporting Initiative (GRI) Guidelines The Global Reporting Initiative is a multi-stakeholder organization founded in 1997

by the United Nations Environmental Program (UNEP) and CERES, a non-profit

organization created to change corporate environmental practices.4 The objective of

the GRI is to provide all companies and organizations with a comprehensive

sustainability reporting framework in order to create “a sustainable global economy

where organizations manage their economic, environmental, social and governance

performance and impacts responsibly and report transparently” (GRI). GRI issues

their guidance through a process of continuous improvement. The first GRI guidelines

were released in 2000, the second version G2 was published in 2002 and the G3.1 was

in 2006. GRI has just recently released its fourth version, G4, in May 2013 after a

period of public consultation.

The GRI Reporting Framework contains general guidance and prescriptive indicators

concerning an organization’s strategy, its management approach, and its economic,

environmental and social sustainability performance. Also released are sector-specific

supplements that add sector-specific indicators and specific guidance for sector

4 Interestingly, CERES was founded the same year as the Exxon Valdez oil Spill, and in response

to the spill created the Valdez principles, a 10 point code of corporate environmental conduct to

be publicly endorsed by CERES companies. Today’s leading sustainability reporting framework

therefore had its origins very closely linked to the maritime transportation sector.

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application. In the current G3.1 version, reporting organizations are requested to self-

declare their GRI application level of either A, B, or C, a measure of completeness to

fulfilling the guidance (GRI 2006). The GRI guidelines are the leading voluntary

reporting framework available today.

International Integrated Reporting Council (IIRC)

In recent years the notion of integrated reporting (IR) has gained in popularity. The

purpose of integrated reporting is to create one single, concise and comprehensive

document detailing how an organization’s strategy, governance, performance and

prospects lead to the creation of value over the short, medium and long term (IIRC).

This report would include the information typically found in a company’s financial

statements as well as the information found in standalone sustainability reports,

replacing these two separate documents by providing one reference document for all

stakeholders. Yet discussions around integrated reporting have raised a myriad of

concerns over the format, content, and usefulness of such reporting.

To address these concerns and work toward an agreed-upon framework, the IIRC was

launched in 2010 by the Prince of Wales along with a number of international

partners. The IIRC calls itself a global coalition of regulators, investors, companies,

standard setters, accountants, and NGOs working to create a globally accepted

framework for IR in order to encourage movement toward this type of reporting

(IIRC). The framework has undergone discussion for the past two years, and was

recently released in a draft form in April 2013 for a public consultation until

December 2013, at which point it will undergo a pilot test period amongst 90

organizations until September 2014 (IIRC).

ISO26000 ISO26000 was launched as a standard in 2010 following five years of negotiation

with around 500 stakeholders from government, NGOs, industry, consumer groups

and labor organizations (ISO). The standard provides guidance for companies on

social responsibility, developing sustainability management routines and practices,

and on how to discuss social responsibility with their relevant stakeholders. ISO26000

is voluntary guidance.

30

OECD Guidelines for Multinational Enterprises The Organization for Economic Cooperation and Development (OECD) Guidelines

are recommendations for multinational companies who operate in who countries

adhering to the OECD. The guidelines were first created in 1976 as voluntary

standards for conducting business responsibly in a number of areas including human

rights, employment, the environment, information disclosure, combating bribery,

consumer interests, science and technology, competition and taxation. They are non-

binding voluntary principles and standards for responsible business conduct in a

global context in conformance with applicable laws and international standards, and

are recognized as the only multilaterally agreed code of responsible business conduct

to which governments have committed. Today they represent “far-reaching

recommendations for responsible business conduct that 44 adhering governments –

representing all regions of the world and accounting for 85% of foreign direct

investment – encourage their enterprises to observe wherever they operate” (OECD).

The guidelines were most recently updated for the fifth time in May of 2010 to

guarantee their continued role as a leading international instrument for responsible

business conduct (OECD 2011).

AA1000

AccountAbility’s AA1000 series are “principles-based standards to help organizations

become more accountable, responsible and sustainable” (AccountAbility). The

standards provide a framework for organizations to identify, prioritize and respond to

sustainability challenges, and provide guidance on sustainability assurance and

stakeholder engagement. They have been developed through a multi-stakeholder

process to ensure independence and relevance to those who will use them.

National Voluntary Standards In addition to voluntary frameworks, there are also a rising number of voluntary

reporting standards that are being promoted by national governments. The author has

conducted previous research into these standards, and has identified the following: the

Canada Environmental Protection Act of 1992, the Norway Accounting Act of 1998,

the Australia Corporations Act of 2001, the Japan Law of Promoting Environmentally

31

Conscious Business Activities of 2001, the Ireland Council of Institutions Act of 2006,

the Brazil Electricity Sector Regulations of 2007, the US Reporting of Greenhouse

Gas Rule of 2009, the India Companies Act of 2011, and the Spain Sustainable

Economy Law of 2011 (Morris/Baddache 2012b). These voluntary regulations range

in their scope and thematic focus, but show an overall pattern of increased interest in

providing regulatory frameworks for corporate disclosure.

Figure 2: National Voluntary and Mandatory Reporting Laws; Source: Morris/Baddache 2012b

2.3.2. Mandatory Standards and Laws

National Mandatory Standards Mandatory reporting regulations are also on the rise, with the most recent and

comprehensive law published in France in 2013, called the Grenelle II Act 225

(Morris/Baddache 2012b). This prescriptive law requires reporting on 32 social,

environmental and governance indicators covering a range of issues including

employment figures, waste management, and anti-corruption practices. It is one of the

first reporting laws to require both listed and unlisted, French and foreign companies

to report. Article 225 law joins the ranks of prior mandatory reporting laws such as

Denmark’s Financial Statements Act of 2009 which requires reporting on social

responsibility, actions and achievements and South Africa’s King Code of

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Governance of 2009 which requires reporting on social, environmental and economic

indicators. In addition to national governments, stock exchanges have also begun

requiring companies to report on sustainability activities, such as the Shanghai Stock

Exchange in China or the Securities and Exchange Commission (SEC) in the US,

requiring information on regulatory compliance related to the environment

(Morris/Baddache 2012b). These fragmented laws serve to advance regional reporting

activity, but further cause lack of comparability among reporting companies.

This analysis of reporting standards shows that while national mandatory laws act as a

driver toward sustainability reporting, the fragmentation between countries stands to

be problematic for companies operating in multiple geographies and may act as a

barrier to cohesive reporting. In addition, the fragmentation of voluntary reporting

standards is certainly a barrier to reporting, leaving many companies confused about

how to comply with multiple standards at once. Reporting standards are therefore

both a potential driver and barrier to reporting to be considered within this study.

Almost all of the reporting standards highlight that stakeholders must be engaged in

order to issue an effective report. The following section addresses the questions of

why stakeholders are important to reporting, and how they are accounted for in

current reporting practices. The intention is to provide general context for comparison

with how maritime container carriers account for stakeholders in their reporting.

2.3.3. Stakeholder Expectations Stakeholder engagement has become a fundamental part not only of company

sustainability reporting practices, but also of core sustainability strategy. A

company’s legitimacy in their sustainability practice requires both an engagement

strategy and demonstrated efforts to involve their various stakeholder groups in the

company’s activities. Through prior work, the author has identified three levels of

stakeholder engagement that companies can employ – the lowest is to “Inform,” or

simply to broadcast information via traditional media, the next is to “Communicate,”

which entails tailored communications to particular stakeholder groups through such

formats as surveys, social media and conferences, and the highest is to “Engage,”

33

which can involve partnerships, joint ventures, or even research collaborations with

stakeholders (Morris/Baddache 2012a).

No legal standards or regulations exist concerning the involvement of stakeholders in

business practices. However, all of the identified voluntary reporting frameworks

identify stakeholders and stakeholder engagement as a key element in sound

sustainability reporting practice. AA1000 and GRI both refer to stakeholder

engagement as a necessary step in identifying reporting materiality, and all four

frameworks, AA1000, GRI ISO26000 and OECD Guidelines were themselves

developed through a stakeholder engagement process. GRI further states that a

company’s report should be based on the expectations and interests of stakeholders

with regard to scope, boundary, application of indicators and assurance approach

(GRI 2006).

Nevertheless, companies still struggle to engage with their stakeholders in meaningful

ways. Prior research conducted by the author revealed that companies often feel

increased external pressure but mistakenly putting stakeholder engagement into a

public relations or communications team. When it comes time to engage, these

companies speak only to known parties rather than the most relevant stakeholders,

and have difficulty linking feedback to internal business processes (Morris/Baddache

2012b). Regardless, companies in all sectors will soon be motivated to improve their

level of engagement as the new GRI G4 guidelines consider engagement as a

necessary step to defining materiality and reporting on relevant issues.

This section shows that while stakeholder engagement is identified as a necessary part

of reporting frameworks, companies themselves still struggle to engage properly. It

should be considered that those companies who do engage with stakeholders in their

sustainability reporting are employing a leading practice. The author retains this

element as a criterion for report evaluation.

Moving on from reporting frameworks and stakeholders, the next section will look

more closely at research on sector-specific reporting to understand what

methodologies have been employed to judge the extent or quality of industry

reporting. The author intends to inform his content analysis methodology from this

review.

34

2.4. Previous Research on Sector-Specific Reporting Sector-specific research on sustainability reporting is increasingly available but

studies range greatly in scope, methodology, and aim. In addition to the surveys

offered by KPMG and UNEP/SustainAbility, the author examined the following

studies to identify potential models for conducting a sector reporting review, and to

better understand if previous research exists on identifying industry-specific barriers

and drivers to reporting.

Adams and Kuasirikun examined the largest UK and German chemical and

pharmaceutical companies through a comparative and longitudinal study of company

reporting practices (Adams/Kuasirikun 2000). The study was performed over a period

of 10 years using content analysis to measure reporting maturity, and results showed

that German companies in these industries had reached maturity earlier. This study

ultimately measured the performance of countries rather than an industry, but the

method of longitudinal analysis was retained for this thesis.

Guthrie et al. studied social and environmental reporting of the Australian Food and

Beverage Industry by building a framework to examine disclosure across many

reporting media, such as annual reports and websites (Guthrie, et al. 2008). The study

addressed a research gap by developing an analysis framework that included industry-

specific variables. After performing content analysis across a sample of representative

company disclosure in 2004, the study found that disclosures were mostly declarative,

that companies were most often reporting on industry-specific issues, and that

websites had a higher frequency of disclosure. This study reinforced that

sustainability reporting often occurs across several media, revealing a limitation in the

author’s intended scope of looking exclusively at sustainability reports.

Jenkins and Yakovleva explored the development of the media of social and

environmental disclosure in the mining industry and of the factors that drove the

development of disclosure (Jenkins/Yakovleva 2004). The chosen method was to

perform a temporal analysis of recent trends using a case study of the 10 largest

mining companies in order to identify variation in reporting maturity, offering a

simple classification of leaders to laggards. The study chose content analysis as the

35

data collection method and found that sector reporting is becoming more sophisticated

across a range of variables, such as accordance with GRI, increasing levels of external

verification, and a trend toward more producing more CSR reports.

Perez and Sanchez equally looked at the evolution of sustainability reporting in the

mining industry (Perez/Sanchez 2009). This study analyzed 31 reports published by

four major mining companies between 2001 and 2006 across 62 indicators using

content analysis and a basic rating scale of 0 or 1 to identify the presence of absence

of information. The results showed an evolution in reporting comprehensiveness and

depth, and basic accordance with Jenkins and Yakovleva. The author retained the

method of a rating scale for this thesis.

Transportation-focused studies were also identified and reviewed for methodological

approach as well as thematic similarities with the maritime transportation industry.

Mak et. al performed a comparative study of environmental reports issued by

European and Asian airlines to identify the status and progress of environmental

reporting within the industry (Mak. et al 2007). The study analyzed only

environmental reports available online across 10 European airlines and 23 Asian

airlines during the reporting year 2001, adopting a framework designed by Adams in

1998 measuring 15 elements related to environmental improvement and

environmental systems. The findings, based on thematic content of the reports, varied

greatly depending on the element measured, and showed that reports produced by

European airlines were richer in content than those from Asian airlines, a finding for

comparison within this thesis.

Van Wijk and Persoon looked at the transportation-related sector of tourism by

examining the sustainability reporting among international tour operators, or firms in

which at least half of its revenues come from selling holiday packages (Van

Wijk/Persoon 2006). The study performed content analysis of 42 operators’ annual

reports, sustainability reports and websites using a framework that analyzed firm size,

industry sector characteristics, nationality, and business model. Results show that firm

size played an important role in the robustness of reporting, that brick and mortar

operators performed better than their online counterparts, and that nationality did not

play a role in reporting quality. Ultimately this industry was found to be a laggard in

reporting compared to others.

36

A number of common themes were found among the examined research. First,

content analysis is repeatedly the accepted method of examining sustainability

reporting. While studies range on the frameworks and criteria used for their research,

each has developed a coding or scoring system to facilitate the final analysis and

discussion. Certain studies focus exclusively on one reporting medium, such as

environmental reports, and others attempt comprehensive analysis across multiple

media. The theme of maturity often recurs within the literature, confirming the

author’s choice to focus on the maturity of the maritime transportation sector. And

finally, though generally applicable barriers and drivers such as size, geography, and

sector were addressed in studies, the specific barriers and drivers to the maritime

container transportation industry remain unknown, providing further evidence that

this thesis will add to existing literature.

The following section will complement these findings from general sector-specific

studies on reporting by looking specifically at the maritime transportation sector.

2.5. Previous Research on Maritime Transportation Sector

While studies on sustainability reporting of the maritime transportation sector remain

very few, a number of studies have been performed on the sustainability of the

industry. In addition, industry papers reveal necessary context of the CSR issues

specific to the maritime transportation industry.

Coady and Strandberg prepared a comprehensive look at the state of corporate social

responsibility in the maritime shipping industry in preparation for the Rio+20

conference in 2012 (Coady/Strandberg 2012). The paper provides a general survey of

existing information on CSR issues specific to the shipping industry and ship owners,

as well as a short literature review of papers and reports issued by industry initiatives

in order to present a draft CSR framework for the shipping sector. Four key findings

are presented in this research: CSR activities in other global sectors are increasing,

CSR activities in the shipping industry are also increasing and evolving due to new

performance requirements from regulatory agencies, customers, investors, NGOS,

and leading companies, SMEs could be at risk if they do not participate in the

37

development of sector CSR standards, and industry associations have a key role to

play in addressing barriers to CSR engagement. Perhaps most important and relevant

to the development of the author’s thesis, Coady and Strandberg indentified key

industry barriers to addressing CSR within maritime shipping. These key barriers

include: a general lack of knowledge of what CSR is, the systemic issue of a highly

regulated industry that has to function across diverse public policy regimes, the

disparate and fragmented nature of the sector, and the complexity and cost of CSR

activities which can be prohibitive for SMES – the majority of carriers in the shipping

industry. The paper concludes that one possible solution to overcoming these barriers

is through participation in industry associations (Coady/Strandberg 2012). The author

considered these barriers when developing hypotheses to test with industry

stakeholders.

Alternatively, McGuire and Perivier argue in “The Nonexistence of Sustainability in

International Maritime Shipping” that the shipping industry practice of using open

registries5 undermines the industry’s ability to internalize the true sustainability costs

associated with shipping (McGuire/Perivier 2011). This study is designed to serve as

a scoping piece to identify the unsustainable practices of the maritime industry,

standing in clear contrast to the hopeful nature of Coady and Strandberg’s findings.

The primary conclusions are that all efforts toward industry sustainability are crippled

by the open registry system, and that the un-sustainability of the industry will increase

as globalization amplifies maritime shipping demand. A possible solution presented is

an increased academic focus on the industry’s open registry practice to gain insight on

how to get cultural industry acceptance to internalize these currently externalized

costs. The author also included that the practice of open registries is a key barrier to

sustainability reporting.

Additional studies looked closer at particular segments of the maritime shipping

industry, in order to further define CSR issues and providing recommendations to

improve CSR practices. Fafaliou et al. attempted to clarify the meaning of CSR in the

European maritime sector, in particular for Greek-owned short sea shipping (i.e. on

inland waterways), across a number of variables by interviewing company employees.

5 The practice of open registries refers to owners registering their vessels in countries that do not require a legal or economic link between the ownership of the vessel and the jurisdiction in which the vessel is registered. This concept is explained further in following sections of the paper (see: Flags of Convenience).

38

Results showed that all interviewed respondents were aware of the notion of CSR,

either informed through the press of through personal acquaintances. The researchers

also unearthed certain barriers to engaging in CSR, such as lack of public support,

lack of information, or no self-consciousness of CSR impact on business activity. The

findings also showed that ownership plays a key role as only subsidiaries of

international conglomerates or companies owned by those personally aware of

benefits from CSR engage in the application of CSR activities. Pinock and Ajagunna

focused specifically on Caribbean ports and their challenges to reach a measure of

sustainability (Pinnock/Ajagunna 2012). The study presents certain barriers to

sustainability for these ports, such as unfavorable economies of scale and a lack of

competition. Further, the research concludes by presenting nine policy

recommendations to advance sustainability in the region.

Only two papers were found during the literature review that addressed sustainability

reporting of the maritime transportation sector directly. A paper by Rajiv Deengar

entitled “A Role for Sustainability Reporting in the Maritime Shipping Industry” was

unavailable to the author, however Deengar was interviewed as a key stakeholder as

part of the semi-structured interview study. Fet released a paper in 2003 entitled

“Sustainability Reporting in the Shipping Industry” to provide a sector-specific look

at how the GRI guidelines would affect industry reporting practices (Fet 2003). The

paper identifies a key framework for reporting indicators based on the life cycle

assessment (LCA) of an ocean vessel, noting the importance of a value chain

approach. Ultimately the research presents an overview of reporting systems and

environmental management tools, but given its early year of publication does not

attempt to measure or analyze existing sustainability reports.

Research performed on the sustainability practices of transportation companies, and

specifically on the maritime transportation industry, has revealed a number of initial

barriers that may explain this poor performance. Few studies have been performed

specifically on maritime transport, and of those studies only two were identified that

focused on reporting, and neither analyzed current reporting maturity. The review of

maritime shipping sector research revealed a short list of potential barriers for the

industry to engage broadly in sustainability efforts, which the author will retain for

later consideration in answering this study’s second research question:

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• a general lack of knowledge of CSR, lack of information, no self-

consciousness of CSR impact on business activity

• systemic issue of a highly regulated industry that has to function across

diverse public policy regimes (regulatory landscape)

• disparate and fragmented nature of the sector

• complexity and cost of CSR activities which can be prohibitive for SMES,

unfavorable economies of scale

• efforts toward industry sustainability are crippled by the open registry system

(flags of convenience)

• lack of public support

• ownership, conglomerate control

• lack of competition

This concludes the theoretical review of existing literature on the current state of

sustainability reporting, developing context on the current state of reporting, learning

how the landscape of reporting guidelines acts to drive reporting, noting the

importance of stakeholders, examining methodologies to study sector-specific

reporting, and validating the need for this study among prior studies maritime

shipping sector reporting. The identified barriers and drivers will be retained for

further analysis in the following sections.

The next section of the thesis will begin the empirical study of maritime container

reporting through a longitudinal analysis of sustainability reports, and then discuss the

results in context of the findings from the literature review.

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3. Current State of Sustainability Reporting This section presents a study of the industry’s reporting maturity through content

analysis of published sustainability reports. Maturity is here defined as a combined

measure of both external communications practices as well as internal sustainability

processes which enable communication (see 3.1: choice of indicators). The section

begins with a presentation of the criteria used for report inclusion, describes the

methodology and choice of indicators used to measure the reports, presents the results

from the study, and offers a short discussion on the trends identified in the results.

Relative to the research questions, the intention of this section is to illustrate the

current state of industry reporting as measured by its level maturity. This is a

necessary starting point before analyzing the barriers and drivers to reporting.

In order to produce a representative sample of sustainability reports within the

industry, content analysis was performed on reports issued by the top 20 container

carriers by volume over the past 10 year period, beginning with the first report issued

in 2002 and ending with reports issued in 2013 on activities in calendar year 2012.

Among the top 20 carriers, only the 12 companies who issued sustainability reports

were included for analysis. Sustainability reports were selected for inclusion only if

they were released as separate publications, and if they were available for download

on carrier websites as of April 1st, 2013.

Excluded from this study was information found in annual reports, in communications

such as press releases or news articles, or on carrier websites. These selection criteria

resulted in a sample of 51 sustainability reports issued over the ten-year period,

deemed to be a representative sample of the industry. The types of reports analyzed

include: sustainability, CSR, social responsibility, environmental, and environmental

and social.

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Table 4: Container Carriers by size and reporting practice; Source: Author/Alphaliner

3.1. Choice of Indicators The author analyzed the sustainability reports using six indicators that represent

maturity in sustainability communications of the carriers as well as maturity in their

sustainability practices. The indicators have specifically been chosen because each is

the output of having developed an internal process of measurement, engagement, or

reporting. In other words, it would be difficult for a carrier to fulfill an indicator

without having developed an internal sustainability process.

These indicators were partially selected based on a study of reporting trends titled

“Corporate Responsibility Reporting: A View for the Next Cycle,” published by the

non-profit business network and consultancy BSR (Business for Social

Responsibility), a leader in advisory services on sustainability reporting practices

(BSR). BSR identified the following trends as indicative of the current best practices

in reporting: materiality, stakeholder commentary, key performance indicators, and

robust reporting cycles. The author also selected two additional indicators to

complement these trends: the presence of a GRI index, and the presence of an

independent assurance statement. These indicators were selected for their objectivity,

and all six are measured in the sustainability reports using a binary coding system –

“1” representing the fulfillment of the indicator and a “0” representing the absence of

the indicator. This section will briefly discuss each selected indicator, presenting its

42

definition, its importance in representing reporting maturity, and the method used to

determine its fulfillment.

3.1.1. GRI Index As part of adherence with the GRI reporting guidelines, companies are requested to

include a table within their reports matching GRI indicators to the pages on which the

information is reported – referred to in this study as the GRI Index. This is an

important indicator of report maturity, as it shows a company’s dedication to go

beyond using the GRI as simple guidelines for reporting but rather a means by which

to catalogue its efforts and self-measure the completeness of its reporting versus the

GRI. It also gives readers a clear view of the company’s self-declared compliance to

this best practice framework in voluntary reporting, helping to understand the level of

ambition in reporting.

In order to measure indicator fulfillment, the author performed a keyword search for

the terms “GRI” or “global reporting initiative” and looked either in the table of

contents or in the last few pages of the report for the presence of the index. In certain

cases, the report redirected the author to an index published on the carrier company’s

website, which was counted as indicator fulfillment.

3.1.2. Materiality Process As defined in the BSR report, materiality is a process of focusing on areas that deliver

greatest business value to a company and its stakeholders rather than trying to address

every sustainability risk and opportunity (BSR). The author considers materiality as a

process for defining and prioritizing the most relevant sustainability issues on which

to focus strategy and reporting resources, identified in large part through stakeholder

engagement. Materiality as a concept has roots in US financial reporting, defined by

U.S. Supreme Court as “presenting a substantial likelihood that the disclosure of the

omitted fact would have been viewed by the ‘reasonable investor’ as having

significantly altered the ‘total mix’ of information made available” (SASB). The

inclusion of a materiality process is an important indicator of reporting maturity

because it reflects a level of sophistication in a company’s approach to sustainability

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strategy as well as an interest in reporting only the most relevant topics for

stakeholders. For the reader, this also translates into reports that are generally more

concise or focused to topics of interest.

In order to measure indicator fulfillment, the author performed a keyword search for

the term “materiality” and looked closely at the carrier’s explanation of its CSR or

sustainability strategy for any discussion defining a scope of reported indicators.

3.1.3. Stakeholder Commentary An additional indicator highlighted in the BSR trends report, stakeholder commentary

is defined as the inclusion within a report of independent third-party opinions on the

reporting practices or sustainability performance of a company. Stakeholder

commentary can appear in the form of stakeholder dialogue, chapter comments, or

longer statements on the full report, and may be provided by individual internal or

external stakeholders or by stakeholder panels. In the author’s opinion, stakeholder

commentary is a means by which to solicit broad, unedited opinions, and by that

definition does not include stakeholder surveys, which are pre-determined

questionnaires designed by companies on a limited scope of information. Stakeholder

surveys were therefore not counted as indicator fulfillment.

The inclusion of stakeholder commentary is an important indicator of reporting

maturity, as it reveals a deep practice in stakeholder engagement – commentary is an

outcome of such engagement. In addition, the presence of commentary shows the

willingness of a company to be open to objective critiques of both its sustainability

reporting and sustainability performance, to which it will be held accountable. This

commentary also provides a balanced peer opinion against which a reader can

compare his or her own opinion. In order to measure indicator fulfillment, the author

performed a keyword search for the terms “stakeholder,” “stakeholder commentary,”

and “stakeholder dialogue,” and further looked for evidence of stakeholder

commentary throughout the report, generally sectioned off graphically in text boxes.

3.1.4. Key Performance Indicators

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An additional indicator of reporting maturity is a company’s definition and use of Key

Performance Indicators, or KPIs. BSR’s trends report defines KPIs as a selection of

seven to 15 indicators that provide an at-a-glance view of a company’s CSR

performance across social, economic and environmental issues. This study considers a

broader definition – providing a short list of quantitative or qualitative indicators

linked to a company’s strategy, as opposed to a laundry list of activities. The use of

KPIs is an important indicator of reporting maturity as it demonstrates a company’s

desire to define reasonable measures of its sustainability performance, and their use

may indicate the initial steps toward a full materiality process in concert with its

stakeholders. Further, KPIs provide readers a set of indicators by which they can track

company progress toward its sustainability objectives.

In order to measure indicator fulfillment, the author performed a keyword search for

the terms “KPIs” or “key performance indicators,” and more closely looked through

sections on sustainability strategy to search for any mention of grouping or

prioritizing of indicators. Of all measured indicators in this study, KPIs are perhaps

the most subjective since each company may have a different definition and way of

presenting of what is key to their performance. However, the author considers this

indicator as a valid measure of maturity, since a correlation was found between the

identification of KPIs and company adherence to GRI, which itself recommends such

a process of indicator prioritization in its guidance.

3.1.5. Assurance Statement Assurance statements are evaluations by independent, third-parties who use a set of

standards to assess a company’s systems, processes and competencies that underline

its sustainability performance, including the self-declared information presented in

sustainability reports. These statements were borne out of pressure from stakeholder

groups such as investors and governments to produce similar verifications to those

found in financial reporting. Today, sustainability report assurance is a growing

practice that claims to have moved beyond simple verification, instead helping

companies demonstrate the credibility of commitments and accuracy of claims along

with providing suggestions for continuous improvement in reporting and strategy. The

inclusion of an assurance statement is an important indicator of reporting maturity as

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it demonstrates to readers a company’s willingness to commission and transparently

present a professional account of their claims, to which the company will be held

accountable.

In order to measure indicator fulfillment, the author looked for the presence of an

assurance statement from one of the following types of assurance providers:

professional audit firms such as PriceWaterhouseCoopers or KPMG, quality

assurance firms such as BureauVeritas or Lloyd’s Register, or CSR assurance

consultancies such as Verite or Solstice. The presence of statements from civil society

firms, opinion-leaders, and advisory panels were considered as stakeholder

commentary rather than assurance statements.

3.1.6. Regular Reporting Cycle The final indicator selected from the BSR trends report is a robust reporting cycle,

which the author re-framed for this study as regular reporting cycle considering the

short period of time studied. Regular reporting cycle is defined as an annual or every-

two-year reporting cycle, where the first year of reporting does not qualify. The

existence of a regular reporting cycle is an important indicator of reporting maturity

as it shows a dedication to measuring and reporting sustainability progress over time.

A regular reporting cycle creates a level of accountability for the presented

information, requiring discipline within a company to follow through with

commitments made as part of their sustainability strategy. In addition, a regular cycle

gives readers the ability to compare a company’s progress year-over-year as a

“capture of time”, unlike the constantly updated communications on websites or

through social media.

In order to measure indicator fulfillment, the author researched and collected all

carrier sustainability reports within the 2002 – 2012 period and noted the years in

which reports were published. All reports that were regularly followed by a second

report on an annual or bi-annual schedule were counted, with the exception of the first

year reporting.

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3.1.7. Excluded Indicators Additional indicators considered for this study include both adherence to the UN

Global Compact (UNGC) and the use of integrated reporting as defined by the

International Integrated Reporting Council (IIRC). On the former, brief analysis of

current reports revealed that only a subset of carriers already employing GRI were

inclined to track towards the UNGC, making this indicator somewhat redundant. In

addition, the UN Global Compact is more clearly linked to sustainability strategy

rather than reporting practices. On the latter, no container carriers currently issue

integrated reports as defined by the IIRC, deeming this indicator inconsequential. This

will however become a valid indicator to include in future studies, as the IIRC has

just released their draft guidance on integrated reporting in April 2013.

3.2. Results: A Look at Reporting Maturity The results of the content analysis are presented in the following table:

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Table 5: Maturity of Top 12 Carrier Reports; Source: Author

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3.3. Discussion of Results Looking first at the evolution of the reporting landscape, there is clearly an increasing

trend of the quantity of published reports over the past ten years, rising from one

report published annually in 2002-2003 to between seven to nine reports published

annually in 2011-2012. A second noticeable trend is that reporting experienced a

geographical progression, beginning in Japan with NYK Line in 2002 and MOL in

2004, moving to Korea with Hanjin Shipping in 2005, and then to China with

COSCO in 2006 (and CSCL in 2009), and eventually moving into Europe to

Denmark with Maersk in 2007, and finally Germany, France and Switzerland between

2008 and 2012. This regional movement shows interesting first mover effects with

one regional leader and multiple regional followers reporting in succession. Finally,

by measuring the growth of representative market share, it also could also be argued

that sustainability reporting became a mature industry practice in 2007/2008 with the

entrance of Maersk Line, resulting in almost 30% of market share represented by

industry carriers issuing reports. The share represented by all reporting carriers today

totals to just over 60%.

Looking next at the indicators of reporting maturity, all measured indicators saw

growth over the studied time period and today the reporting carriers show good

practice in three of the six indicators. On the positive side, half of all carriers have

signed onto using GRI as a reporting standard, have begun a process to identify and

report on key performance indicators, and are reporting on regular cycles. On the

negative side, only one quarter of reporting carriers include stakeholder commentary

in their reports, and between one to two carriers perform a materiality analysis and/or

contract independent assurance statements. These poorly performing indicators

illustrate great opportunities for improvement in reporting practices.

One of the more significant indicators, GRI indices first appeared in 2005 and the

indicator reached its peak and plateau in 2008 with six of twelve carriers reporting.

This is a significant finding since two years prior in 2006 GRI had launched its G3

Guidelines, a comprehensive upgrade to the more general guidance that had been

provided since the organization’s inception in 1997. While correlation cannot prove

causation, the number of GRI indices remained high after this date leading the author

49

to believe there is indeed a connection between the new guidelines and the increased

reporting. Additionally, those companies who include GRI indices also score well on

the presence of Key Performance Indicators, showing a potential connection between

the process of GRI compliance and the definition of key sustainability activities. Also

a leading indicator, all carriers who issued more than single-year reports established

regular reporting cycles – with the exception of Hamburg Sud. This shows that these

carriers consider sustainability measurement and reporting a long-term investment

into sustainability performance.

Among the marginal indicators, stakeholder commentary appeared only in reports

issued by the three Japanese carriers, NYK Line, MOL and K-Line. Two of these

carriers, K-Line and MOL, included commentary starting in their first issued reports,

and NYK Line began including commentary in 2005 when they changed from an

Environmental to a CSR report. This may reveal a cultural importance to including

stakeholder viewpoints within reports issued in Japan, or conversely a lack of

perceived importance within the rest of the industry to include stakeholder comments.

Also a marginal indicator, assurance statements were commissioned and appear only

in reports issued by COSCO and Maersk Line. This could be attributed to the

relatively large size of these two carriers and the additional resources they allocate to

their sustainability practices. In both cases of stakeholder commentary and assurance,

the carriers fulfilling these indicators should be used as examples of best practice for

others.

Finally, as the lagging indicator, materiality process was only defined by the industry

leader Maersk Line. This is a puzzling result since materiality is often facilitated by

adherence to the GRI as well as the identification of Key Performance Indicators,

indicators on which half of the studied carriers scored well. Defining a materiality

process and using it to focus the topics presented in sustainability reports is a priority

next step towards improving the maturity of these carriers’ published reports.

3.3.1. Stakeholder Input from Interviews Stakeholders were asked during interviews to provide their thoughts on the current

state of industry sustainability reporting. Most experts interviewed believe that the

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maritime container transportation industry is lagging behind others when it comes to

sustainability reporting (Farrag, Borman, Sterling, Helfre, White, Deengar), echoing

the results of the 2011 KPMG survey of industries. An ESG analyst went as far as to

say that maritime shipping is in the bottom 20% of all industries (Helfre).

Certain interviewees explain that this is attributed to the fact that maritime shipping is

a service sector, which like other service sectors have been lagging in reporting, or

that maritime shipping is not a largely publicly traded industry and the privately-

owned carriers are not subject to the rigorous filing requirements of the United States

or the United Kingdom which would have pushed them to report earlier (White). Yet

there is a sense that the sector is improving, perhaps more rapidly than related sectors

like port operations (Helfre) and air cargo (Vance), which are lagging even further

behind.

3.3.1.1. Potential Improvements to Reporting

Interviewed experts were also asked to identify current best practices in industry

sustainability reports, as well as speculate on where improvements should be made to

reporting. The following is a brief discussion of their responses.

Both sustainability analysts and container carriers themselves agree that carriers are

using good practices in reporting on environmental emissions and health & safety

(Karlsson, Oh), explaining that these are industry issues they had addressed long

before they were associated with sustainability (Oh). However, there is much room

for improvement. Carriers need to focus on the core issues relevant to their operations

and most do not yet have a materiality process in place (Oh). Carriers also need to

show stronger links between their sustainability efforts and the investment community,

for example demonstrating how fuel consumption affects their operational success in

terms of the bottom line (Karlsson).

Analysts believe that carriers need to be more transparent on certain issues, such as

lobbying and public policy engagement as well as supply chain activities (Helfre).

And finally, an interviewed carrier identified that carriers could stand to make greater

social contribution beyond philanthropic efforts (Oh). These recommendations, along

with the results of the report content analysis, provided a clear starting point for

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carriers looking to improve both their sustainability reporting and their sustainability

practices.

3.4. Discussion Summary The six indicators measured during the content analysis reveal that the maritime

container industry attained its current level of sustainability reporting maturity around

2008. From this point on, half of the carriers studied scored on three to five of the six

indicators. Perhaps more revealing is the performance of the other half of reporting

carriers included in this study, which continued to score either zero or one out of the

six indicators. This leads the author to conclude that only six of the top 20 carriers are

currently issuing what could be considered mature sustainability reports.

This performance, supplemented by the general sentiments from stakeholders, leads

the author to conclude that the industry is in fact lagging in its reporting practices.

This answers the first research question set out in this report to define the current state

of sustainability reporting practices.

The limitations of the conclusions drawn here are related to the choice of indicators,

and the decision to study only the top 20 carriers by TEU volume. It is possible that

with a different selection of indicators, reporting carriers would have shown improved

scores. However, as these six indicators were deemed to broadly represent reporting

maturity, it is the author’s opinion that the presented trends are accurate and that only

a handful of container carriers are performing at a good level of reporting practice.

The following section continues the empirical study by focusing on the second

research question, attempting to understand the barriers that have caused this

reporting lag, as well as the drivers which prompted carriers to begin reporting.

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4. Barriers and Drivers to Industry Reporting

This section aims in multiple parts to provide an overview of the studied industry,

present its key stakeholders, develop an understanding of any structural elements that

have acted as barriers or drivers to sustainability reporting, and to provide stakeholder

discussion on the discovered barriers and drivers.

Section 4.1 will study the composition and operations of the global shipping fleet and

explore container shipping as the driving factor of the industry’s historical growth.

Section 4.2 will describe the container shipping industry value chain and present

container shipping’s major actors and stakeholders, with the intent of discovering

possible systemic barriers or sources of pressure (drivers) to report on sustainability.

Section 4.3 will present the identified barriers and drivers, and provide stakeholder

discussion to confirm or deny their importance and influence on carrier reporting

practices.

4.1. Background and Overview of the Maritime Shipping Industry Freight transport largely defines the maritime shipping industry today, as the

popularization of international air travel has relegated passenger travel at sea to

shorter trips and pleasure cruises (Lehmköster 2010). The global merchant fleet is

broadly made up of three major types of vessels: bulk carriers, which are designed to

transport unpackaged commodities; tankers, which are designed to transport liquid

cargo, most frequently oil; and container ships. These three categories account for

around 85 percent of the global fleet, which is comprised of more than 50,000 vessels

(Heiberg 2003). Freight traffic is measured in deadweight (dwt) tons, which describes

the amount of cargo that can be safely loaded onto an empty ship. The global fleet has

a capacity of around 1192 million dwt, with bulk carriers accounting for 418 million

dwt, tankers also accounting for 418 million dwt, and container ships accounting for

162 dwt (Lehmköster 2010).

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Figure 3: Global merchant fleet; capacity growth in million dwt. Source: Lehmköster 2010

Maritime transportation is also defined by its operation on water, which Hofstra

University professor Dr. Jean-Paul Rodrigue calls, “geographical by its physical

attributes, strategic by its control and commercial by its usage.” Geographically, the

industry depends on the use of oceans and rivers to transport goods from the point of

departure to the point of arrival. Commercially, the industry has calculated over time

the most optimal routes for circumnavigating the globe called trade lanes, corridors of

a few kilometers in width linking ports and geographical regions of countries. In order

to maximize speed from port to port, trade lanes were designed to follow the shortest

routes possible between any two points on the earth, known as the great circle

distance, but are diverted by physical constraints as well as political borders

(Rodrigue). Today, the majority of ocean carriers operate on these trade lanes running

liner services, maintaining a routine schedule between ports in order to guarantee

service timeliness and reliability for customers.

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Figure 4: Global shipping density; revealing trade lanes. Source: Rodrigue 2013

Since the 1950s the maritime shipping trade has grown about 18-fold, doubling that of

global GDP, which has grown only eight- or nine-fold. The industry now accounts for

75 percent of global trade in terms of volume– astounding when compared to the 16

percent volume by rail and road, 9 percent by pipeline, and 0.3% by air. In terms of

value, the maritime shipping industry accounts for 60 percent of world trade, or US$9

trillion of a total US$15 trillion (Heiberg 2003). Seeking an answer to this growth,

one has to look no further than the container ship.

4.2. Maritime Container Transportation Containerization revolutionized the industry in the 1960s, when Malcolm P. McLean,

a trucking entrepreneur from North Carolina, dreamed up the idea of having one

container that could be lifted from a truck directly on to a ship without first having to

unload or repack its contents. His idea led to the rise of intermodalism, a concept in

which the same container with the same cargo could be transported and exchanged

between the different transport modes on its journey including ships, trucks and trains

(World Shipping Council). McLean defined the industry standard container size to be

twenty-feet long, which is now referred to as a Twenty-Foot Equivalent Unit, or TEU.

Countries initially baulked at the high initial fixed costs involved in container

transport, requiring properly equipped ships, port facilities, storage space, and even

railway systems. For this reason, container traffic was initially set up on the busiest

container routes and trickled to marginal routes over the years (Lehmköster 2010).

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Since its advent, container transport has grown to a value of US$5.6 trillion,

accounting for nearly 60 percent of the world’s maritime shipping trade (Heiberg

2003), making it the most substantial part of the industry today.

4.2.1. Maritime Container Shipping Value Chain In order to better understand the operations as well as the actors involved in the

maritime container shipping industry, it is worthwhile to discuss the industry value

chain. For clarity, this discussion begins with a description of the supply chain of

international goods transportation. Key actors in this chain include shipping

customers (companies), third-party logistics operators, container carriers, ports, and

terminal operators.

Figure 5: Maritime container industry supply chain, noting commercial relationships. Source: Supply

chain graphic from DAMCO; commercial relationships elaborated by author.

The value chain is clarified through an example: a company manufactures a product

in its factory in country A for sale at the point of sale in country B. In order for the

product to arrive, the company needs to engage transport suppliers across a

combination of transportation modes – road, rail, sea, and/or air. The company has the

choice of engaging these modes directly and managing the commercial relationship

and physical goods exchange between them, or it can engage a third party logistics

(3PL) company to handle these details from point of pickup to point of delivery. If the

company engages the various modes directly, it may enter into commercial contracts

with each including a container carrier to handle the ocean leg of the journey. (If the

company chooses to engage a 3PL, it will be the 3PL who enters into this commercial

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contract with the container carrying company.) The container carrier receives the

goods at a port of departure, transports the goods across the ocean, and unloads the

goods at the port of arrival in the destination country.

From the container carrier perspective the value chain has two commercial

relationships to consider; on one side with the shipping customer or 3PL as described

above, and on the other side the relationship with ports. In order to load and unload

goods from a local port, the carrier must pay port fees to the port authority as well as

establish a contract with local terminal operators. It is worth noting that many carrier

companies are also vertically integrated with terminal operations to facilitate this

transaction and avoid further terminal charges. The terminal operator itself enters into

a commercial relationship with the local port authority management to lease and

operate on the land (Federal Maritime Commission).

In reality, this is an over-simplification of container flows in the port supply chain,

which includes a number of handovers to other transport modes in the area

surrounding the port known as the hinterland, including smaller “feeder” ships that

transport goods further inland, along with traditional rail and road connections. A

recent study from the University of Antwerp, sponsored by the OECD and

International Transport Forum, states that the multitude of modal choices implies that

modeling port-related hinterland flows remains a very difficult exercise (Nottebottom

2008). For the sake of efficiency, this paper considers that port authorities handle the

commercial relationships with these modes, the cost of which may have an effect on

carrier port fees.

A unique element in the maritime container shipping industry value chain is its ship

ownership structure, which exists in part due to the extreme capital costs in building

and operating ships. There are three parties in ship ownership to consider: the owner,

the operator, and the charterer. When a person who fits out a ship is also the

proprietor of the ship he is called the ship owner. Usually a ship will not be owned by

a single person because of the large investment required but rather owned by a group

of persons, or an enterprise such as a bank, which form a company or partnership. The

day-to-day manager who is engaged in the transportation of goods and/or passengers

is generally referred to as the ship operator. And the "charterer" is the person or the

57

company who hires the ship. These three parties can overlap, creating owner-

operators or owner-charterers or even owner-operator-charterers. In terms of the

container value chain, ship ownership structure is important to mention because it

clarifies that the ship owner is not always the party responsible for establishing a

commercial relationship with the client (Professional Sources: Angie Farrag, Peder

Michael Pruzan-Jorgensen, BSR).

From this perspective the maritime container value chain is simply a component part

of a larger value chain tracing the lifecycle of the ship itself – from shipbuilding to

ship operation to ship breaking at end of life. Key actors in this value chain include

banks or financiers, container carriers, ship architects, component suppliers, engineers,

shipyards, and ship breakers.

Figure 6: Maritime container ship lifecycle. Source: Elaborated by author.

To provide a simplified example of the value chain, it is assumed that the container

carrier presented is also the ship owner. Based on sufficient customer demand, a

carrier would begin the process of acquiring a new ship by seeking external financing

for the capital required, which is often a mix of public and private funds. Once

acquired, the carrier contracts a ship designer or architect, or uses in-house designers,

begins sourcing the components for the ship itself, and purchases time within a

shipyard for the ship’s construction. Construction itself can take upwards of 1-2 years.

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Before the ship is built, the carrier may also source a number of additional containers

for use with the new vessel.

During the ship’s lifecycle, the carrier will regularly contract a shipyard to perform

upkeep and maintenance on the ship. The carrier may even resell the ship after a

certain number of years of service to recuperate part of their original investment.

Ships remain in operation for a maximum of 30-40 years. Ultimately, the carrier will

sell the ship to a ship breaker, who works within their own yards or docks to break the

ship and sell materials for scrap.

This section reveals that both carrier size and complex ship ownership are potential

barriers to be considered when looking at container carrier sustainability reporting

practices. This section also illustrated a few of the important actors in the maritime

container value chain, and the following sections will take a closer look at these

industry stakeholders importance and how they may count as barriers and drivers to

reporting.

4.2.2. Main Carriers in Maritime Container Shipping In order to determine the major maritime container carriers to use in this study, the

author consulted Alphaliner, which is known as the most credible platform for

information and statistics on the liner shipping industry and on containerships.

Alphaliner reports that as of March 2013 there are over 100 container carriers

operating 5,934 ships on liner trades, accounting for 16,935,020 TEU and

217,306,066 dwt. The graphic below shows the top 30 operators by TEU.

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Table 6: Top 30 Container Carriers by TEU. Source : Alphaliner

There are some initial observations to be drawn from this diagram. The top seven

carrier companies account for more than 50 percent of the industry volume by TEU.

The top three carrier companies, which each have more than 1 million TEU in their

fleet, charter more vessels than they own. After the top 20 carriers companies,

additional carriers account for less than 1 percent of the global fleet. Rodrigue

comments on fleet size to give some perspective on market entry. He notes that

container shipping services require the deployment of many vessels to maintain a

regular liner service, citing that the East Asia-Europe trade lane would require a

minimum of 14 vessels – a severe constraint against new actors entering the market.

However, second hand vessels can be purchased for relatively smaller amounts, and

the purchase price can be easily covered by a few successful voyages. In this regard,

the shipping industry is rather open to smaller players (Rodrigue). This helps illustrate

that even players with less than 1 percent market share can operate on several trade

lanes and remain profitable, despite the perceived barriers to entry.

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4.2.3. Maritime Container Shipping Key Industry Stakeholders Stakeholders are key to understanding the pressures placed on container carriers to

report on their sustainability performance. This section briefly describes each

stakeholder group’s relation to container carriers and how their activities may

influence carrier reporting practices. The intention is to identify possible sources of

pressure that can be included as drivers to sustainability reporting.

It should be noted that additional industry stakeholders exist with a lesser influence on

sustainability reporting including the media, port and terminal operators, intermodal

operators (road, rail, and air), financiers/ship owners, employees, and end consumers.

Customers

Shipping customers are defined as those who purchase transportation services from

maritime container carriers. This stakeholder group puts direct pressure on carriers to

report on both their social and environmental performance. Some examples of large

maritime shipping customers are Nike and Heineken. Third-Party Logistics (3PL)

Companies can also be considered a shipping customer in the eyes of the carrier. 3PLs

act as middleman, selling transportation services to brands and aggregating shipping

demand in order to purchase transportation services at lower rates from container

carriers. 3PLs influence carrier reporting in the same manner as customers, passing on

customer requests for social and environmental information to carriers. Some

examples of 3PLs include DAMCO, DHL and DBSchenker.

Regulators

Regulation in the maritime shipping industry is a partnership between two entities, the

International Maritime Organization (IMO) and its constituent member countries. The

IMO was created by a UN convention in 1958 and acts as the self-regulator of the

maritime shipping industry, primarily focused on safety, security and prevention of

marine pollution. As a group, the IMO creates instruments as standards for marine

operation and works to follow these instruments through to implementation by its

member countries. An example of these instruments is the International Convention

for the Prevention of Pollution from Ships (MARPOL) in 1973, which regulates

accidental and operational oil pollution as well as chemicals, goods in packaged form,

sewage, garbage and air pollution (IMO). The IMO has a clear impact on industry

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sustainability reporting, as their three core areas of regulation are safety, security and

pollution – key sustainability topics for carriers. Further, compliance with member

country laws based on IMO regulations requires carriers to report on these issues.

Classification Societies

Classification societies are non-governmental organizations that act as insurance

bodies, setting and verifying technical standards for the construction and operation of

ships to better identify the risks in operation. They are contracted by carriers to

validate that a ship is built according to these standards, and also carry out routine

audits of the ship in service to check compliance with the standards (Lloyd’s List).

The pressure exerted on a carrier is inherent to this process – societies oblige the

carriers to report on certain information to be compliant, and when a ship is found to

be non-compliant, the carrier must work towards compliance to become “classed” by

the society. Classification societies also lobby the IMO, which can have additional

consequences on the regulation of carriers. The largest names include ClassNK, ABS,

and Lloyd’s Register (Lloyd’s List).

Activist Groups

Activist organizations are generally reactive and serve the place pressure on carriers

with poor sustainability practices. These organizations produce reports and conduct

campaigns against offending carriers with the aim of raising public awareness,

increasing political attention, and eventually changing the practice and performance

of the company. The two largest activist groups in maritime shipping are WWF and

Greenpeace.

Industry Associations

The term industry associations can cover a broad range of non-governmental

organizations (NGOs), including trade organizations working on industry topics,

customer organizations focused on supply chain management, or trade unions

representing seafarers. Each of these organizations have different types of influence

on sustainability reporting: trade organizations generally enable container carriers to

develop standards and the means by which to measure and report on sustainability

issues, customer organizations pressure carriers to produce information relative to

their particular industry, and labor unions work to ensure that carriers demonstrate

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their respect for seafarer rights. Examples of trade organizations include the

Sustainable Shipping Initiative (SSI), the Environmental Ship Index (ESI), the Clean

Shipping Initiative (CSI), and the Clean Cargo Working Group (CCWG). Examples

of customer organizations include the European Shippers Council (ESC) and the

Global Shippers Forum (GSF). An example of a large trade union is the Seafarers

International Union of North America (SIU).

Environmental, Social, and Governance (ESG) Analysts

The past 10 years have seen the rise of specialty agencies that act as advisors to

investors on the extra-financial performance of companies, categorized here as ESG

Analysts. Analysts submit requests to maritime carriers to complete and submit

comprehensive questionnaires that cover their environmental, social, and governance

performance, and rate and rank the responses by industry for interested investors.

Examples of ESG Analyst groups include MSCI, Vigeo, and Sustainalytics.

Sustainability Indices

A sustainability index is a market listing that highlights companies managed in a way

that respects the environment and society. Listing on a sustainability index often

rewards companies with increased respect and legitimacy, and grants access to

socially and environmentally conscious investors. Indices seek representation across

all major industries including maritime transportation, and similarly to ESG Analysts

send out requests for sustainability information through questionnaires, obliging

carriers to report on their sustainability practices. The largest of these indices includes

the Dow Jones Sustainability Index (DJSI) managed by RobecoSAM, the

FTSE4Good Index owned by the Financial Times and the London Stock Exchange,

and the Ethibel Sustainabilty Index (ESI) managed by Standard & Poors.

From this review of stakeholders, it is apparent that customers, ESG analysts and

sustainability indices have the most direct influence on a container carrier’s reporting

practices given the industry’s current financial crisis. All three of these groups send

direct questionnaire to carriers on their social and environmental practices, and all

three have shareholder groups directly monitoring carrier companies’ financial

sustainability. Pressure from each of these three groups is therefore considered

potential drivers for carrier sustainability reporting.

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This brief industry overview provided key insight into the operations, value chain

relationships, and stakeholder pressures exerted on maritime container carriers. The

following section will put together the list of potential barriers and drivers to reporting

that have been identified thus far in the research in order to answer the second

research question–highlighting the key barriers and drivers specific to sustainability

reporting in the maritime container shipping industry.

4.3. Identifying Industry Barriers and Drivers This section intends to identify the key industry barriers and drivers to maritime

container carrier sustainability reporting. First, the author presents a full list of

potential barriers and drivers to reporting that have been identified throughout this

study, including in the literature review and in the study of the industry value chain

and stakeholders. Added to this list are additional potential barriers and drivers

identified in an archival Factiva search6 of industry social and environmental shocks

over the past 10 years. The author then develops a shortlist of potential barriers and

drivers, presents the case for each, and provides discussion from the industry

stakeholder interviews that either confirms or denies the relevance of the barrier or

driver. Conclusions are presented in the final section of the thesis.

6 The Factiva search was performed using certain keywords inspired by the author’s previous work in this sector, including maritime transport, maritime freight, container ship, environment, social, accidents, disasters, human rights, piracy, and risk. Full details of this search are available in

Appendix 4.

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The full list of barriers and drivers identified throughout this study are as follows:

Table 7: Full list of Potential Barriers and Drivers. Source: Author

From this long list, the author chose the following barriers and drivers to explore

further and discuss with industry stakeholders. The reason for selecting each barrier

and driver is discussed one-by-one in the following section.

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Table 8: Short List of Barriers and Drivers. Source: Author

4.4. Barriers to Reporting

4.4.1. Regulatory Structure The study of industry stakeholders revealed that regulation in ocean transportation is

different than that of land-based industries. Companies who own assets and operate

physically within a country are subject to the local laws and regulations of that

country, and the host country has the ability to enforce regulations if a company is

found in violation of a law. Ocean transportation is not physically located in one

specific country. The industry’s assets (ships) operate in international waters and only

temporarily rest within national jurisdictions to load and unload their cargoes, at

which time the ship is subject to national laws. However, even then there are

questions of who is directly implied by these laws, due to the complexity of ship

ownership (see: Complex Ship Ownership).

Further, there exists no international governmental jurisdiction that can create and

enforce regulation on ocean transportation in international waters. The International

Maritime Organization was created in the 1940s as a self-regulatory body under the

auspices of the United Nations in reaction to a growing need for standards and legal

instruments to govern the industry (IMO). The IMO has 170 member states that

participate and agree to locally adopt the IMO’s regulations and enforce them as

national law. Yet the effectiveness of this structure greatly depends on the vigor and

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robustness of each member state’s own expertise, experience and resources enabling

them to enforce these laws. In addition, there is a limited amount of sanction power

that the IMO has to hold the member states accountable. Consequently, this creates a

situation where there exist theoretical international laws, but in reality there is an

inequality in how they are enforced. This raises the question: Who is capable of

enforcing law on carriers?

4.4.1.1. Stakeholder Discussion Interviewees thought that regulation has not been strict enough to push carriers

toward sustainability (Helfre). Even those who feel the IMO serves as a useful self-

regulatory body believe it faces issues of global governance (White) when it comes to

national enforcement of regulations. An illustrative case of the perceived weakness of

the IMO’s member state structure is the Republic of Korea, which has been part of the

IMO since 1962 but did not begin enforcing regulation on maritime carriers until

2010-2011 (Oh). Further complicating the regulatory structure, interviewed experts

agree that regulations cannot reach in international waters (White, Karlsson), creating

a contradictory situation for enforcement. Re-examining the case of Korea, even

though the government is now paying attention on a national level to the IMO-drafted

regulations, the country’s container carriers operate in international waters outside of

the short sea range where Korea has jurisdiction - so the government cannot actually

enforce the regulations (Oh).

Regulatory issues run deeper than weak enforcement and border on voluntary

avoidance. Interviewees mentioned that flags of convenience have for a long time

given carriers the ability to avoid regulatory pressure at a national level (Karlsson). If

this voluntary practice goes unchecked, the continued lack of transparency will

reinforce the industry status among ESG analysts (and thus investors) as a laggard in

sustainability (Helfre). In addition, external stakeholders have long viewed shipping

as the most environmentally friendly mode of transport. As a result, the maritime

industry has received significantly less regulatory pressure to report on its

environmental performance than road and air transport have received (Karlsson) in

the past decades.

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Paradoxically, and almost despite these factors, shipping customers note that carriers

are often too preoccupied with the notion of meeting regulatory compliance – to the

detriment of sustainability reporting. Policy makers note that regulation has

debilitated the industry, which has created carriers who are too dependant on

regulations and so caught up in compliance that they do not see the need to report

beyond what is required (Deengar). An interviewed shipping customer mentioned that

the resistance was palpable 10 years ago when asking carriers to report on anything

more than required by regulation (Vance), and it has taken a number of years to reach

a certain level of transparency and willingness to share such information.

Similarly to ownership, regulatory weakness continues to exist today and must be

considered a limiting factor rather than a strict barrier. One interesting potential

solution noted by a policy maker to overcoming this barrier is more active

participation in the legislative process on the national level. Engaging with

policymakers to provide expertise on the industry to the policymakers to guide the

regulation. Further, learning from policymakers in order to voluntarily report on

certain topics may prevent the creation of additional legislation (Deengar).

4.4.2. Complex Ship Ownership The study of the industry value chain revealed that ownership is complex and

different for each vessel. Ships are often owned by a bank or group of financiers,

managed by a carrier company headquartered in their home country, registered or

“flagged” in a second country, and operated by a company independent of the carrier.

Further, when it comes to local law enforcement, ships are steered into and out of

national ports by a pilot working for the local port authority of that country. This

ownership and operation structure complicates the attribution of consequences for

individual actors when a ship is found to violate a law. This raises the question:

Which actor is legally responsible for a ship?

Further, ship owners often wish to conceal their identity. A 2003 report by the OECD

entitled “Ownership and Control of Ships” concludes that it is very easy and fairly

inexpensive to establish a complex web of corporate identities to cover the identities

of beneficial owners of ships (OECD 2003) - a beneficial owner being defined by

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Investopedia as “a person who enjoys the benefits of ownership even though [legal]

title is in another name” (Investopedia). The means of creating this web are

mechanisms legally available in many jurisdictions, and result in an incorporated

International Business Corporation or Private Limited Company that can do business

around the world (OECD 2003). The most important feature that facilitates this

process is the ability of corporations to be registered as owners of vessels, and the

most common mechanisms to provide anonymity for beneficial owners are bearer

shares, nominee shareholders, nominee Directors, the use of intermediaries, and a

sustained failure of jurisdictions to require reporting from ship owners. Open registers,

defined in the following section, are the easiest jurisdictions in which to register

vessels covered by such complex legal and corporate mechanisms (OECD 2003).

The OECD does not venture into value judgment on this practice, however the paper

does hypothesize on the reasons why owners may seek anonymity. The report states

that while certain owners may have perfectly legitimate or innocuous reasons, others

may seek anonymity to minimize legal and fiscal exposure, or worse yet, for reasons

that are “absolutely illegal, such as criminal activities or money laundering” (OECD

2003: 4). This raises the question: Does this ship ownership structure act as a means

to avoid disclosure?

4.4.2.1. Stakeholder Discussion Complex ownership structure within the industry was identified by interviewees as a

key factor that delayed reporting. Ownership was called by one expert “the unsung

issue in sustainability,” resulting in entangled structures that have an effect on

accountability and liability and make it harder for customers and stakeholders to track

down responsible parties (White) to respond to requests for information (Sterling).

In maritime shipping, container carriers own perhaps half of their vessels and charter

the other half. This ownership structure helps the carriers to avoid credit issues due to

the cyclical nature of the market (Helfre), but limits their control and responsibility in

ship operations. There is a famous saying that “you can’t tell a ship’s captain what to

do” (Farrag), and carriers themselves admit limited control to what happens on board

chartered vessels including factors like fuel use and consumption (Oh). This was

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noted to be a common consequence of outsourcing – those who outsource the

transport of goods to independent ship owners feel less responsibility to measure the

sustainability impacts of those vessels (Karlsson). In addition, carriers do not own the

containers they carry and in most cases do not know what they are transporting (Oh).

An interviewee illustrates ownership complexity with an example: a ship management

company from Hong Kong running ships through the Philippines and trying to get the

maximum return for the ship-owner is concerned with the shipping rates and hardly

with anything else, including the sustainability of its operations (Deengar).

It is interesting to point out that complex ownership is a factor that still exists in the

industry, even though a number of carriers have begun to report. Due to this, the

author must conclude that ownership is not a barrier but rather a limiting factor to

reporting.

4.4.3. Poor Media Image / Poor Communications: Stakeholder Discussion

A third factor tested during stakeholder interviews is the poor image of the industry as

presented in mainstream media. Stakeholders agreed that there exists a negative

media spiral linked to lackluster carrier communications efforts that remains a

sustained barrier to reporting (Sterling). Carriers do not traditionally proactively

communicate for fear that reported information is poorly received, yet because the

mainstream media only features the industry with stories of maritime accidents or

environmental disasters, the industry’s image remains poor (Sterling). This is

confounding to analysts, who are curious to know why carriers don’t communicate

positive efforts through the media (Helfre), noting that those companies who perform

best on sustainability rankings are those who actively communicate (Karlsson). One

interviewed carrier mentioned that is a long-standing industry tradition, and that top

company management at the interviewee’s company is still unwilling to report on

issues such as corruption (Oh).

Given these results the author concludes that this factor, while not as systemic as

factors such as complex ownership or weak regulatory enforcement, remains a key

barrier to sustainability reporting.

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4.4.4. Distance From Public Eye The author’s Factiva search and value chain analysis revealed that unlike other

industries, maritime transportation is far from the regard of the public in many ways.

• Physical: While trucks and trains physically enter our daily lives, ships are

remote and contained to offshore routes, out of sight.

• Commercial: This is a B2B industry and consumers do not (often) purchase

ocean transportation directly, so they do not have a direct commercial link to

the activities of the industry.

• End Product: Transportation has only recently entered into the scope of

product labeling schemes, and no indication of the impact of maritime

shipping is present on products.

• Media: Outside of disasters, traditional media outlets are not interested by the

industry, and so it does not enter into regular consumer awareness.

This raises the question: Does the distance from the public put less pressure on

carriers to report?

4.4.4.1. Stakeholder Discussion

Originally thought by the author to be a strong barrier, distance from the public eye

was generally discounted. In fact, certain interviewees compare maritime shipping to

other industries such as oil & gas companies who are also out of the public eye but are

very advanced in sustainability reporting (Borman). Other interviewees failed to see

the link between this distance and reporting practices (Helfre).

4.4.5. Flags of Convenience Further complicating a ship’s subjectivity to laws is the question of ship registration.

The study of the industry value chain revealed that according to international law, and

to the admiralty laws of most states, every vessel engaged in international trade must

be registered in a country, called its flag state (ICFTU 2002). In addition, and also

consistent with international law, any country has the right to allow a ship to fly its

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flag. This registration process obliges the vessel owner to follow the host nation’s

laws and regulations in return for the protection and sovereignty of that state.

A practice known as “flags of convenience” (FOC) has developed, in which ship

owners register their ships in foreign countries with open registries, but have no clear

link to the flag state. The FOC system has given rise to a phenomenon where flag

states compete for ship registrations in a race to the bottom, promising lower costs by

keeping fees, taxes, and regulation light. This practice has proven to be profitable for

the vessel owners who benefit from the lax regulation and reduced ship registration

costs, and also for the flag states themselves. Unfortunately, it has also driven

increased registration to states that have inadequate levels of accountability and

responsibility.

The International Transportation Workers Federation (ITF) maintains a list of 34

registries it considers to be FOC registries. Today, 55% of the world merchant fleet is

registered to just the top 11 countries identified by the ITF, with the additional 23

countries accounting for under 1% each. The registers of Panama, Liberia, Marshall

Islands, Bahamas, Malta, and Cyprus alone account for more than 50% of the global

fleet registration (ITF Global). This is in phase with UNCTAD, who reports in the

Review of Maritime Transport 2012 that “an estimated 71.5% of the world tonnage is

now registered under a foreign flag, that is, vessels operate under a different flag to

that of the nationality of the owner” (UNCTAD 2012: 42).

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Figure 7: Top 11 Flags of Convenience; Source: Wikipedia

In general, this system provides further shielding for ship owners from the need to

report on their activities, and poses an obstacle to the enforcement of international law.

This raises the question: Do flags of convenience allow carriers to avoid

accountability for their operations?

4.4.5.1. Stakeholder Discussion

While flags of convenience were not discounted as a barrier, they were also not seen

as a separate barrier but rather linked to both ownership and regulatory structure.

4.4.6. Lack of Sustainability Resources: Stakeholder Discussion An unprompted factor identified by interviewees which could explain the lag in

reporting is the observation that most carriers do not even have sustainability teams in

place, nor do they approach sustainability from a strategy or performance perspective

(Farrag) – key internal structures and processes enabling sustainability reporting

practices. Interviewees agreed that lack of resources is one of the key barriers for non-

reporting carriers. According to an ESG analyst, a number of the non-reporters are

limited by internal constraints or lack of resources (Helfre), and they do not have the

manpower or staff to engage in the exercise (Oh). Maersk offered itself as an example

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– the key reason for its ability to issue a sustainability report is the fact that Maersk is

a large company with a large sustainability team. Maersk knows that other carriers

don’t have dedicated personnel (Sterling). As an added factor, carriers have been

traditionally focused on issuing a different set of reports associated with safety and

security of their vessels (Sterling), which may have pulled resources in a different

direction.

These results have convinced the author that lack of internal sustainability focus or

lack of a dedicated sustainability team has been and remains a key barrier to

sustainability reporting.

4.5. Drivers to Reporting

4.5.1. Maritime Accidents and Environmental Activism Factiva research of industry social and environmental shocks over the past 10 years

revealed that the maritime shipping industry rarely appeared in mainstream media

outlets unless it was in reaction to a maritime accident that caused eventual pollution.

A particularly illustrative example is the Prestige oil spill of November 2002. The

Greek-owned oil tanker Prestige left Portuguese harbor and almost immediately

noticed that the ship’s hull integrity was compromised. The captain issued a distress

call, but was refused harbor by Spanish, French and Portuguese authorities that feared

pollution of their coastlines. As a result, the vessel was forced to remain in stormy

waters and eventually split in two, releasing 125 tons of oil a day and totaling to over

63,000 tons of leaked oil, causing the largest recent environmental disaster in the

maritime industry. In response, the event was publicized and heavily criticized by the

WWF which prompted the vessel’s classification society ABS to issue a report on the

event, and the IMO and EU to pursue new regulation on requiring double hulls for all

future vessel construction. The author therefore hypothesizes that maritime accidents

are a potential driver that push maritime actors to report on certain aspects of their

sustainability performance, notably their impacts on the environment. In addition, this

example demonstrates that NGOs take an activism role in response to maritime

accidents, which the author retains as a second potential driver to reporting.

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4.5.1.1. Stakeholder Discussion

• Environmental Activism – Carrier companies, analysts and policy makers

agreed that militant environmental activism rarely happens in maritime

container shipping (Sterling), to the point where it is generally non-existent

(Helfre). Even mainstream environmental non-profits mentioned that activism

has not had much effect (Borman) on sustainability reporting practices. An

interviewed policy maker noted that activism is not prevalent for container

carriers, but more for tankers or bulk carriers (Deengar).

• Maritime Accidents – The occurrence of maritime accidents was almost

universally rejected as a barrier to reporting, and certain interviewees saw it as

a driver to reporting when accidents enter the public eye (Borman). An

interviewed analyst agreed with a policy maker that container carrier accidents

that expose the products of a known brand might cause the brand to report

(Helfre, Deengar) but not the carrier.

4.5.2. Increased Regulation

The past few years have also given rise to increasing regulations placed on the

maritime shipping industry. While the IMO’s MARPOL regulation went into effect in

1978, it was recently amended in 2000 to increase the sanctions against non-

compliance (IMO). The IMO also issued the International Safety Management Code

on July 1, 1998 and in the same year introduced amendments to the International

Convention on Standards of Training, Certification and Watchkeeping for Seafarers.

New conventions were adopted in the 2000s related to anti-fouling systems, ballast

water management and ship recycling (IMO). In addition, the 2000s brought a focus

on maritime security with the 2004 International Ship and Port Facility Security

(ISPS) Code as well as the 2005 Convention for the Suppression of Unlawful Acts

(IMO). All of these regulations touch on key elements of sustainability, such as

environmental protection, employee safety, bribery prevention, and security, and

increase the compliance and reporting requirements of maritime carriers. The author

retains that this recent increase in regulation acts as a potential driver for

sustainability reporting.

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4.5.2.1. Stakeholder Discussion

Interviews have revealed that an increase of industry regulation cannot be considered

a driver of sustainability reporting. An industry consultant noted that social and

environmental regulations are tightening up, giving carriers common standards

against which they can measure their performance (Farrag). Experts agree that

regulations, such as the IMO regulations identified earlier on ballast water and SOx

emissions, are enabling carriers to report (Karlsson) and to account for their activities

(Sterling). However, there is a shared sentiment that while regulation helps to

standardize the issues addressed by the industry, it does not directly drive reporting

(Farrag, Sterling). And as noted, too much focus on regulation has caused carriers to

focus more on compliance than on reporting (Deengar). The author therefore

concludes that regulation can in certain ways be considered an enabling factor of

reporting, but not a key driver.

4.5.3. Customer Pressure

Additionally increasing is customer awareness of the environmental impacts of their

supply chain providers, all the way to maritime container transportation. Through his

professional work, the author has seen an increase in customer pressure exerted on

container carriers by the shipping customers involved in the Clean Cargo Working

Group, an industry initiative focused on environmental performance improvement

within the maritime transportation industry. The group was formed in 2003 when

concerned shipping customers came together to identify possible ways of improving

their carrier performance, and today provides those shipping customers the

opportunity to measure carrier performance and make procurement selections based

on reported information. The author sees the success of this initiative as justification

for defining customer pressure as a potential driver for increased carrier reporting.

4.5.3.1. Stakeholder Discussion A key driver identified by interviewed experts that pushed container carriers to begin

publishing sustainability reports was growing pressure from shipping customers. An

interviewed reporting expert noted that the environmental impacts of shipping were

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long unknown to the customer (White) or simply not considered as the biggest impact

that warranted their attention (Sterling). Prior to 10 years ago, customers were more

focused on the classic purchasing criteria such as delivery date and price (Vance). The

lack of awareness also extended to other stakeholders such as regulators and analysts

(Helfre), and even carriers themselves were not aware at the time of what constituted

sustainability issues (Oh).

An ESG analyst noted that awareness began to grow among customers in 2003, and

has redoubled since the economic crisis in 2008 (Helfre). At the time, customers

began asking questions about carriers’ green programs and social initiatives, and even

though carriers were working in these areas they did not know to report them as

sustainability (Oh). This awareness grew in part to the publication of certain reports

and the growth of emerging sustainability standards. UNEP released a report in 2006

that demonstrated the significant percentage of greenhouse gas emissions contributed

by the maritime shipping industry (Farrag). Initiatives like the Carbon Disclosure

Project issued guidance on how to measure what they call Scope 3 emissions

(including transportation services) in 2011, which prompted customers to look into

their supply chains emissions (Helfre).

As a result of this rising awareness, shipping customers, led by the biggest brands or

global players, have increasingly pushed into their supply chains to ask transport

providers to report on their emissions (White, Oh, Farrag, Karlsson, Sterling, Helfre).

This pressure has been strongest on container carriers, which transport the goods of a

large number of customers at once and would have received multiple requests per

vessel (Deengar). An interviewed carrier noted that customers have been a key factor

in raising awareness of sustainability issues among carriers (Oh), who now see

reporting as an opportunity to demonstrate their sustainability performance to their

customers (Borman). Customers note that even today’s non-reporters are feeling the

pressure to report, and asking customers how they can begin building sustainability

reports (Vance).

These results confirm the author’s observation that customer pressure has resulted in

increased transparency and reporting by carriers. It is interesting to note that not only

did this pressure push carriers to report, but it also increased their capacity to do so.

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Further, customer pressure enabled direct dialogue with customers to discuss which

issues were relevant for reporting, and established this discipline of customer

engagement among carriers. The author confirms that customer pressure is a key

driver of sustainability reporting, and stands to continue increasing reporting practices

among industry laggards.

4.5.4. Sustainability Ratings: NGO/Index Pressure: Stakeholder Discussion

Along with customer pressure, interviewed experts note that NGO and Sustainability

Index pressure have further acted as a driver for reporting. The rise of non-

governmental movements such as Green Awards, the Clean Ship Index (CSI), and the

Environmental Ship Index (ESI) have increased the requests for information from

carriers on their sustainability practices (Borman). Standards organizations such as the

CDP and sustainability indices such as the Dow Jones Sustainability Index have

increasingly issued questionnaires to carriers asking about their sustainability

performance (Oh). As one interviewed carrier notes, in order to respond to these

diverse and broad questionnaires, carriers had to begin monitoring their own

sustainability activities and develop internal processes to report on them (Oh).

The author sees a clear relation between these increased sustainability ratings

initiatives, which have developed over the past 10 years, and the evolution of carrier

reporting as demonstrated in the content analysis study. Though unprompted, this

factor is therefore considered to be a key driver in sustainability reporting. However,

further study would be required to understand the relationship between the

information requested from these NGOS and sustainability indices and the

information eventually published in sustainability reports.

4.5.5. Peer Reporting: Stakeholder Discussion Peer reporting is a factor identified by experts both as a driver to reporting activity as

well as a barrier. An interviewed sustainability analyst explained it as follows: a

market leader issues a sustainability report and causes other companies to emulate its

activity, but once this first mover advantage has been claimed by one or two

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companies, these established reports acts as a disincentive for other companies to

report (Karlsson). According to expert, this has now become the case in maritime

transport, where a few regional carriers have taken the lead and act as barriers to

further reporting (Karlsson, Borman). An interviewed carrier described the situation

in Korea as clear example of this phenomenon. In Korea the cultural drive is to be

number one. Now that Hanjin Shipping has taken the lead on sustainability reporting,

other carrier companies have lost their incentive to report (Oh).

Experts also note that laggard carriers are not convinced of the financial value

proposition in reporting (Farrag), or do not see how to make money doing it (Borman)

now that the competitive advantage has disappeared. Customers note that this is a

missed opportunity, since they use reported information to make better buying

decisions and reward carriers who are making the investment into newer vessels and

technologies. According to these customers, this is a direct financial return investment

that carriers should consider (Vance).

4.6. Results The summary findings from the study of key industry barriers and drivers to

sustainability reporting are as follows:

Table 9: Resulting Barriers and Drivers. Source: Author

From the short list of barriers, both poor media image and lack of sustainability

resources were confirmed as barriers, distance from public eye was discounted as a

barrier, and both regulatory structure and complex ship ownership were categorized

as limiting factors, or in other words, not preventing carriers from reporting but

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making it more difficult to do so. From the short list of drivers, both customer

pressure and NGO/Index pressure were confirmed as drivers, both maritime accidents

and environmental activism were discounted as drivers, and increasing regulation was

cited as an enabling factor, or in other words, not obliging carriers to report but

facilitating reporting. Peer reporting was found to be both a driver and a barrier to

reporting, depending on the situation in which it arose.

These results answer the second research question in this study, and provide insight

into why container carriers were delayed in their reporting practices, and what

eventually pressured them to begin issuing sustainability reports. Given the small

sample size of the industry stakeholders interviewed, these barriers and drivers must

be considered indicative but not exhaustive.

4.7. Trends in Sustainability Reporting During the stakeholder interviews, in addition to questions on barriers and drivers the

author asked questions about current factors that stand to influence sustainability

reporting practices going forward. The following is a brief discussion of these factors.

4.7.1. Industry-specific reporting Experts agree that the biggest trend in reporting today is the development of industry-

specific guidance. Increased focus on sector-specificity from three of the major

voluntary guidance organizations, GRI, IIRC, SASB, will have an impact on all

sectors including maritime transportation (White). There is also increased expectation

that shipping will come up with its own standards over the next decade (Borman),

finding industry-specific topics relevant to its stakeholders (Karlsson). Further,

analysts believe that the CDP stand to develop more elaborated sections with

questions specifically concerning shipping (Helfre).

4.7.2. Reporting laws Experts also noted that national mandatory reporting laws, specifically carbon-related

laws will push carriers to develop reports in the future (Farrag). Sustainability

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analysts claim that this move from voluntary to mandatory reporting at a national

level is the only driver that will convince non-reporters to issue sustainability reports

(Helfre). As one expert said clearly, the period of voluntary reporting is over

(Karlsson).

4.7.3. Materiality While materiality is an identified weak point in current reports, the market leader

Maersk line noted that there will be a divergence to 2 types of reports in the future:

those that try to follow GRI guidance in a comprehensive way, and those that are

leaner and more material (Sterling).

4.7.4. ESG Analysis ESG analysts noted the industry’s largest player Maersk Line is no longer answering

certain requests from agencies like Sustainalytics (Helfre), perhaps indicating that the

dramatic increase in requests through sustainability ratings and indices over the past

10 years is beginning to cause carrier fatigue.

This section identified the key barriers and drivers to the industry’s current reporting

practices as studied through the maturity analysis. The next section will provide final

cross-analysis and conclusions from the global study.

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5. Conclusions

5.1. General Conclusions This study intended to provide a snapshot of the current state of sustainability

reporting in the maritime container transport industry, by examining the current

literature on the industry’s reporting practices and performing empirical studies on

both reporting maturity as well as on the key drivers and barriers to reporting

practices. The questions it set out to answer were:

• What is the current state of sustainability reporting practices by maritime

container carriers? (By extension, what is the maturity of current reports?)

• What industry barriers and drivers exist to the practice of sustainability

reporting which explain this current state?

Both a review of the available literature and an empirical study of reporting using

content analysis revealed that the industry is in fact a laggard in reporting. A 2011

KPMG survey of top reporters ranked transportation 14 out of 16 sectors in terms of

report availability (KPMG 2011). Content analysis showed that the maritime

container shipping industry only began issuing environmental reports in 2002, well

behind the origins of standalone environmental reports in 1989 (Kolk 2004). Asian

carriers were first to issue standalone reports and it took an additional five years for

the first European carrier to issue similar reports.

In addition, the industry attained its current level of sustainability reporting maturity

(measured by the six developed indicators: presence of GRI Index, materiality

analysis, stakeholder commentary, KPIs, assurance statement, and robust reporting

cycle) around 2008 when four of the seven reporting carriers scored on three of the

six measured indicators. However, even today, only six of the industry’s top 20

carriers by volume score on these same three indicators, showing that the industry has

not improved further since 2008, reaching a perceived plateau. Interviews with

stakeholders later confirmed these findings, with six out of 10 interviewees stating

without prompting that the industry is lagging in reporting.

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Figure 8: Key Barriers and Drivers to Sustainability Reporting; Source: Author

The second phase of the study, composed of analyzing the industry value chain,

archival research on industry shocks, and a series of semi-structured interviews with

industry stakeholders, revealed two key barriers that have prevented industry

reporting. The identified barriers were lack of sustainability resources and a negative

media image of carriers:

• The industry currently suffers from a partial and negative media image since

mainstream media outlets seem to not find general interest in reporting on the

maritime industry (perhaps due to its complex technical nature) except

surrounding such events as maritime accidents, pollution, corruption, or piracy.

This has resulted in a tense relationship between media and maritime carriers

and reinforced the maritime industry’s “long-standing tradition” (Oh) of

resistance to communicating on controversial topics, and by extension, a

barrier to reporting on a broad array of sustainability issues.

• A second barrier finds that non-reporting carriers may not be issuing

sustainability reports for lack of resources (funds, employees, time) put behind

sustainability efforts, resulting in the lack of a dedicated internal sustainability

team or limited engagement on sustainability by upper management. Since this

study examined only the twenty largest maritime carriers, the author does not

believe this is due to a lack of funding. Instead, this barrier indicates a

potentially deeper problem of corporate culture within the industry, namely

that carriers do not see sustainability as key to their continued financial

performance. Consequently, lack of resources could be seen as a false barrier,

or more likely, a symptom of industry culture that needs further study.

In addition, this study has identified limiting factors to reporting, which either make

reporting difficult or allow carriers to avoid reporting but do not prevent it outright.

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These limiting factors are complex ship ownership structure and weak regulatory

structure:

• The maritime shipping industry depends on the operation of capital-intensive

vessels that pose many risks in their operations, which has seen the rise of

individuals looking for a way to profit from investing in vessel ownership

while simultaneously distancing themselves from risks, resulting in complex

ownership structures through both shell companies and registration of vessels

in countries with low regulations, a practice known as flags of convenience.

Complex ship ownership is therefore a limiting factor since, as carriers are

decreasingly the owners of the ships they operate, it affects a carrier’s control

and influence on a vessel’s operations and impacts. This limited liability,

accountability, and responsibility results in limited motivation (or perhaps

means) for a carrier to report on a vessel’s sustainability performance. Further,

there is little recourse for stakeholders to pressure carriers to report on the

overall sustainability of their fleet, since both stakeholders and carriers have

difficulty holding legitimate owners accountable.

• Weak regulatory structure is also identified as a limiting factor to reporting.

The maritime shipping industry operates in unregulated international waters,

which makes it difficult for both the industry’s self-regulatory body, the IMO,

and its member states to enforce regulation on carriers. Stakeholders add that

regulation has thus far not pushed carriers to sustainability; in part because

maritime shipping is seen as the most environmentally friendly mode of

transport and regulatory attention has focused elsewhere. Additionally, the

practice of flags of convenience limits the effectiveness of the current

regulation in place, since they are more broadly enforced in non-flag of

convenience nations. It would seem from this discussion that weak regulatory

structure is indeed a barrier to sustainability reporting, however, this assumes

that regulation is the sole driver to reporting, and that its absence would be a

complete block to reporting, which is proven not to be the case. Therefore

weak regulatory jurisdiction and enforcement have been a hindrance to

widespread sustainability reporting, limiting what carriers are obligated to

report, but it has not prevented the practice from occurring voluntarily.

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For both of these issues, additional research would need to be performed at a more

granular level of detail, looking specifically at the types of ownership structures that

exist within the industry (including the role played by flags of convenience), and

looking specifically at individual regulations, to understand how these factors directly

link with reporting practices.

Though the current regulatory structure is seen as a limiting factor, increasing

regulation itself has been identified as an enabling factor to reporting, which helps

build reporting capacity but does not oblige publishing, and as such is not a driver.

• An increased focus by regulators on the environmental performance of the

maritime shipping industry has led to increasing regulation over the past few

years. This is forcing carriers to begin measuring and reporting on certain

sustainability information, but does not obligate the publication of a report. In

the absence of specific sustainability reporting laws, this increasing regulation

is not seen as a driver of reporting.

This study has identified two key drivers that have pushed carriers to report, both

linked to stakeholders: customer pressure and NGO/Sustainability Index pressure.

• Customer pressure is key to explaining the rise in reporting over the past 10

years. Certain events such as the publication of the UNEP report “Bridging the

Emissions Gap” in 2006, or the 2001 publication and continuous refinement of

the GHG Protocol Accounting Standards, have demonstrated to shipping

customers the significant percentage of greenhouse gas emissions contributed

by the maritime shipping industry, and prompted customers to look into their

supply chains and ask transport providers to report on their emissions. This

pressure from customers has been a factor in raising awareness of

sustainability issues among carriers, who have begun to see reporting as an

opportunity to differentiate themselves to their customers through

sustainability performance. Similarly, it is important to note that pressure from

customers has direct financial implications for carriers, since sustainability

performance is becoming an increasing evaluated criterion in bidding

processes. Customer pressure is therefore a driver, since it at once builds

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carrier capacity to gather sustainability information and requires the

publication of this information in a synthesized report.

• NGO / Sustainability Index pressure refers to the rise of sustainability indices

such as the Dow Jones Sustainability Index, launched in 1999, or the

FTSE4Good Index launched in 2001, and the subsequent pressure placed on

carriers to report on information in order to be listed. In order to respond to

these diverse and broad questionnaires, carriers have had to begin monitoring

their own sustainability activities and develop internal processes to report on

them. Again, it is important to note that pressure from sustainability indices

has direct financial implications, as carriers have something to gain from

accessing an investor pool interested in rewarding sustainability performance.

NGO/Sustainability Index pressure is therefore a driver of carrier reporting, as

the indices specifically measure the quality of information published in

sustainability reports, requiring the carrier to report.

Identified as both a driver and a barrier to industry reporting is peer reporting. As

mentioned, an existing peer report can either eliminate the competitive advantage of

being a first-mover or encourage competitors to report in order to stay in step with

industry leaders. This was reflected in the analysis of industry reporting, as both Asia

and European regions saw first movers take the lead and drive one or two additional

carriers to report soon thereafter, whereas the entrance of Maersk Line seemingly

acted as a barrier to additional carriers issuing mature reports. Peer reporting would

therefore need to be studied on a case by case basis to understand its nature.

In sum, the author believes that this study of the industry’s reporting maturity as well

as its key barriers and drivers has served as a key starting point for improving industry

reporting going forward.

Carriers who are currently reporting can improve their report maturity in the eyes of

stakeholders by building a materiality process to select the most relevant reporting

topics, engaging with stakeholders to include their unedited feedback on report

quality, and by contracting independent third party assurance to increase the level of

trust in the reported information. Further, stakeholders suggest that carriers

communicate on how their sustainability efforts connect with the investment

community, that they include greater levels of transparency on lobbying and public

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policy efforts, and that they begin communicating on the social benefits provided by

carrier activity beyond philanthropic efforts. These recommendations are quick wins.

Conversely, non-reporting carriers may be encouraged to report if the barriers

identified in this report are overcome. Addressing the barrier of lack of sustainability

resources will most likely require proving the business case of sustainability to upper

management within carriers. Much progress on this front has already been made, but

this requires further work by external consulting firms, customers, and even internal

champions to demonstrate the potential financial, reputational, and legitimacy gains in

investing in sustainability. Groups like Natural Capitalism have worked to prove the

business case of sustainability, but these general studies need to be made more

relevant to actors in the maritime shipping industry.

Addressing the barrier of negative media image may prove easier, but it would most

likely require active invitations by media outlets to maritime carriers, giving them a

safe haven to present their efforts in a positive light. Thankfully, there are

developments on this front that may help encourage carriers and media to bridge the

gap. A recent example is the English news agency ITN, who will be creating a

dedicated news channel called ITN Global Logistics and Transport News featuring

maritime shipping initiatives (among other modes) and providing a platform for

industry actors to communicate on their achievements. This initiative by a mainstream

news outlet shows that media outlets respond to the interests of their viewers, who

increasingly want to know the sustainability impacts of their products, including how

they are transported. By levering consumer and customer interest in sustainability,

additional media outlets may be inspired to engage the maritime industry and break

the communications barrier.

This study has therefore succeeded in providing a snapshot of current reporting

practices, industry barriers and drivers, and potential avenues to improve reporting

going forward. However, the reporting landscape is constantly changing. This past

month saw the emergence of the new GRI G4 guidelines and the draft IIRC integrated

reporting standard, and this year stands to see increased focus on sector-specific

indicators and the rise of additional mandatory sustainability reporting laws. The

author feels that this fragmentation in standards may pose an additional barrier to

sustainability reporting for non-reporting carriers, adding to the complexity of what

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needs to be reported, by when and to whom. In addition, there is growing sentiment

that voluntary reporting period has done all it can to encourage carrier reporting, that

the first-mover competitive advantages have already been seized in major markets,

and that the period of voluntary reporting is over. In other words, there is a sentiment

that no additional efforts to overcome the current barriers and reinforce the identified

drivers will help the industry to break through the observed reporting plateau. If this

proves to be true, it remains to be seen if reporting laws will have enough weight to

push the last major maritime carriers to issue sustainability reports.

5.2. Limitations and Further Research The limitations of the conclusions in this research arise from methodological choices

made by the author. Concerning the content analysis, the author’s chose a narrow

scope of six representative indicators across the top 20 carriers by TEU volume

during the past 10 years. This small sample size is adequate for the sake of this paper,

but at best provides tendencies for this representative group rather than firm

conclusions for the entire industry. An additional limitation is the restriction of

examining only sustainability reports available on carrier websites, whereas other

documents or website content published by carriers were not examined. The author

chose this restriction to simulate the position of report users, who presumably do not

want to search for information across multiple documents but rather find the

information they need quickly and in one source. This choice could lead to incorrect

conclusions in case a carrier had published sustainability-related information

elsewhere or had produced a report which was not available online at the time of the

study. A further limitation is related to comparison, both the inherent incomparability

of sustainability reports, and the choice not to compare the studied sector with an

external sector. Finally, a potential problem with the findings is the underlying

subjectivity concerning the scoring of selected indicators, since the author was the

only researcher who analyzed reports for the reported information. A second

researcher may have helped to correct this subjectivity.

Concerning the series of semi-structured interviews, the limitations are directly linked

to the nature of interviews. While over fifty potential stakeholders were identified the

final pool of respondents who agreed to participate was out of the author’s control and

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accepted due to the time restrictions of the study. An additional limitation is in the

structure of the questionnaire, which the author designed to be semi-open ended but

also guided by certain discovered barriers and hypotheses.

Consequently, further research on the maturity, barriers and drivers of sustainability

reporting in the maritime container transportation industry is desirable, and should be

based on larger samples of both reports as well as interviewees. Differences in

sustainability reporting of the maritime container transportation industry and other

sectors should be evaluated as well. Further content research could be performed with

a broader range of criteria, specifically focused on the GRI framework and its draft

transportation sector supplement, which stakeholders identified would have increasing

importance in the reporting practices of carriers. And finally, further research on

barriers and drivers could be made more concrete through the use of case studies of

container carriers to provide specific examples of good and best practices to reporting.

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Appendix 1 – Full List of Analyzed Sustainability Reports

Full List of Analyzed Sustainability Reports; Source: Author

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Appendix 2 – Full Semi-Structured Interview Questionnaire Questionnaire | Jonathan Morris | Thesis on maritime container sustainability reporting The intention of the below questionnaire is to gather a variety of perspectives on maritime container sustainability reporting practices. I have invited container carriers, regulators, analysts, non-government organizations, reporting bodies, and sustainable indices to answer. Please answer the following questions as fully as you can, to the best of your knowledge. When in doubt, a longer, more diverse answer is preferable.

1. What is your overall opinion about sustainability reporting in the maritime container transportation industry?

a. How does sustainability reporting compare with other sectors? Is it behind other sectors? Is it more advanced?

b. Who do you think is the main audience? c. What purpose does sustainability reporting serve? d. Does it meet the needs of [you] / the key audience?

2. Despite initial environmental reports from carriers appearing in 2002, it took until 2006-2007 to see 5 or 6 of the major container carriers begin reporting. In your opinion, what are the factors that contributed to the late start in sustainability reporting?

a. What barriers within the industry prevented carriers from reporting on sustainability earlier?

b. Please provide your thoughts on the following barriers. Were these a factor in the delay of sustainability reporting?

i. Weak Regulatory Enforcement (open oceans, international policy) ii. Complex Ship Ownership Structures (owner, operator, charterer, etc) iii. Flags of Convenience iv. Distance from Public Scrutiny v. Poor Media Image (only enters mainstream media in case of accident,

corruption, etc) 3. In your opinion, what pressured carriers to begin reporting on sustainability?

a. What external factors or drivers encouraged or required sustainability reporting by carriers?

b. Were there significant events / regulations over the past 10 years that could explain the move towards sustainability reporting?

c. Please provide your thoughts on the following drivers. Were these a factor that pushed carriers to report on sustainability?

i. Maritime Accidents ii. Increased Regulation iii. Environmental Activism iv. Client/Customer Pressure

d. What external stakeholders pressure carriers to report on sustainability? 4. In more detail, what do you think of the quality of the current sustainability reports

themselves? a. What are some best practices of the sustainability reporting within the industry? b. What are the weak points in reporting? c. To whom are the reports addressing? d. Do the reports fulfill their purpose?

5. What trends or evolutions do you see within the next few years in sustainability reporting by carriers?

a. What current drivers could lead towards changes in sustainability reporting? 6. What possible improvements could be made to sustainability reporting by carriers?

a. What are the opportunities to create higher quality sustainability reports? b. What about for those companies not reporting, what would be the key motivating

factors

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Appendix 3 – Factiva Research Introduction to social and environmental Shocks in Maritime Transportation

Industry between 2003 and 2013

Historically shrouded and kept out of public scrutiny, the maritime shipping industry

has experienced growing pressure to report on its activities over the past 10 years.

These pressures have grown, in part, due to the increased awareness of industry

practices, accidents and scandals through media exposure, which has triggered

regulators, civil society and the public to hold the shipping industry accountable and

caused subsequent changes seen in industry reporting. The following is a recap of key

industry events over the past 10 years as research through news aggregator Factiva,

grouped into the principle categories of safety (negligent accidents), security

(piracy/terrorism attacks), environment (oil spills), and governance (illegal bilge

water and oil dumps). For each event, a short note is given on changes in industry

reporting.

Safety

Negligence

MV Tricolor

On December 14, 2002 in the early morning fog, the MV Tricolor collided with a

Bahamanian flagged container ship the Kariba with a load of 3,000 cars in the English

Channel, listing to its side and sinking in the middle of the channel. Despite

protections set up around the wreck, two days later the cargo ship Nicola, followed by

another vessel, the Vicky, carrying 70,000 tons of fuel, struck the sunken Norwegian

vessel after failing to heed French naval warnings. (Factiva: Fuel tanker hits sunken

ship in channel). The Vicky made it safely to a nearby harbor but its reinforced hull

was cracked in several places and it was leaking oil into nearby waters. According to

Numast spokesman Andrew Linington, 90% of these accidents happen as the result of

the human factor. He said that there is a constant drive to reduce crewing levels,

pushing people to work 80 to 90 hour weeks. (a lack of interest/recruitment in

seafaring).

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The actors involved were the two original ships involved in the collision, the Tricolor

and the Kariba, as well as the Nicola, the Vicky, and local French authorities. The

ship-owner of the Tricolor was Capital Bank of Scotland and its operator was

Wallenius Wilhelmsen Linesworth.

Reporting Consequences

Royal Bank of Scotland – no reported information.

Wallenius Wilhemsen – privately owned, no reported information, started

environmental reporting in 2005.

However, there was heavy media and NGO reporting.

MSC Napoli

In January, 2007 the MSC Napoli, carrying 2,318 containers, was deliberately

grounded near Devon, UK after suffering hull damage in the English Channel two

days earlier. The vessel issued a distress call, and authorities decided that the least

environmentally risky option was to tow the vessel in. However while towing to port

for repairs, the vessel was beached after fears arose of it breaking up (Factiva: years

of pollution averted by beaching). Despite this precaution, the vessel began leaking

over 200 tons of oil, affecting over 1,000 seabirds. (Factiva: fears grow for heritage

coast). In a later investigation by the Marine Accident Investigation Branch, it was

found that the Napoli was carrying many overloaded containers and was travelling too

fast for the conditions, sacrificing safety and risking an environmental disaster to

reduce costs and meet tight delivery schedules (Factiva: probe finds shipping Indus

sacrificing safety).

The actors involved in this incident were the ship owner Metvale Limited, the ship

chartering company MSC, the ship operator Zodiac Maritime Agencies Ltd, the NCP

Environment Group, the Devon County Court, Det Norske Veritas classification

society and the Marine Accident Investigation Branch.

Reporting Consequences

Metvale Limited – private, limited company.

Zodiac Maritime Agencies – privately owned, no reported information, started

environmental reporting in 2010.

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Det Norske Veritas reported on this accident in their 2008 Annual Report, stating that

an investigation concluded there were human and technical reasons behind this

accident. In a separate Press Release, the company concluded that the technical

reason behind the ship’s troubles, insufficient buckling strength in the forward part of

the ship’s engine room, was a “minor structural modification” and would only need to

be repaired on a few other ships.7 Again, there was heavy media and NGO reporting.

COSCO Busan

On November 7th, 2007, the pilot of the freighter COSCO Busan sideswiped a support

of the San Francisco-Oakland Bay Bridge, causing a huge spill in the San Francisco

bay. Captain John Cota had boarded the ship locally and was working with a Chinese-

speaking crew to navigate the vessel out of the bay, but struggled to read navigational

devices amidst anxiety about thick fog. Transcriptions showed that he apologized to

the Chinese crew after the accident. (Factiva: pilot, crew struggled in fog before bay

oil spill).

The city of San Francisco filed a lawsuit against the ship owners and other parties

seeking assorted damages, civil penalties, and recouping of costs to clean up the spill.

Named in the lawsuit were the ship owner Regal Stone and operator Fleet

Management, Hanjin Shipping Co. Ltd. Who owned the fuel, Synergy Management

Services and Synergy Marine, agents of Regal Stone, and John Cota (Factiva: san

Francisco sues ship owner, others over oil spill in bay).

It was later determined during a National Transportation Safety Board hearing that

Cota was taking prescription medications to combat a number of ailments, and

physicals showed that he had a prior history of alcohol abuse and depression, and

recently began suffering from sleep apnea. He was taking lorazepam, an anti-anxiety

medication, Wellbutrin for depression, Valium as a sleep aid, Aciflux for heartburn,

Lipitor for high cholesterol, Alphagan for glaucoma, Imitrex for migraines, and

potassium citrate for kidney stones. The hearing revealed that use of these

medications prompted the Coast Guard to ask Cota to voluntarily turn in his mariner’s

license in the weeks after the accident.

7 http://www.dnv.com/press_area/press_releases/2008/dnvconcludes.asp

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NTSB investigator Dr. Barry Strauch also revealed that Cota was convicted of driving

under the influence in 1999 and entered an alcohol rehabilitation program, and was

later granted a waiver to retain his pilot’s license.

Cota pleaded not guilty to criminal negligence and violating environmental laws and

refused to testify in the hearing. (Factiva: Impact of medications prompted request for

license of pilot on oil-spilling container ship). He was sentenced to 10 months in

prison, one year of supervised release and 200 hours of community service for his role.

(USDOJ : Cosco Busan Operator Admits Guilt in Causing Oil Spill).

The environmental price tag for the oil spill exceeded $5 million. The ship’s owner,

Regal Stone Ltd. Of Hong Kong, was asked to pay for the impact including damage to

wildlife and human costs. (Factiva: the spill is not over). The ship operator Fleet

Management Ltd eventually agreed to pay a total $10 million criminal penalty.

(USDOJ : Cosco Busan Operator Admits Guilt in Causing Oil Spill). The final

settlement in 2011 required the owners of the ship to pay $44 million for all the

resource damages caused by the oil spill. (Baykeeper : COSCO settlement falls short).

The actors involved in this incident are the ship-owner Regal Stone Ltd, operator

Fleet Management Ltd, the pilot John Cota, the crew of the Cosco Busan, the San

Francisco Port Authority, the National Transport Safety Board, Department Fish and

Game, PRBO Conservation Science, National Marine Fisheries Service, the City of

San Francisco.

Reporting Consequences

Regal Stone Ltd – private company, no reported information.

Fleet Management Ltd – private company, no reported information.

The NTSB issued a full accident 160 page accident report.

Cosco issued both a Sustainability report and an Environment report in 2008, but

made no mention of the Cosco Busan incident in either.

Heavy media reporting, NGO reporting, and legal reporting.

Security

Piracy (& terrorist attacks)

MV Sirius Star

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Piracy off the coast of Somalia rose to a crescendo between 2005 and 2008, the year

when some 100 reported vessels were captured and held for Ransom off the coast of

the African nation. One such attack happened on November 15th, 2008 when the MV

Sirius Star, a Saudi-owned oil tanker and operated by Vela International Marine, was

en route from Saudi Arabia to the US and attacked by Somali pirates. The

International Chamber of Shipping said the ship was 800 miles east of Mombasa,

Kenya when attacked. The ship had 25 crew members on board and was carrying over

US$100 Million worth of oil. (Guardian: Pirates hijack Saudi-owned oil tanker with

British crew on board)

This attack made world headlines since the Sirius Star is three times the mass of a US

aircraft carrier and capable of carrying over 2m barrels of crude oil, and was attacked

twice as far out to sea as other attacks at the time, according the US Navy. Even more

astonishing, days later the Somali pirates demanded US$25 million ransom for the

safe return of the ship and crew. The UK government refused, and the Somali pirates

counter-demanded US$15 million. Finally, on January 9, 2009 the BBC reported that

the ship had been freed after a ransom of US$3 million had been paid. (BBC News:

Saudi tanker freed off Somalia). This attack showed that Somali pirates were

operating in an area of over 2.8 million square kilometers, an area larger than

international security forces could patrol.

The actors involved in this incident were the ship-owner Vela International Marine,

unidentified Somali pirates, Somali spokesperson Mohamed Said, and British foreign

secretary David Milliband.

Reporting Consequences:

Vela International Marine – private company, no reporting, but the company issued 3

short press release statements during the capture and return of the vessel.

Environment

Oil Spills

Prestige

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On November 13 2002, the Greek-owned oil tanker Prestige, carrying 77,000 tons of

oil, was caught in a storm northwest of Spain when one of its 12 tanks burst. Fearing

that the vessel would sink and cause a major environmental disaster, the ship’s

captain radioed nearby Spanish rescue workers in hopes of being brought into harbor.

To his distress, local authorities from Spain, Portugal and France all refused harbor

and ordered the ship kept at sea to avoid endangering their coastlines. The integrity of

the single hull on the vessel soon deteriorated and a 12 meter portion broke off,

releasing oil into the open water. On November 19th, the ship split in half and sank

along the coast, releasing 125 tons of oil a day and totaling to over 63,000 tons of

leaked oil, causing the largest recent environmental disaster in the maritime industry.

(source: multiple)

This incident involved a number of actors including the ship-owner Mare Shipping,

Inc. operator Universe Maritime Ltd, and its ship captain Apostolos Mangouras, the

port authorities of Spain, Portugal and France, the classification society ABS who

approved the ship fit for sailing, as well as the WWF who publicized the event, and

indirectly, the EU, US, and the IMO who pursued subsequent legislation to protect

against future spills.

This event caused a series of new laws and regulations including the 2003 EU

Regulation 1726/2003 which accelerated phasing-in of double-hull for single-hull oil

tankers, the 2005 EU Third Maritime Safety Package whose main objective was to

benefit those operators who respected the safety standards, as well as single-hull

vessel bans in the US, Italy, and Spain (Factiva: Italy bans obsolete cargo ships from

its waters) .

It also caused a public outcry among environmentalists, including the WWF who

published a series of reports including the 2003 Report, “The Prestige: One Year On,

A Continuing Disaster”

(http://www.wwf.fi/www/uploads/pdf/Prestige_raportti_marras03.pdf)

Reporting Consequences

Mare Shipping Inc. – a private Liberian company, no reporting.

Universe Maritime Ltd – Greek private company, no reporting.

97

ABS openly reported in their 2003 Annual Report, disavowing allegations against the

company. They claim to have become the scapegoat for Spanish and regional

governments. They stated that in response to the media scrutiny and political criticism,

they “established new standards for transparent and open cooperation with

governments, industry partners and the media.” They do believe that the incident

fueled the industry move to double-hulled vessels. (The trial is still ongoing to this

day).

WWF issued a report on the environmental destruction one year after the event.

Governance

Illegal Dumping of Bilge Water and Oil

MSC Elena

In May 2005, inspectors detained the chief engineer Mani Singh of the MSC Elena

and its crew after discovering a concealed pipe (known as a “magic pipe”) that

bypassed treatment equipment to discharge oil sludge and bilge water directly into the

ocean (Factiva: MSC engineer charged in pollution probe). The US Justice

Department later discovered in a hearing that company officials in Hong Kong told

crew members to lie, and the ship engineers ordered documents destroyed and

concealed. Singh pleaded guilty to making false statements to the Coast Guard,

denying knowledge about the existence and use of the pipe, obstructing justice,

concealing evidence and concealing discharges in a falsified log. He was sentenced to

pay $3,500 in fines (Factiva: ship’s engineer sentences in maritime pollution case)

and sentenced to 2 months in prison (Factiva: prison for MSC engineer in magic pipe

pollution case).

The company that owns the Elena, MSC Ship Management Limited pleaded guilty

and agreed to pay the largest fine ever associated with a single ship’s illegal pollution

at sea – a sum of $10.5 million (Factiva: ship’s engineer sentences in maritime

pollution case).

The actors in this incident include the ship owner MSC Ship Management Limited,

chief engineer Many Singh, the Coast Guard of the state of Massachusetts, the US

Department of Justice.

98

Reporting Consequences

MSC Ship Management Limited – private company, no reporting.

Jane Maersk

In recent years, other carriers had also been charged for bypassing oily-water

separators, including AP Moller Maersk in September 2003 who agreed to pay

$500,000 in a plea bargain in federal court after presenting false records of an oil spill

in San Francisco concerning Vessel Jane Maersk, and Evergreen International in

April 2004 who agreed to pay $15 million in fines and $10 million to environmental

groups after pleading guilty to having bypass equipment aboard seven of its ships

(Factiva: MSC engineer charged in pollution probe).

Reporting Consequences

AP Moller Maersk – no reporting at the time of incident.

Evergreen Marine – no evident reporting at time of incident.

99

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Table of Contents

Executive Summary ............................................................................................................. 5

Acknowledgements ............................................................................................................... 8

Introduction ........................................................................................................................... 9

1. Aim and Research Methodology ........................................................................... 14

1.1. Aim of the research .......................................................................................................14

1.2. Choice of Industry and Companies Selected ..........................................................14

1.3. Methodology ...................................................................................................................16

1.3.1. Research Strategy .................................................................................................................. 16

1.3.2. Research Method ................................................................................................................... 16

1.3.2.1. Literature review .............................................................................................................. 17

1.3.2.2. Planning the literature search strategy ....................................................................... 17

1.3.2.3. Conducting the Literature Research ........................................................................... 18

1.3.2.4. Conducting the Report Analysis ................................................................................. 18

1.3.2.5. Conducting the Semi-Structured Interviews ........................................................... 18

2. Literature Review ..................................................................................................... 20

2.1. Origins and Current State of Sustainability Reporting .......................................20

2.1.1. Evolution of Extra-Financial Reporting ......................................................................... 20

2.1.2. Characteristics of Modern Sustainability Reporting .................................................. 21

2.2. Motivations For Companies to Report .....................................................................25 2.2.1. Reasons for Non-Reporting ............................................................................................... 27

2.3. Factors Influencing the Selection of Reporting Content ......................................28

2.3.1. Voluntary Standards, Frameworks and Guidelines .................................................... 28

2.3.2. Mandatory Standards and Laws ....................................................................................... 31

2.3.3. Stakeholder Expectations .................................................................................................... 32

2.4. Previous Research on Sector-Specific Reporting...................................................34

2.5. Previous Research on Maritime Transportation Sector ......................................36

3. Current State of Sustainability Reporting .......................................................... 40

3.1. Choice of Indicators ......................................................................................................41

3.1.1. GRI Index ................................................................................................................................ 42

3.1.2. Materiality Process ............................................................................................................... 42

3.1.3. Stakeholder Commentary ................................................................................................... 43

3.1.4. Key Performance Indicators .............................................................................................. 43

3.1.5. Assurance Statement ............................................................................................................ 44

3.1.6. Regular Reporting Cycle .................................................................................................... 45

3.1.7. Excluded Indicators .............................................................................................................. 46

3.2. Results: A Look at Reporting Maturity ...................................................................46

3.3. Discussion of Results .....................................................................................................48 3.3.1. Stakeholder Input from Interviews .................................................................................. 49

3.3.1.1. Potential Improvements to Reporting ........................................................................ 50

3.4. Discussion Summary ............................................................................................................ 51

4. Barriers and Drivers to Industry Reporting ...................................................... 52

4.1. Background and Overview of the Maritime Shipping Industry ........................52

4.2. Maritime Container Transportation ........................................................................54

4.2.1. Maritime Container Shipping Value Chain .................................................................. 55

4.2.2. Main Carriers in Maritime Container Shipping ........................................................... 58

106

4.2.3. Maritime Container Shipping Key Industry Stakeholders ....................................... 60

4.3. Identifying Industry Barriers and Drivers ..............................................................63

4.4. Barriers to Reporting ...................................................................................................65 4.4.1. Regulatory Structure ............................................................................................................ 65

4.4.1.1. Stakeholder Discussion .................................................................................................. 66

4.4.2. Complex Ship Ownership ................................................................................................... 67

4.4.2.1. Stakeholder Discussion .................................................................................................. 68

4.4.3. Poor Media Image / Poor Communications: Stakeholder Discussion .................. 69

4.4.4. Distance From Public Eye .................................................................................................. 70

4.4.4.1. Stakeholder Discussion .................................................................................................. 70

4.4.5. Flags of Convenience ........................................................................................................... 70

4.4.5.1. Stakeholder Discussion .................................................................................................. 72

4.4.6. Lack of Sustainability Resources: Stakeholder Discussion ..................................... 72

4.5. Drivers to Reporting .....................................................................................................73

4.5.1. Maritime Accidents and Environmental Activism ..................................................... 73

4.5.1.1. Stakeholder Discussion .................................................................................................. 74

4.5.2. Increased Regulation ............................................................................................................ 74

4.5.2.1. Stakeholder Discussion .................................................................................................. 75

4.5.3. Customer Pressure ................................................................................................................ 75

4.5.3.1. Stakeholder Discussion .................................................................................................. 75

4.5.4. Sustainability Ratings: NGO/Index Pressure: Stakeholder Discussion ............... 77

4.5.5. Peer Reporting: Stakeholder Discussion ........................................................................ 77

4.6. Results ..............................................................................................................................78

4.7. Trends in Sustainability Reporting ...........................................................................79 4.7.1. Industry-specific reporting ................................................................................................. 79

4.7.2. Reporting laws ....................................................................................................................... 79

4.7.3. Materiality ............................................................................................................................... 80

4.7.4. ESG Analysis.......................................................................................................................... 80

5. Conclusions ................................................................................................................. 81

5.1. General Conclusions .....................................................................................................81

5.2. Limitations and Further Research ............................................................................87

Appendix 1 – Full List of Analyzed Sustainability Reports ..................................... 89

Full List of Analyzed Sustainability Reports; Source: Author ............................... 89

Appendix 2 – Full Semi-Structured Interview Questionnaire ................................ 90

Appendix 3 – Factiva Research ...................................................................................... 91

Bibliography ........................................................................................................................ 99

107

Table of Tables Table 1: Carrier Size and Geography; Source: Elaborated by Author……….16 Table 2: Research Parameters; Source: Elaborated by Author……………….17 Table 3: Interviewed Stakeholders; Source: Author……………………............19 Table 4: Container Carriers by size and reporting practice; Source:

Author/Alphali ………………...………………………………...……………..41 Table 5: Maturity of Top 12 Carrier Reports; Source: Author ………………..47 Table 6: Top 30 Container Carriers by TEU. Source : Alphaliner….………..59 Table 7: Full list of Potential Barriers and Drivers. Source: Author…….…..64 Table 8: Short List of Barriers and Drivers. Source: Author …………………..65 Table 9: Resulting Barriers and Drivers. Source: Author……………………….78 Table of Figures Figure 1: Abbreviated Interview Guide; Source: Author……………….…...20 Figure 2: National Voluntary and Mandatory Reporting Laws; Source: Morris,

BSR………………………………………...………………………………......32 Figure 3: Global merchant fleet; capacity growth in million dwt. Source:

Lehmköster 2010………………………………...…………..........................53 Figure 4: Global shipping density; revealing trade lanes. Source: Rodrigue ...... 54 Figure 5: Maritime container industry supply chain, noting commercial

relationships. Source: Supply chain graphic from DAMCO; Commercial relationships elaborated by author................................................................... 55

Figure 6: Maritime container ship lifecycle. Source: Elaborated by author. ...... 57 Figure 7: Top 11 Flags of Convenience; Source: Wikipedia……………………72 Figure 8: Key Barriers and Drivers to Sustainability Reporting; Source:

Author ……...………………………………...………………………………81